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News & Tips: Prudential, NCC, Entertainment One & more

M&A activity adds some excitement to otherwise dull markets
August 10, 2016

A flurry of M&A activity among the mid-caps has added some excitement to what would otherwise be a rather dull summer trading day. Click here for The Trader Nicole Elliott's latest thoughts.

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Prudential (PRU) posted a 6 per cent rise in operating profits to £2.06bn for the first half of the year. The life insurer's Asia business continued to deliver the biggest rise in operating profit from long-term business, up a fifth to £682m. Outflows from retail funds in its M&G business meant operating profit declined 10 per cent. We place our recommendation under review.

Shares in PaySafe (PAYS) climbed 5 per cent after the online payments specialist grew underlying sales by a fifth in the first half of 2016, prompting management to hike full-year revenue guidance. Moreover, the group’s acquisition of US rival Skrill meant adjusted cash profits nearly tripled to $144m (£111m). Under review.

Investors reacted to the sudden resignation of NCC (NCC) finance chief Atul Patel from the board of the cyber security group. He will leave in early February, or earlier if a successor is appointed. Investors responded by sending the group’s shares down a tenth. Under review.

Ahead of its interim results next week, Gem Diamonds (GEMD) has warned that extreme weather conditions at its Letšeng mine in Lesotho have led to limited access and reduced production. Damage to overhead power lines is soon expected to be restored, though the company said it may need to review its current year operational guidance. While recovered carats are not expected to be “affected materially”, costs could be impacted. Our recommendation is under review.

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Shares in Entertainment One (ETO) climbed 7 per cent after the film-and-TV distributor’s bosses said they had rejected a preliminary takeover bid of 236p from ITV (ITV). The offer valued the group at just over £1bn.

Shire (SHP) continues to impress with its steady roll-out of new products. The rare disease specialist has now launched Vonvendi, the first ever recombinant treatment for adults with rare blood disorder von Willebrand disease. The share price bumped up another 1.5 per cent following this announcement and with a well stocked pipeline, we expect more similar positive updates in the near future. Buy.

Despite a major lack of financial information, biotech darling GW Pharmaceuticals (GWP) has provided an update on quarterly trading. As expected from a loss-making company, this focused more heavily on the clinical trials success which has been achieved in the last 9 months than the financials. Losses have escalated but the group remains in a strong net cash position and the outlook is exciting following the recent approval of its first drug. Buy.

Motor retailer Lookers (LOOK) has announced its disposal of its parts business to Alliance Automotive for £120m. Alliance Automotive is part of Alliance Automotive Group, a large European distributor of vehicle parts to the automotive aftermarket. The transaction is expected to complete by the end of October 2016.

Just when we thought shares in Centamin (CEY) could not get any higher, the stock pushed up 3 per cent this morning after the Egypt-focused gold miner posted an impressive set of half year results. Second quarter production of 140koz was 12 per cent ahead of the first three months of the year, and 30 per cent up on 2015, with all in sustaining costs well down at $669 and the average realised gold price at $1,268 an ounce.

Petra Diamonds (PDL) has announced the recovery of a 138.57 carat Type IIa white diamond at its Cullinan mine in South Africa. The diamond, which will be part of the company’s next sales process at the end of this month, helped to nudge the miners shares up by 1.5 per cent in early trading.