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Today’s market overview

Investors are taking the opportunity to bank some recent profits with shares down sharply in London in early trading but The Trader Dominic Picarda remains convinced that we are merely consolidating ahead of a final quarter rally.

IC TIP UPDATES:

Ophir Energy (OPHR) has announced appraisal and flow test results from the Pweza-3 well offshore Tanzania, of which it owns 40 per cent withBG Group (BG.) holding the balance. The well flowed 150m cubic feet of gas a day and the work completed is likely to reduce the number of development wells required on the block, improving its economics. We keep our buy on Ophir.

Development Securities (DSC) confirms that its joint venture with Patron Capital has entered into an agreement to sell the Phones 4u Arena in Manchester although no further details will be released until the deal is completed. Buy.

German property specialist Sirius Real Estate (SRE) says that trading remains bang in line with expectations after demand from its core Small and Medium Enterprise market in Germany remained solid. The company is also making progress on its refinancing and repaying its various loans. We maintain our buy recommendation.

KEY STORIES:

Tesco (TSCO) has announced underwhelming results for the half year to 26 August with underlying pre-tax profits down by 7.4 per cent year on year to £1.47bn. Performance in the UK stabilised with total sales up by 1.7 per cent excluding petrol and like for like food sales up 1 per cent in the second quarter. But a slower expansion programme and changes to the general merchandise offering held back overall performance. Overseas markets were mixed with several European markets proving very tough. Tesco has also announced the formation of a joint venture in China with China Resources Enterprise which will fold Tesco’s 134 Chinese stores into CRE’s 2,986-strong estate. Tesco will also contribute £185m now, a further £80m on completion and another £80m in a year’s time in return for a 20 per cent stake.

In contrast, Sainsbury (SBRY) has continued to take market share in the UK grocery market. In a trading statement today it reported 5 per cent total sales growth in the second quarter with like for like sales up by 2.1 per cent, giving 1.5 per cent like for like sales growth for the whole of the first half. The company opened 31 convenience stores and five supermarkets in the period.

Pawnbroker Albemarle & Bond (ABM) says that talks with largest shareholder EZCORP over underwriting a fundraising to refinance its stretched balance sheet have failed. The company will now have to redouble its efforts to negotiate changes to its covenants with its banks having already agreed a 1 month extension to a 30 September covenant test which it would have failed. A chief restructuring officer will be appointed by 10 October.

Domino’s Pizza (DOM) traded well through the summer months, reporting UK sales up 10.4 per cent in the 13 weeks to 29 September. Year to date like for like sales are up 5.6 per cent in the UK with digital sales now accounting for more than 60 per cent of sales, almost half of which come from mobile phones. Operations in Ireland also performed well, like for like sales are up 5.2 per cent year-to-date, and the smaller German and Swiss businesses also solid like for like sales growth.

Homewares specialist Dunelm (DNLM) surprised the market with a reversal in like for like sales growth as it struggled during the recent warm weather and against strong comparatives. The 13 weeks to 28 September saw like for like sales dip by 5.3 per cent with the first few weeks particularly weak before like for like sales growth resumed on a week by week basis later in the period.

Wolfson Microelectronics (WLF) has said that the cancellation of orders from a major customer coupled with other orders slipping into next year means that revenues for the final quarter will be in the $40m-$50m range.

OTHER COMPANY NEWS:

Soco International (SIA) confirmed the positive performance of its test wells at the TGT-10XST1 exploration well offshore Vietnam, which flowed 27,600 barrels of oil per day.

Andor Technology (AND) expects to results for the year to 30 September in line with expectations. A restructure of its sales operations also appears to be bearing fruit with the company expecting to report record full year order intake, although timing of delivery remains uncertain.

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