Markets & Finance

Rolls-Royce Rises


From Standard & Poor's European MarketScope

Britain

Aircraft engine maker Rolls-Royce was up £0.05 to £2.49, after the company said it is making good progress in the first quarter of 2005. The company added that during the quarter Etihad Airways ordered four Airbus A380s powered by the Trent 900 engine, and 12 A330s powered by Trent 700s.

Liquor group Diageo was up £0.13 to £7.59, after Deutsche Bank said that the company's attractive dividend yield of 3.9% and 8% share buyback program over the next 12 months should help support the share price. The broker noted that the company acquired 125 million shares in March, in line with expectations. The broker reiterated equal weight recommendation, noting that the majority of British investors are underweight on the stock. The broker also retained its £7.70 price target, saying that the share price could exceed this level due to the buybacks.

Cleaning and pest-control group Rentokil was up £0.06 to £1.68 after Credit Suisse First Boston initiated coverage with an outperform rating and a £1.85 target. The broker said it is time for a turnaround after underperformance in the last three years and added that significant investment has already been made. A new mergers and acquisitions director is in place and there are easy comparatives for the next 18 months, according to the broker.

Videogame publisher Eidos was up £0.03 to £0.68, after the company said it is

seeking further clarification of the rival offers it has received from British publisher SCi Entertainment and Californian private-equity group Elevation Partners. The company noted that SCi Entertainment offered one new SCi share for every six shares held in Eidos, while Elevation Partners made an offer of £0.50 per share.

France

Renault was up €0.90 to €69.80, after French March new car registrations were reported to have risen 2.5% to 202,692 units. First quarter registrations were up 3.9% to 526,450. The carmaker's car sales for March are up 2% to 56,721 units. Its first quarter sales were up 3.4% to 141,979 units.

Retailer Etam was down €1.50 to €23.00, after the company reported a fiscal year 2004 loss of €61.1 million compared to €19.4 million profit in fiscal year 2003, after encountering a strong deterioration at its British operations. Britain had a negative impact of €74.6 million on fiscal year 2004 net profit. Operating profit dropped to €2.8 million compared to €47.4 million, and sales fell 2.4% to €1.047 billion. The company confirmed it has appointed as its new chief executive, Richard Simonin, the former head of London department store Harrod's.

Mailroom equipment maker Neopost was up €2.75 to €69.55, after Citigroup increased its target to €76.10 from €70.40 and kept its buy rating. Following better-than-expected fiscal year 2004/2005 results, the broker has upgraded its model slightly. The broker considers the company's valuation appealing. ING also raised its target to €74 from €70 and maintained a buy rating. The broker added that better-than-expected fiscal year 2004 to 2005 results prompted an increase in its adjusted earnings per share forecast for fiscal year 2005/2006. The broker believes the company is a secure investment and good news could come from further exceptional dividend payments and share buyback programs.

Germany

Automotive supplier Continental was up €2.99 to €62.82, after a number of brokers raised their target price and ratings for the shares following robust fourth quarter and fiscal year 2004 figures released yesterday. WestLB upgraded the stock to outperform from neutral while Lehman Brothers, Deutsche Bank, UBS and Morgan Stanley raised their price targets. WestLB upgraded on changes to its assumptions for the automotive systems and passenger tire divisions. Lehman Brothers said that on the back of the better underlying 200 results and management's reiterated confidence about 2005, shares continue to look attractive despite their strong performance over the past couple of years. Morgan Stanley said the fourth-quarter underlying profit came in 26% above its expectations while fourth-quarter cash flow came in over 20% above its forecasts. The broker also welcomed the announcement that targets improved profits in each business segment in 2005 and it is confident thatrising raw material costs can be offset by price increases and other savings.

Chemical and pharmaceutical company Merck was up € 2.29 to €57.29 after a research institute, Displayresearch, forecast the price for liquid crystal displays will rise in the second half of the year. Separately ISuppli says Samsung and other makers of LCDs will face a shortage of glass and components this year, leading to price increases. The company yesterday said it expects to continue to perform well this year, boosted by its Erbitux colon cancer drug and demand for liquid crystals used in electronic displays.

Sporting-goods maker Adidas was up €1.40 to €123.82, after the company said it forecasts soccer-related sales of over €1 billion as a consequence of the 2006 World Cup in Germany. In 2004 the company's soccer-related sales grew 20% to more than €900 million. The company will introduce the first World Cup related products in the second half of the year. The company claims 35% market share of the global soccer products market.

Optical data storage equipment maker Singulus Technologies was up €0.70 to €12.25, after the company said it bought back 1.89 million shares through the end of February and will continue to buy back shares through May 27. Cheuvreux said the company has already bought back 5.1% of the shares outstanding between October 6, 2004 and February 28, 2005. The additional share buy-back of up to 1,817,612 shares may commence immediately and will continue until May 27, 2005. The broker said all the shares will be cancelled as management's goal is to improve earnings per share. As the broker expects no positive fundamental newsflow, it is sticking to its underperform rating.


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