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Bwin boosted by talk of payment division sale, as FTSE shrugs off eurozone downgrades

Analysts say payment business could fetch £64m, with Bwin’s Ongame poker division also up for sale

Talk that online gaming group digital could sell some of its non-core businesses has received a mixed response.

The company was said to be considering a flotation of its payment processing business CQR in an effort to unlock value for shareholders. But Paul Leyland at Investec issued a sell note on the business, saying:

We would be sceptical of this as a catalyst for four reasons. First, it is unlikely to be near-term (2013 plus). Second, the business is unlikely to be particularly large. Third, it is likely to carry significant revenue risk currently. Finally, we see the online gambling payments model challenged in a regulated environment.

Michael Campbell at Daniel Stewart was more positive. Bwin is already close to selling its Ongame poker network, and the broker estimated that the two disposals could between them raise around £90m for the company. Campbell said:

This will boost our estimated net cash of £210m for 2012 by around 43% to £300m. We remain buyers given the strong balance sheet and cash upside from the sale of non-core assets, the continuous shift towards regulated revenues, and US upside potential.

In the market Bwin ended 1.4p higher at 164.1p.

Overall the FTSE 100 finished 20.80 points higher at 5657.44 as investors reacted calmly to Friday’s downgrade of the credit ratings of nine eurozone countries by Standard & Poor’s. Angus Campbell, head of sales at Capital Spreads, said:

The market seemed to be unconcerned with the recent downgrades across Europe, it’s possible knock effect of a downgrade to the EFSF [bailout fund] and a threat of Greece exiting the eurozone. The index ground higher throughout the day as investors discounted the recent run of bad news as already priced in.

In the absence of any direction from US markets which were closed for Martin Luther Day, the main driver for the small gain was a French bond auction that was considered to be successful and was as if the market had stuck two fingers up at the credit ratings agency.

The rally comes with a hint of caution though as it has been on the back of low volumes. We will have to wait to see if US markets will follow suit tomorrow. Clients have been selling into today’s strength expecting it so be short lived.

And proving the Eurozone problems were not far below the surface, banks came under pressure again. Barclays fell 2.1p to 199.1p and Lloyds Banking Group lost 0.035p to 29.465p. But Royal Bank of Scotland managed to rise 0.32p to 24.42p.

Carnival was the biggest faller in the index, down 370p to £18.78 after the Costa Concordia disaster in Italy.

Outsourcing group Capita closed 10.5p lower at 647.5p after downgrades from both Merrill Lynch and Collins Stewart.

Heading in the other direction was Pearson, up 33p at £12.50 ahead of an update on Thursday. In a buy note UBS played down talk that Apple could be set to compete with Pearson in the educational sector:

We believe trading is likely to remain robust in the fourth quarter, although tough comparisons at the likes of Penguin make the scope for upgrades hard to judge.

Later that day [Thursday] Apple is holding a press conference in New York to announce its plans in education. Judging by investor queries, concerns exist that Apple could start to compete more directly with Pearson in provision of textbooks. But, UBS Apple analyst Maynard Um thinks this highly unlikely given Apple’s role as a distributor of other’s content (seen with iTunes/App store) and focus on selling hardware.

Among the mid-caps, Inmarsat dropped 22.3p to 397.7p after a negative US report on its partner LightSquared.

A special board formed to advise the US government announced that LightSquared’s network would cause harmful interference to many GPS receivers. Given that Inmarsat receives payments from LightSquared under the terms of a spectrum sharing agreement, any doubt about the US group’s future earnings has an immediate impact on sentiment towards Inmarsat. Analysts at JP Morgan said:

The [US agency] statement increases the pressure on the FCC [Federal Communications Commission] to remove the grant given to LightSquared to build a nationwide wireless network and represents a severe setback for LightSquared’s future.

We nevertheless believe that spectrum in the US remains valuable and therefore any owner of the LightSquared spectrum would continue to make the payments to Inmarsat. Of our 800p fair value for Inmarsat 100p are driven by the LightSquared payments


But Tui Travel added 3.2p to 164.9p after UBS added the company to its merger watch list and issued a buy recommendation with a 220p target. There has been speculation for some time that Tui’s parent, Tui AG, could buy out the rest of the business, funded by a sale of Tui AG’s Hapag-Lloyd container shipping division. While UBS admits the idea is not new, it believes the move could happen:

Although a potential buyout of 45.5% of Tui Travel has been in the public domain for some time, we see this as increasingly plausible, with Tui Travel’s valuation offering considerable fundamental upside (37% to 220p price target) whilst price support should remain as we see low risk of Tui signalling disinterest.

Lower down the market, Rockhopper Exploration, one of a number of companies looking for oil off the Falkland Islands, rose 28.75p to 303.75p after saying it expected to find a partner for its Sea Lion field. The company told a Morgan Stanley conference last week that seven or eight companies had expressed interest, and it expected a deal within three months. It would even be willing to relinquish the operation of the field if the interest was sufficient. Exploring near the Falklands is politically sensitive because of the continuing ownership dispute with Argentina. But Morgan Stanley said:

Management believes the current political issues in focus are being over-played, and are mostly posturing by countries rather than cause for concern.

Weekend reports suggested Cairn Energy, down 0.8p at 291.4p, could be interested in a possible takeover of Rockhopper. Cairn has around .6bn of liquid assets which could fund its existing Greenland project as well as new ventures. But Andrew Whittock at Liberum Capital said:

We would view any partnership with Rockhopper negatively. It would be better if it maintained its focus on exploration or returned all liquid assets to shareholders than pay a premium to get bogged down in a field development in a region of significant political risk. © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds