Inmarsat traded just below a three-year high yesterday on hopes it can resurrect a deal with LightSquared, its bankrupt US customer.
The satellite operator climbed 5.4 per cent to 732.5p after Morgan Stanley analysts argued that investors had been too quick to write off the value of the LightSquared contract. In July, Dish Network bid $2.2bn for LightSquared, which failed after regulators refused to approve its plans to build a mobile network using Inmarsat’s bandwidth.
With Dish Network’s offer expected to be approved by the bankruptcy court later this month, a resumption of the company’s spectrum rental agreement with Inmarsat looked increasingly likely by early next year, Morgan Stanley said.
LightSquared’s existing $145m a year deal could be worth 240p per Inmarsat share, said the broker. However, it included only half that value in its 820p price target to reflect that interference problems with GPS networks have not yet been solved. Combining Dish’s network with Inmarsat’s offered one potential solution, the broker argued.
Since hitting a five-year low when LightSquared filed for bankruptcy last May, Inmarsat shares have already jumped 87 per cent.
Vodafone provided the day’s main focus awaiting confirmation that it had sold out of its Verizon Wireless joint venture for $130bn. The FTSE 100 rose 1.5 per cent or 93.26 points to 6,506.19 as Vodafone added 3.4 per cent to 213.2p.
Miners underpinned the wider market as stronger than expected Chinese manufacturing data lifted metals prices. Anglo American was up 3.9 per cent to £15.36, Antofagasta took on 3.6 per cent to 885.5p and Ferrexpo rose 6.7 per cent to 177.3p.
Rio Tinto led the sector, up 4.2 per cent to £30.35, as the miner hosted a visit to its Pilbara iron ore mine in Western Australia. Expansion was running ahead of schedule and demand from Chinese steelmakers remained largely unchanged, according to JPMorgan analysts on the tour.
Silver miner Fresnillo underperformed, down 2.1 per cent to £12.75, after UBS advised taking profits. A 27 per cent rally last month meant the stock was being valued at 36 times forward earnings, against a historical average of 21 times, UBS said.
WPP rose 3.5 per cent to £12.37, a 13 year high. Deutsche Bank added the stock to its “buy” list in a note examining the convergence between IT contractors and advertising agencies as more marketing spend goes toward digital.
“While the peers have some very strong individual digital brands, WPP has the strongest collection of digital businesses,” said Deutsche. The increased importance of media buying and market research justified a £15 target for WPP, it said.
Housebuilders gained after a Hometrack survey said prices for August showed their biggest year-on-year rise for more than three years. Persimmon was up 4.2 per cent to £11.45, Taylor Wimpey firmed 4.5 per cent to 103.9p and Bovis Homes advanced 4.5 per cent to 777p.
A falling oil price helped lift the airlines, with IAG up 3.4 per cent to 296p and easyJet rallying 4.1 per cent to £12.84.
Separately, Merrill Lynch said EasyJet “has significant medium-term M & A risk” as founder Sir Stelios Haji-Ioannou may choose to sell his 25.7 per cent stake. Sir Stelios’s sale of Stelmar Shipping in 2005 could be seen as an indication of his intentions, the broker said.
A retread of vague takeover speculation helped lift Tullett Prebon, which closed 5.7 per cent higher at 361.3p. Macquarie was rumoured in April to have looked at the interdealer broker, when the shares were trading at around 240p.
BWin, the online casino and bookmaker, fell a further 1.7 per cent to 108.1p after weaker than expected results last week led Morgan Stanley to downgrade.
“We see potential for a compelling turnround, and see the US as a free option at today’s price,” it said. “However, declining revenues in all products and countries has undermined our confidence, and marketing cuts could exacerbate this.”
New issue CentralNic rose 19.1 per cent to 65.5p, giving the internet domain name registrar a market value of about £36m.