IG Group beats prediction to hit EBITDA up 34%.

IG Group’s earning before interest tax depreciation and amortisation (EBITDA) is up by more than a third, the spread betting company’s half-year results reveal.

The results for the 6-month period to end 30 November 2009 showed EBITDA up 34% at £81m (€93.9m, $134.6m), from £60.2m in the same period in 2008, beating the 32% increase that IG predicted in December.

There was strong growth in Australia, continental Europe and Singapore, as well as an increase in its UK customer base of 29%.

The growth reflected a strong EBITDA margin also up from last year, hitting 56.4% from 47.4% 12 months earlier, and trading revenue up 14% to £143.8m, from £126.4m.

Chief executive Tim Howkins said: “IG has again delivered record results with strong growth in both revenue and profits. We continue to experience strong levels of activity and account opening, both in the UK and overseas, where our expansion continues. All our markets have great potential and IG is well positioned to deliver further growth.”

Profit before tax rose by 34% in line with EBITDA to hit £78m, from £58.2.

IG Markets South Africa, a subsidiary, has also reached an agreement to acquire the business and client list of Ideal CFD Financial Services, IG Group revealed in a statement.

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Wall Street opened in negative territory this afternoon, as the ten-month rally left the S&P 500 trading at almost 25 times its companies’ reported operating earnings – the highest valuation since 2002.

Figures released soon after the opening bell were also disappointing. The National Association of Realtors unveiled an unexpected 16% plunge in US pending home sales for November, suggesting the recovery in the US housing market may have stalled.

One month’s data is not enough to judge whether this is really the case, however. We must consider the fact that there was a huge interest in the government’s $8000 tax credit, which was initially scheduled to expire at the end of November but recently extended, and is meant to expire sometime in mid-2010. Therefore the likelihood is there’s no longer any urgency to buy right now; first-time home buyers have more time to save and shop around.

Ironically, today’s data may end up being positive for stock markets, as it could contribute to the scaling back of expectations for an interest rate hike in the short term – the main factor that has been strengthening the dollar recently.

Separately, another report revealed that US factory orders rose by a stronger-than-expected 1.1% in November, as economists underestimated demand for business equipment. This follows a 0.6% rise in October.

When excluding transportation, orders climbed 1.9%, the biggest rise since June. In addition, bookings for capital goods, excluding aircraft and military equipment – a barometer of future business investment – increased 3.6%. This is higher than the previously reported 2.9% increase.

By 3.30pm (London time) the Dow Jones Industrial Average had bounced off earlier lows. The blue-chip index was trading 9.68 points (-0.09%) lower at 10574.28 while the broader S&P 500 was 2.17 points (+0.19%) higher at 1135.16. The Nasdaq, meanwhile, traded 2.81 points higher (+0.15%) at 1889.51.

RadioShack was among the star performers today, soaring 8.6% to $21.50 after Goldman Sachs upgraded the stock from ‘neutral’ to ‘buy’ and added it to its ‘Conviction Buy’ list.

Goldman Sachs also raised its price target on RadioShack to $25 from $21, representing a potential upside of 16% from the current price. [1]

Tenet Healthcare also rallied on the back of a Goldman recommendation. The broker added the second-biggest publicly held US hospital chain to its ‘Conviction Buy’ list as well. ‘Tenet is the only hospital company for which we see the potential for further margin expansion in 2010, starting from a lower baseline than the group,’ Goldman wrote in its latest report on the company. [2] Tenet’s shares traded 12.3% higher at $6.12.

Meanwhile, Potash Corp of Saskatchewan (USA), a fertiliser company, jumped 5.6% to $118.51 after being upgraded to ‘outperform’ by Credit Suisse. [3]

Elsewhere, Kraft Foods saw its share price advance 3.3% to $28.34 after Warren Buffett’s Berkshire Hathaway voted against a proposal related to Kraft’s offer for Cadbury.

Source: [1] Reuters News (5 January 2010), [2][3] Bloomberg News (5 January 2010)

Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.

The above comments do not constitute investment advice and neither IG Index nor Spread-Betting.org accept any responsibility for any use that may be made of them.

IG Index is Authorised and regulated by the Financial Services Authority, register number 114059.

The first trading day of 2010 has been impressive, with the Dow and S&P 500 both putting on over 1% during the first hour.

Stocks and commodities were buoyed by a barrage of robust manufacturing data today.

Official reports revealed that China’s Purchasing Managers’ Index (PMI) for the manufacturing sector rose at the fastest pace in five years. It came in at a seasonally-adjusted 56.1 in December, up from 55.7 the prior month.

In the meantime, a separate report released this afternoon showed the US ISM manufacturing index climbing to the highest level in more than three years, coming in at 55.9 from 53.6 in November.

‘An improvement in the data points will be another confirmation of the evidence that we’ve been getting stronger,’ said Edward Riley of Riley Asset Management in Boston. ‘Also, people tend to put more weight on data that comes out in the beginning of the year, so this could have an out-sized influence on trading.’ [1]

The robust data left the market feeling as if the global manufacturing industry is experiencing a synchronised rebound, which helped commodities and miners appreciate in value.

February crude oil advanced to a two-month high of $81.7 a barrel today, while gold climbed 2.4% to $1122 per troy ounce. In addition, March high-grade copper gained over 2% to $3.43 per pound.

Shares in US energy giants Chevron and Exxon jumped 2.5% to $78.9 and 1.1% to $68.96 this afternoon. Chevron’s gains may have been partially attributable to a bullish article in Barron’s. The financial newspaper said Chevron could gain 20% over the next year due to the heavy emphasis it has put on oil exploration projects.

Chesapeake Energy was another star performer, up 5.6% to $27.32 a share after Total SA agreed to pay $2.25 billion for a 25% stake in Chesapeake’s Barnett Shale gas fields.

Financials have also experienced a positive day so far, with Citigroup gaining 1.5% to $3.35 and Bank of America up 2.9% to $15.49.

Morgan Stanley, the sixth-biggest US lender by assets, surged 4.6% to $30.98 after UBS and Credit Suisse upgraded the company. UBS raised its recommendation on Morgan Stanley from ‘neutral’ to ‘buy’ while Credit Suisse upgraded the lender from ‘neutral’ to ‘outperform’.[2]

In contrast, US airlines remained in the red, as investors continued to speculate that higher oil prices, tougher security checks and colder-than-usual winter conditions would weigh on the sector’s bottom line. US Airways saw its shares sink 2.5% to $4.72, Delta Air Lines fell 3% to $11, and Southwest Airlines slid 2% to $11.20.

Elsewhere, Alcon Inc, the world’s biggest eye-care company, dropped 3% to $159.47 despite Novartis offering to buy the rest of the company from Nestlé SA and minority shareholders for around $39.3 billion.

Nestlé said it will sell its 52% stake in Alcon to Novartis for an average of $180 a share. Novartis also offered to pay 2.8 of its own shares for each remaining Alcon share held by the public.

By 3.30pm (London time) the Dow Jones Industrial Average traded 148.12 points (+1.42%) higher at 10576.17, while the broader S&P 500 climbed 15.53 points (+1.39%) to 1130.63. The Nasdaq fared relatively better, meanwhile, adding 27.65 points (+1.49%) to 1887.96.

Source: [1] Reuters News (4 January 2010), [2] Bloomberg News (4 January 2010)

Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.

The above comments do not constitute investment advice and neither IG Index nor Spread-Betting.org accept any responsibility for any use that may be made of them.

IG Index is Authorised and regulated by the Financial Services Authority, register number 114059.