Stock of the day 01/06/2015 – Amec Foster Wheeler PLC/ Synergy Health PLC

It’s the turn of some FTSE250 stocks to announce their latest results on Tuesday, as Amec Foster Wheeler and Synergy Health both attempt to impress investors.

The fairly embryonic Amec Foster Wheeler PLC had a rough time of its since its formation; it will be hoping its mild upswing in 2015 can continue after its first-half trading statement on Tuesday. The news at the start of last year that AMEC was to takeover Foster Wheeler for £1.9 billion initially inspired the stock to a high of £12.98 at the start of April 2014.


(Source: IT-Finance.com 01/06/2015)

However, the completion of the deal, and arrival of Amec Foster Wheeler, saw a swift turnaround for the stock, culminating in a low of £7.91 in the middle of December. It entered the New Year at £8.42 and quickly plunged back down to £7.76 in the middle of January. However, since then the stock has picked up slightly, hitting a high of £9.83 towards the end of March, its best price since November 2014; yet it could sustain this level, and Amec Foster Wheeler is currently trading at £9.29.

As welcome the takeover news was at the start of 2014, the news of its finalisation saw just as robust reactions, but this time in the opposite direction. Obviously the downturn in oil prices can’t have helped the stock, but there is a direct correlation between the news of the AMEC/Foster Wheeler takeover completion, and the rapid declines felt by the newly merged company.

However, it has being doing good business of late, securing some notable contracts in the past few months. The Beco LNG contract, worth $3.8 billion, was confirmed last week, whilst an ITER nuclear contract, worth around $78 million, was awarded earlier in May. The company has also seen positive progress in its enhanced oil recovery field project in the North Sea, an area, however, where the company is under pressure to slash its cost base since the oil tumble in 2014. Amec Foster Wheeler has a consensus rating of ‘hold’ with an average target price of £10.17.

The curse of negative M&A reports has hit Synergy Health PLC ahead of its full year 2015 results on Tuesday. Up until last week Synergy had been doing very well indeed; a gradual increase throughout most of 2014 saw it open the year at £12.01 before increasing to £14.01 by the middle of October. It is here that Synergy’s real growth kicked in, as it surged by 31% to £18.39 following the announcement of a $1.9 billion takeover deal by Steris Corp. This goodwill carried on all the way until the middle of April 2015, where Synergy hit an all-time high of £24.28. Whilst the stock then began to recede from this high towards the end of April, it was the end of May where its troubles really make themselves known.


(Source: IT-Finance.com 01/06/2015)

The news that the Federal Trade Commission is intending to block the deal between Synergy and Steris, which has a looming long-stop date of July 12th, understandably sent the arguably inflated stock price plummeting. It lost 4.5% on the 26th, and another 16% on the 27th to reach £18.10. It stalled its losses somewhat on the 28th, rising back by around 4.5%. However, with little good news surrounding the takeover, the Synergy has begun to fall once more, and has a current trading price of £17.99.

The reason for the FTC’s displeasure is the tax-avoiding intentions of Steris, with the move largely arranged for tax-inversion purposes. The FTC has also claimed that the merger would harm competition by removing ‘likely future competition between Steris's gamma sterilization facilities and Synergy's planned x-ray sterilization facilities in the United States’. Of course, Synergy and Steris are challenging the FTSE’s decision, but face an uphill battle to instil trust back in investors in the meantime.

In amidst all of this turmoil, there is a chance Synergy’s full year results won’t full register with investors. Nevertheless, the company stated in its third quarter results, announced in February, that it is on track to meet the Board’s full year expectations after posting 5.7% year-on-year growth in reported revenue to £303.1 million for the first 9 months of 2015, with underlying revenue (excluding currency effects) growing by 9.6%. Synergy Health has a consensus rating of ‘hold’ with an average target price of £19.77.

Monday’s stock news:

M&A rumour and resolution continues to be the main equities mover in 2015, with Imagination Technologies, one of the most recent additions to the FTSE250, being the latest takeover talk winner. The tech stock jumped over 7.5% as analysts at Liberum suggested that Imagination was an attractive prospect for any takeover hungry companies, something that has increased since Intel got rid of its stake in Imagination earlier in the year.

AstraZeneca had its own good news this morning, as it reported its lung cancer drug ‘AZD9291’ is showing positive progress. This helped the pharmaceutical giant initially grow by around 2.5% after the bell, but an increasingly bearish market shrank these gains to around 0.4%. Standard Chartered, on the other hand, fell by around 1.7% after the bank claimed it was trying to ‘figure out’ what role it played in the ever-expanding FIFA scandal.