Bizwatch

Sunday, Aug. 29, 2004

After a low, shares in Shell may be a bargain

GEORGE ESIRI/REUTERS

Is It Time to Buy Shell?
Eight months after disclosing that it had massively overstated its proven oil reserves, Royal Dutch/Shell continues to be roiled by a barrage of bad news. Britain's Financial Services Authority and the U.S. Securities and Exchange Commission are still investigating the company, even after announcements last week that they are fining Shell a combined $150 million for "unprecedented misconduct," in the words of the FSA. And Nigeria's Senate passed a resolution calling on the company to pay $1.5 billion for environmental and health hazards it allegedly caused in the Niger Delta.

But with Shell stock at about $7.30 a share in London , or just over 11 times its estimated earnings this year, and other Big Oil stocks such as BP and Exxon Mobil trading closer to 14 times earnings, that suggests: buy. "We can't help but think there is now limited downside risk," said Merrill Lynch analyst Mark Iannotti, while

INDICATORS
Rising Interest
Japan's Sumitomo Mitsui Financial Group sought to scupper a merger agreement between rival banks UFJ Holdings and Mitsubishi Tokyo Financial Group (MTFG) with a $29 billion bid for UFJ. It said it would consider SMFG's offer, but would still link up with MTFG, creating the world's largest bank.

Stripe Strife
German-based sportswear maker Adidas said it had filed a suit in the U.S. against Polo Ralph Lauren, claiming a twin-striped jacket produced by the fashion house infringed upon Adidas' trademark three stripes.

upgrading his recommendation. Shell's stock isn't the bargain it was last winter after the reserves scandal broke, when it traded at around $6.30. Keeping it buoyant: plans for a big revamp of Shell's corporate structure and continuing rumors — dismissed by both sides — that France's Total might try to acquire the company.

Losing Ground Control
Ah, summertime, when the livin' is easy and Europe's airlines enjoy a holiday boom — right? Not exactly. Alitalia CEO Giancarlo Cimoli last week warned that the state-owned carrier faced collapse within 20 days unless unions agree to cost cuts and layoffs. But downsizing has consequences: British Airways (BA), which has chopped 13,000 jobs since 9/11, last week grounded more than 100 flights at its Heathrow hub.

The main reason: staff shortages. Did BA fumble its math? The carrier blames twice the normal rate of workers quitting the firm earlier in the year, with recruiting delays not helping. Unions disagree: BA "didn't just cut the flab," railed Ed Blisset of the GMB. "It cut into the bone as well." But with quieter winter months approaching, "shareholders would probably prefer [BA] run on edge this time of year," counters one airline analyst. Even CEO Rod Eddington lent a hand at Heathrow late last week — a great way to spend a summer holiday. — By Adam Smith

The Spitzer Treatment
Britain's GlaxoSmithKline (GSK) reached a $2.5 million settlement with New York Attorney General Eliot Spitzer over allegations that it withheld information about the safety of antidepressant Paxil. GSK also agreed to publish online the results of all its clinical trials since December 2000. Spitzer sued the firm in June, claiming it failed to release data suggesting Paxil could increase suicidal tendencies in children.

The Bottom Line
	This is an economy with no spare capacity
		TREVOR WILLIAMS, chief economist at Lloyds TSB, warning that Britain's second-quarter GDP growth of 3.7% year-on-year, its fastest in almost four years, could stoke inflation