What a week it was for Cairn Energy. On Wednesday, its shares fell to their lowest price in nearly a year. By the close of play yesterday, the stock had wrapped up its best week since the financial crisis.
The sudden turnaround in the Scottish oil group’s fortunes came on Thursday afternoon, when the Indian finance ministry introduced a new tax bill to the nation’s parliament.
For Cairn, which has been trying to recoup a $1.7 billion rebate from the Indian government as part of a long-running tax dispute, the proposal is a potentially lucrative one. “This is a materially positive step that significantly increases the chance of reimbursement,” Werner Riding, an oil and gas analyst at Peel Hunt, the broker, said.
Previously, he had thought that Cairn had only a 30 per cent chance of getting any money out of the Indian government; now, with India pushing this new bill to ensure that it remains attractive to overseas investors, he puts the figure at 90 per cent.
James Carmichael, Berenberg’s energy analyst, agreed that “the bill removes considerable uncertainty”. Both brokerages are now tipping Cairn’s shares to clients, with this drawn-out saga seemingly drawing to a close.
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Neither analyst expects Cairn to get the full $1.7 billion it was awarded by an international tribunal last December. Instead, they think it probably will get something closer to $1.1 billion. Still, that’s still a lot of money — equivalent to Cairn’s present market capitalisation, even after this week’s surge. Much of the rebate has been earmarked to be returned to shareholders, although Carmichael also expects it to “transform the company’s ability to fund new growth opportunities”.
Cairn shares, which surged by a quarter on Thursday, added another 9¾p, or 6.1 per cent, yesterday to 168¼p, extending their weekly gains to 31.7 per cent.
It was another decent week for the wider market. The FTSE 100 edged up 2.52 points to a one-month high of 7,122.95, leaving it 90.65 points, or 1.3 per cent, above where it began the week. It was its third straight weekly gain, equalling the best run this year. The more UK-focused FTSE 250 slipped back from the record high it reached on Thursday as it dipped 49.95 points, or 0.2 per cent, to 23,456.16. Still, it rose 507.33 points, or 2.2 per cent, across the week.
Long-suffering Capita shareholders will have relished the outsourcer’s ascent to the top of the leaderboard, a position it hasn’t frequented too often in recent years. The stock enjoyed its best session since November, jumping 4p, or 11.3 per cent, to 40p as it swung back to a profit in the first half. In general, companies have fared well during this latest results season, which got investors a little more excited about those due up next week. Watches of Switzerland, Britain’s biggest seller of Rolex watches, which is due to update the market on Tuesday, ticked up 27p, or 2.8 per cent, to £10.02, while Flutter, the Paddy Power owner, gained 360p, or 2.9 per cent, to £127.20 before its half-year numbers on Thursday.
Hospitality shares struggled, though, despite headlines about falling coronavirus cases. The Restaurant Group, the Frankie & Benny’s owner, retreated 3¼p, or 2.7 per cent, to 117p; SSP, the airport restaurateur, lost 6¼p, or 2.5 per cent, to 247p; and Mitchells & Butlers, the pubs group, fell 7½p, or 2.6 per cent, to 275¾p.
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However, there was some fizz in the East Imperial share price as the recently listed tonic maker bagged a deal with Dan Murphy’s, one of Australia’s biggest off-licence chains, to stock its drinks. It added 1p, or 8.8 per cent, to 13½p.
Wall Street report
A blockbuster jobs report pushed the S&P 500 and Dow Jones industrial average to new records, the S&P closing on 4,436.52, up 7.42 points, or 0.2 per cent, and the Dow on 35,208.51, a gain of 144.26 points, or 0.4 per cent.
