After four profit warnings in just over a year, BG Group has been marked by many traders as a takeover target. Analysts urged caution.
BG fell a further 2.6 per cent to £10.54 in the wake of Monday’s costs warning and cut to production guidance. With the stock down 19 per cent this month and the credibility of its new management dented, investors have been speculating that BG might now be vulnerable to a bid from the likes of PetroChina.
But while BG holds world-class assets including the Santos Basin prospect, the rest of the portfolio was unlikely to appeal at a time when shareholders are lobbying for improved capital discipline, said analysts.
“Does a potential buyer want to manage politics in Egypt or Kazakhstan – or cost pressures in Australia – in order to get Brazil?” asked Société Générale. “We think BG’s share price is not in true bargain territory, and this is a very large company whose intense investment phase means that its 2014-15 financial position would likely make it dilutive to even the largest potential buyers.”
Signs of stability among emerging markets meant the FTSE 100 broke a five-day losing streak. The index edged up 0.3 per cent or 21.67 points to 6,572.33 as bargain hunting helped hard-hit financials such as Aberdeen Asset Management, up 3 per cent to 403.2p.
Counterbid hopes lifted F&C Asset Management through BMO’s 122p offer value, with the stock up 6.1 per cent to 123.5p. Standard Life, F&C’s 10.2 per cent shareholder, stoked hopes of a competitive auction by announcing it would keep its options open should another suitor emerge.
Takeover hopes continued to lift Severn Trent, up 4.6 per cent to £17.78, with Borealis of Canada reported to be working on a second offer ahead of Severn’s next trading update on February 14.
Carnival rose 2.8 per cent to £25.48 after 2013 results from its main rival Royal Caribbean beat expectations. The key positive was that Royal Caribbean guided for net yields to turn positive this year, against Carnival’s guidance last month for a slight decline.
Numis Securities, upgrading Carnival to “buy”, expected the group to boost guidance when it reports first-quarter numbers in March. Two highly publicised ship failures last year mean Carnival offers greater yield recovery potential than Royal Caribbean, with the former less exposed to the Caribbean market where excess capacity has been weighing on pricing, Numis said.
Fresnillo was the worst performer among the miners, down 3.1 per cent to 751p. Production figures from the Mexican bullion miner were better than expected but there was no progress in lifting the suspension of an explosives licence.
Cairn Energy lost 4.5 per cent to 226.4p amid growing worries about its tax dispute with the Indian state, with analysts suggesting a potential bill of between £500m and £700m. Authorities investigating Cairn’s transfer of Indian assets before a spin-off in 2006 have identified a potential 245bn rupee short-term capital gain, the tax on which would be 50-73bn rupees, said Barclays.
Afren, the oil explorer, rallied 4.1 per cent to 150.9. A cut to its 2014 production guidance to reflect maintenance outages had already been widely anticipated.