Investors shrug off concerns about election and Greece, as Wall Street provides supportLeading shares ended the week on a positive note despite uncertainties ahead of the UK general election and the drawn-out talks to solve Greece’s financial crisis.The latest PMI manufacturing index for the UK came in much lower than expected in April, following poor GDP figures earlier in the week. In the US the figures were also fairly weak. Earlier, Chinese manufacturing data showed no improvement on the previous month, but with hopes that the country might introduce more stimulus to boost the economy, that was still enough to support the mining sector.With Europe mostly out of action for May Day, it was a quiet day in London, but at least the traditionally weak period for equities has started off on the right foot. Miners continue to dominate the top end of the FTSE 100 on revived hopes that the Chinese government will be hustled into fresh stimulus measures by the general lack of strength in economic data.We cut our 2015/16/17 estimated sales by an average of around 1% owing to more adverse foreign exchange (from negative 6% to 7%), and lower our respective earnings per share estimates by an average of around 2%. Considering our stand-alone valuation (£11.30) and the value of potential synergies (around 250p-300p), we estimate that Smith & Nephew’s stock price currently implies almost no probability of an industry merger.There is ongoing M&A activity and industry consolidation in orthopaedics. In this process, Smith & Nephew holds potentially strategic value for certain US companies that have business overlap in large joints, trauma and sports medicine. Continue reading...
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