Investors unsettled by Saudi attacks, as well as Greek woes and US economy concernsLeading shares suffered their biggest one day fall for three weeks as a combination of concerns sent investors fleeing for the exits.The latest catalyst was a surge in crude prices as tensions grew in the Middle East, with Saudi Arabia launching military action against rebels in Yemen, adding to fears of disruptions to supplies. Brent crude is off the day’s highs but is still currently 4% higher at $58.79 a barrel.Hikma [on Wednesday] announced their potential first bond issuance, which we believe could be partly to fund future M&A plans. At the full year results they commented on their $1.5bn M&A firepower, and we see a high probability that at least some of this is put to work in 2015, with the Non-Injectable generics division likely the most significant beneficiary. With M&A firepower at 25% of market-cap, we see Hikma as having the highest M&A optionality in the sector, and based on its strong track-record, we anticipate significant accretion.There is a strong value argument for Ophir Energy at this level....We upgrade to a buy rating due to relative balance sheet strength, discovered gas resource monetisation optionality and longer term exploration exposure. Continue reading...
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