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Stand by for take-off at British Airways was the advice Goldman Sachs gave to its clients today as it added the shares to its influential Conviction Buy list.
BA shares responded with a jump of 13.9p to 241.3p, making them one of the best performers among the top 100 companies. They have come up from a low of 188p since July and, according to the American broking house, there is scope for a further 45% improvement in the price if the revenue recovery starts on a restructured cost basis.
Goldman has raised its six-month price target from 165p to 315p. It says the revenue recovery is under way and will be achieved by further cost savings and effective hedging against fuel price rises. Margins will also improve more rapidly than at other national carriers largely due to BA's exposure to the lucrative North Atlantic routes, the broker adds.
The broking house prefers BA to Air France-KLM, which it has dropped from its Conviction Buy list.
BA is currently in merger talks with Spain's flag-carrier Iberia, and has been speaking to American Airlines about a possible alliance.
Investors generally continued to thank their lucky stars for quantitative easing, producing a steady flow of money which has been finding its way back into the stock market, as fund managers — who have sold corporate bonds to the Bank of England — use the money raised to look for better returns elsewhere.
The FTSE 100 index sported a rise of 45.39 at 5169.52.
Wall Street made a slow start this afternoon, but later perked up on news that housing starts had risen to their highest since November, while the number of new jobless claims fell unexpectedly by 12,000 last week. The Dow Jones rose 41.79 to 9833.50.
Speculative buying pushed Tullow Oil up 41p to 1228p. The price has come up from 1026p since the start of the month. Tullow yesterday announced an oil find off Sierra Leone. Today it followed that good news with another discovery, this time in Uganda. Together, the finds would make Tullow much more attractive to any would-be bidder. Earlier this week, Italy's ENI was being tipped to offer up to 2000p a share for Tullow.
Mining shares ran out of steam after an early mark-up, with Lonmin losing 42p at 1788½p, and Anglo American 7½p at 2117p. Central African
Mining and Exploration, which is chaired by former England cricketer Phil Edmonds, marked time at 18¾p following news of yesterday's bid approach from Eurasian Natural Resources, down 16½p at 900p, worth 20p a share. That would put a price tag on Camec of £576 million. In July, Camec announced it had received an approach, and the value of its shares have since doubled. But there were some strange going-on at rival miner African Minerals, which is run by entrepreneur Frank Timis. The price surged 40p to 382p after the company claimed it too had become the target of a bid by ENRC. Not so, says ENRC. It intends to remain firmly focused on Camec. African Minerals also claimed to have attracted the attention of businesses in Brazil and China.
Wolseley, the world's biggest plumbing equipment supplier, stood out with a rise of 24p at 1488p as gossips claimed Abu Dhabi's sovereign wealth fund was looking to buy a disclosable stake. Wolseley has felt the brunt of the collapse in the US housing market, and has been forced to make heavy job cuts and a series of profit warnings. But the price has rallied from 1031p since July.
HSBC has raised its target on fashion retailer Next, down 8p at 1808p, from 2000p to 2100p in the wake of yesterday's better-than-expected
first-half results. KBC Peel Hunt has raised its rating on Next from hold to buy.
Shares of GW Pharma fell 4p to 94¾p following a meeting with brokers on its research and development programme. The presentation focused on the group's cannabis-based treatments, which include Savitex, used to reduce pain for multiple sclerosis sufferers.
Shares of Leyshon Resources were suspended on AIM at 5.37p pending an announcement.
K3 Business Technology firmed 2½p to 90p after it raised £1.5 million by placing 1.76 million new shares at 85p by stockbroker Daniel Stewart.
Reader views (1)
Conviction is something received went someone has done something wrong. In the case of BA it is a question of what have they done right. The turnover is less than it was 10 years ago, debt has increased by 1 billion pounds in the last 12 months to 2.4 billion pounds and the pension fund defecit stands at 1.2 billion pounds.
The in flight snacks exited the plane last month and where is the company going ? The shares are being inflated to use in a merger following the cartel decision,
I am convicted to sell and quickly, don't miss the flight.
- Martin Clarke, london, 17/09/2009 11:52
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