FTSE in-depth: Redrow building to a private deal

 

Liverpudlian entrepreneur and owner of Wolverhampton Wanderers Football Club Steve Morgan is relaxed about the fact that shares of his 'baby' Redrow have been the worst performing housebuilding stock relative to the market over the past 12 months.

Geoff Foster

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The hefty 35% decline over the past year and 6% fall over the past month has in fact worked in his favour.

Rumours suggest that he is currently drawing up plans to take the Flintshire-based group private and his bid terms should now be deemed quite generous.

Redrow's shares climbed 5p to 115.7p on whispers that Morgan, who owns 29.9% of the equity, intends to take the company back into private hands at £495m, or 160p a share. He is said to have the support of 5% shareholder Toscafund.

Ever since founder Morgan regained power at Redrow, via a boardroom coup in March 2009, dealers have been waiting for him to take full control. He knows the group inside out after founding Redrow in 1974 with the help of a £5,000 loan from his father. He floated the company in 2000 and sold shares worth almost £240m.

Investec views Redrow as very much a management-driven special situation. It has a target price of 179p and sees it as a classic turnaround story with the return of Morgan. Full year results are due on September 9, but punters hope the bricks are in place for a mouthwatering buyout before then.

The Footsie fell 78 points afresh on profit-taking before closing 10.32 points off at 5,386.16. Retailers were a drag on sentiment after Next (170p down at 2029p) warned that clothes prices may have to rise by 8% next year due to higher costs and January's hike in VAT to 20%. Rival Marks & Spencer lost 10.4p at 350.3p in sympathy, while Home Retail shed 9.3p at 235.2p and Kingfisher 7.5p at 216.3p. Wall Street added 30 points in the early stages following stronger-than-estimated growth in US service industries and private payrolls suppressed fears the economic rebound is slowing.

Randgold Resources sparkled at 5720p, up 160p, as buyers piled in a head of today's second-quarter results. Randgold recently revised its production guidance for its Loulo gold mine in Mali downwards following a difficult quarter in which processing was affected by a series of power cuts. Oriel anticipates that the Q2 results will highlight another challenging quarter as the company executes a step change in gold production growth.

Buying on the perception that the stock is undervalued helped Centamin Egypt rise 7.40p to 159.6p. In a recent note, Evolution Securities reiterated its buy stance and target price of 195p. The company is on target to achieve gold production of 200,000 ounces this calendar year.

Salamander Energy fell 22.7p, or 9.1%, to 226.7p on a double whammy of bad news. The company has downgraded reserves at its Kambuna field, offshore Indonesia, and announced another dry hole. Panmure Gordon slashed its target price to 330p from 370p. Profit-taking in the wake of the strong interim figures dragged Cookson 25.6p lower to 453.1p.

Reflecting a strong return to profitability at the halfway stage, 4Imprint advanced 8p to 218p. The producer of corporate promotional print products reported a pre-tax profit of £2.8m compared with a loss of £800,000 and declared a dividend of 4.7p a share, up 11% on last time. Analysts reckon the company is well placed for recovery.

In-line half-year results left Moneysupermarket.com 0.5p dearer at 69.3p. The dividend is maintained at 1.3p a share and cash in the bank stood at £28.3m, which suggests a special dividend payment could be on the agenda over the next year.

KBC Peel Hunt says the yield at 5.3%, backed by cash on the balance sheet and rising profitability, limits the downside risk. Its target price is 85p. Director buying lifted drug delivery company Summit Corporation 0.25p to 3.25p. Chief executive Steven Lee bought 150,000 at 3p a share and director Richard Storer 100,000 at the same price. Singer Capital Markets says the stock is fundamentally worth at least 7p a share.

News of a placing at 14p a share to raise £3.15m left San Leon Energy 1.25p off at 15.50p. Cash raised will help it carry out work across its portfolio in Poland, Morocco and Ireland.

Record results helped Allocate Software put on 4p at 76p. Revenues increased by 39% to £22m and trading profit advanced 38% to £3.49m. The company has £2.9m cash in the bank.

Forbidden Technologies rose 2p to 22p on hearing that Renegade Pictures is using FORscene, its market leading editing platform, for the production of its fourth series of Don't Tell the Bride' for BBC3.

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