Baby Ace: MARKET REPORT: Investors buy a stake in online poker specialists Bwin and shares jump 12% amid hopes the company could be sold

Thursday, March 13, 2014

MARKET REPORT: Investors buy a stake in online poker specialists Bwin and shares jump 12% amid hopes the company could be sold

By

Geoff Foster

Activist investors have built a fearsome reputation for turning the screws on managements of underperforming companies, more often than not bringing about boardroom changes and/or corporate activity.

New York-based Spring Owl swooped on Bwin.Party Digital Entertainment in February, acquiring a 6.1 per cent stake in the online poker specialist and placing one of its own on the board.

The shares have jumped 12 per cent since on hopes that if the Bwin management does not get its act together after a disastrous 2013, the company will be broken up or sold. Analysts certainly think so.

Poker playing: The shares have jumped 12 per cent on hopes that if the Bwin management does not get its act together after a disastrous 2013, the company will be broken up or sold.

They rose 4.5p to 126.6p yesterday following full-year numbers which were as bad as expected following August’s profit warning.

Revenues fell 19 per cent to €652million with earnings down by 25 per cent to €108million. The full-year dividend is up 5 per cent to 3.60p.

Jane Anscombe, analyst at Edison Investment Research, said: ‘With Spring Owl on board Bwin could be broken up if 2014 does not show real signs of change. It is trading below the peer average, reflecting its regulatory profile’.

In a note entitled ‘Last throw of the dice’, Nick Batram at Peel Hunt advised clients that ‘2013 should represent the nadir in the group’s fortunes. However, if management fail to deliver the anticipated recovery in 2014, it is possible others will try.’

He added: ‘Current trading shows 6 per cent growth on the fourth-quarter but with New Jersey (the market as a whole) having started more slowly than expected we are likely to have to trim our 2014 earnings forecast by 5-6 per cent’.

Penny share punters nibbled away at Isle of Man-based licensed sports bookmaker Webis, 10 per cent better at 4.12p.

They saddled up on hearing that its fully owned subsidiary WatchandWager.com had signed an agreement with the Hong Kong Jockey Club to provide access to its advanced deposit pool wagering and racetrack operations.

Bulls believe it to be a game-changer for Webis as it takes its tote betting business into the largest betting pool in the world.

All bets were off for the Footsie, 67.12 points down at 6,553.78, as supermarket shares were put through the mincer after a shocking profits warning from the UK’s fourth biggest, Wm Morrison.

It crashed 27.8p or 12 per cent to 205.2p, while J.Sainsbury plummeted 28.3p to 304.9p and Tesco 15.65p to 298.75p, as damaging competition from discounters Aldi and Lidl had City analysts slashing their earnings forecasts for this year and next.

Marks Spencer, whose foods business has shone brightly up until now while its core clothing business continues to disappoint , lost 14.8p to 458.8p.

Ongoing concerns about Russia and the weakening Chinese economy also kept buyers on the sidelines in London and it was the same story across the Pond.

Wall Street closed 231.19 points down at 16,108.89 despite better-than-expected data on retail sales and the labour market.

Drawing encouragement from the 6.9 per cent increase in sales to £203m reported by rival Homebase during the eight-week period to March 1, BQ owner Kingfisher put on 4,5p to 407.4p.

Shrugging off the continuing furore over bank bonuses, Barclays edged 1.9p ahead to 235.65p on a Numis upgrade.

Analyst Mike Trippitt lifted his stance to add from hold and raised his target price to 280p as he sees the bank hitting regulators’ capital requirements faster than expected. He also reckons it will benefit from a slowly improving European macro-economic outlook.

MDM Engineering jumped 14p to 162.5p in response to an agreed 170p-a-share cash offer from Foster Wheeler, the UK and Swiss-based global engineering group.

Broker SP Angel says MDM’s hub in Johannesburg gives it access to great quality engineering expertise and an ability to build projects in often remote and difficult parts of Africa.

After announcing new contract wins for its services division which takes the group above the annual target of £450million, Quindell firmed 0.75p to 37.75p. Trading in the first quarter was ahead of expectations.

The UK’s largest biotech flotation for more than 10 years got the elbow from UK investors. Circassia Pharmaceutics, which raised £200million and whose cat allergy vaccine is in Phase lll trials and could yet end the misery of hay fever, opened and closed at the offer price of 310p.

Investors in highly speculative Gulf Keystone Petroleum, 23.75p down at 120.25p, ran for the exit after a first Competent Persons Report into its assets found it had 12.5billion barrels of gross oil in place and 1.2billion barrels of recoverable reserves and resources at its Iraq portfolio.

The market had been hoping for 19billion barrels of gross oil in place.