Equities have rebounded after a weak start in London thanks to a boost to the banking sector from the results of stress tests. Find out what The Trader Nicole Elliott thinks of the markets here.
IC TIP UPDATES:
It’s the most wonderful time of the year – banking stress test time. Our buy tips Barclays (BARC) and Lloyds (LLOY) comfortably met the Bank of England’s capital stress scenarios, while buy tip Royal Bank of Scotland (RBS) did not meet its individual capital guidance, but does not need to submit a revised capital plan as current management steps to improve the balance sheet are seen by the regulator as sufficient.
Gulf Marine Services (GMS) announced it has secured a new $620m debt facility. The syndicated loan facility combines Islamic and conventional financing and will replace the Group's existing funding facilities with no changes to the previous borrowing covenants. Buy.
The makeover at DIY retailer Topps Tiles (TPT) must be doing the trick as the group reported its goal of taking £1 in every £3 spent in the UK domestic tile market had been achieved a year early. Its catchily-named strategy of ‘out specialising the specialists’ seem to be working with DIY-capable homeowners while its trade loyalty programme helped professional sales rise 50 per cent, an important market given those homeowners who increasingly want improvements done for them. Buy.
It was never going to be an easy time for Merlin Entertainments (MERL) following the rollercoaster ride accident at its Alton Towers theme park earlier this year. The company said trading at the park was “significantly below” the prior year but that year-on-year declines had narrowed in recent weeks reflecting a temporary change in customers brought about by Halloween. Elsewhere, its Legoland parks is expected to contribute a “strong margin performance” in 2015 while its accommodation offering across its global estate “continues to perform well”. Buy.
St Modwen Properties (SMP) expects to deliver record profits for the year to November, underpinned by a buoyant property market and solid progress in advancing its development portfolio. Securing planning consent to develop its 57-acre New Covent Garden site resulted in a £128m valuation uplift in the first half, while in the second half, the second phase of the Longbridge redevelopment was started, including a new 150,000 sq ft Marks & Spencer store. Buy.
Sell tip Shanks (SKS) have disposed of its non-core industrial cleaning business in Wallonia, Belgium. The total loss on disposal is expected to be around €4-5m for the waste disposal group. Shares in Shanks rose 2 per cent on the news. We place our recommendation under review.
As the Christmas month begins, our festive tip Park Group (PKG) moved a little higher after the group reported a first-half loss per share of 0.62p, down on the 1.05p loss per share in the comparable period last year. The company’s earnings are weighted towards the second half, and the order book for the year is 7 per cent ahead of last year. We retain our buy tip.
Our buy tip Jupiter Fund Management (JUP) has lost its chief financial officer Philip Johnson, who has been with the company for six years. The finance role had been narrowed as part of a management restructure. We are keeping our buy tip.
KEY STORIES:
Setting the stage for Spectre, Star Wars: The Force Awakens and other blockbusters drove film revenues up 19 per cent to £26.8m at Pinewood (PWS), helping the studio and production services group post a 13 per cent rise in after-tax profits to £4.3m in the six months to 30 September. Pinewood also continued its expansion and raised £30m via a share issue to pay off bank debt.
Petra Diamonds (PDL) has acquired an interest in the Kimberley Mines in South Africa from De Beers Consolidated Mines in a consortium with Ekapa Mining, an established Kimberley-based diamond tailings producer. Ekapa Minerals, the consortium's acquisition vehicle owned by Ekapa Mining (50.1 per cent) and Petra (49.9 per cent), has entered into a binding agreement with DBCM to acquire the Kimberley Mines for ZAR102m (£4.68m). Separately, Petra Diamonds’ lender group has agreed to waive the measurements of the two covenant tests related to year-end cash profits. Buy.
Iron ore futures on Monday dropped below a closely watched level in Singapore trading — $40 a metric ton — for the first time ever. Meanwhile, demand for basic commodities is underlined by the recent poor performance of the The Baltic Dry Index.
Croda (CRDA) has strengthened its crop care arm by acquiring Netherlands-based Incotec Group, a developer and supplier of technologies for vegetable seeds and field crops, for €155m (£109m).
Van hire group Northgate (NTG) reported an 8 per cent drop in pre-tax profit during the first half of the year, largely due to the £2.4m impact of higher vehicle depreciation rates.
Shares in ITE (ITE) slid 6 per cent after the events group reported lower sales and a 22 per cent drop in adjusted pre-tax profits in the financial year to 30 September. The declines were due to tougher trading in Russia and central Asia. However, the group diversified its business by making three acquisitions - Breakbulk, Eurasia Rail and Africa Oil Week - and booked £77m of revenue for 2016.
Indian power generator OPG Power Ventures (OPG) increased its capacity by 122 per cent to 600MW during the first half of the year. This helped boost revenue by just over £10m to £56.6m.
OTHER COMPANY NEWS:
Gooch & Housego (GHH) posted double-digit revenue and profit growth in the year to September as strong demand for telecom and life science products easily offset a softening Chinese microelectronics market.
McColl’s Retail Group (MCLS) might still be experiencing a drop in like-for-like sales but the fall of 1.8 per cent is a 0.5 per cent improvement on the prior quarter. And management is not being put off as it forges ahead with its convenience store expansion strategy which involves the company having 1,000 by the end of 2016. It added 60 new convenience stores and made 45 food and wine conversions in the period taking its total convenience estate to 893. Also, its first Subway franchise is open and alcohol has been introduced to 100 newsagents. Hold.
Wealth manager and employee benefits house Mattioli Woods (MTW) has released a decent trading statement ahead of its interims for the six months to the end of November. Year-to-date revenue is up 16 per cent on the past comparable, buoyed by recent acquisitions.
Organic sales climbed 18 per cent at GB Group (GBG) in the six months to September, driving a 21 per cent rise in operating profits at the identity data specialist. Revenues rose more than 35 per cent in both the identity proofing and identity solutions business, and the group won major contracts with Bank of New Zealand, Maybank and Ping an Puhui.
