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UK Equities
Experian rises on share buyback hopes
From the Financial Times of Tue, 02 Dec 2014 18:39:50 GMT

Experian stood out on Tuesday’s FTSE leaderboard after Merrill Lynch turned positive on the credit checking agency.

A focus on capital allocation under new chief executive Brian Cassin could allow for a $500m share buyback over the next year, equivalent to 5 per cent of Experian’s market value, Merrill said. It set a £12 target on the stock, which rose 4.4 per cent to £10.49.

“Experian offers a unique combination of substantial intellectual property, high adjusted returns on capital, strong free cash generation and exposure to compelling structural growth themes which is unmatched elsewhere in the business services sector,” Merrill told clients. “With organic growth set to reaccelerate and the valuation at a low relative to the market, we see potential for a material re-rating in the next 12 months.”

Rebounding oil provided the day’s main theme, lifting the FTSE 100 by 1.3 per cent or 85.73 points to 6,742.10.

BP bounced off a two-year low, rising 4.7 per cent to 433.9p, as speculation of a Royal Dutch Shell bid was given a wide airing. The theory coming via US traders was that Shell may propose a merger valued at about $46 per BP American Depositary Receipt, a premium of just 16 per cent.

Shell’s B shares rose 3.8 per cent to £22.92, in line with the sector. BG added 3.4 per cent to 935.5p, Tullow Oil took on 6 per cent to 424.7p and BHP Billiton was up 2.2 per cent to £15.16.

Citigroup advised clients to switch into BHP from Rio Tinto, up 0.7 per cent to £29.77. Large diversified miners should outperform the sector in 2015 as incremental commodities demand favours developed markets rather than China, Citi argued.

Phoenix, the life assurance fund consolidator, rose 1.7 per cent to a record high of 814p in the wake of Aviva’s agreed buyout of Friends Life. With the chances receding of its long-rumoured Friends merger ever coming to pass, Phoenix becomes vulnerable to interest from a sector peer such as Standard Life, traders said.

Royal Mail lost 3 per cent to 405.5p after regulator Ofcom said it would not take action to limit competition among direct mail-delivery groups. Royal Mail has estimated that if competition continues it would lose more than £200m of revenue by its financial year ending 2018.

“This could lower group EPS by around 30 per cent by 2017/18,” Merrill said. “Such an extreme outcome would call into question Royal Mail’s ability to earn a ‘fair-bet 5-10 per cent profit margin’ and as such Ofcom has left the door open to a further review [ . . .] should the universal service obligation appear to be at risk.”

Just Eat edged 0.9 per cent lower to 339.2p. After the close of trade, early investors in the website said they were selling an 8 per cent stake.

BWin Party rose 6.1 per cent to 109.5p on a report that Playtech and an unidentified private equity group were in the auction for the online casino. BWin, responding to a report that it had received a bid from Canadian peer Amaya, said in early November that it was talking to a number of parties.

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