Investors push market higher despite Greece problems and UK election concernsLeading shares end the week on a positive note, heading back towards record highs despite some mixed corporate and economic news, as well as deadlocked talks over Greece’s finances and continuing uncertainties about the UK election.Among the risers BAE Systems was up 11.5p at 515p after the company said it might sell part of its US security and intelligence division. It said it had received a number of enquires about the manpower and services businesses, but there was no guarantee of a sale. Analyst Tina Cook at Charles Stanley said:We believe the news is likely to be positively received as it shows a proactive approach by management and potential to unlock value within the group. The value of the assets is relatively small in relation the group as a whole. BAE’s Cyber and Intelligence division (2014: £1,085m sales versus BAE sales of £16.6bn) comprises the US-based Intelligence & Security business (2014: 79% of sales) and UK-headquartered Applied Intelligence.BAE is positioned to deliver top line and earnings growth (albeit modest) with further material returns to shareholders in 2015. It has continued to win new contracts across its broad geographical footprint, despite budget pressures, and the large order book provides multi-year visibility. There are early signs that the important US defence environment is stabilising and might return to growth next year (but could take time to feed through) against a backdrop of heightened geopolitical strife. Our recommendation is accumulate.We continue to see Merlin’s combination of like for like sales growth, the Midway rollout, and new Legoland parks as attractive over the long term. However, we see only limited scope for upgrades to our forecasts in the near term, and Merlin trades on 20.9 times 2016 estimated PE versus our European leisure coverage on 19.4 times. With the shares up 14% year to date, our unchanged discounted cash flow-based price target of 450p no longer offers upside and we downgrade our rating to neutral.Bloomberg reported PepsiCo will start selling Diet Pepsi without aspartame later this year following consumer backlash against artificial sweeteners. Pepsi will replace aspartame with a blend of sucralose and ace K in a range of diet products. We believe this could be a positive for Tate & Lyle as we expect they would win the business over commodity Chinese suppliers. A sucralose contract with PepsiCo could further explain Tate’s decision to combine all sucralose production in its Alabama plant as the US is the largest market for Diet Pepsi. Continue reading...
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