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News & Tips: Sports Direct, Restaurant Group, Aviva & more

Today's market overview

News & Tips: Sports Direct, Restaurant Group, Aviva & more

Further terror attacks in France coupled with the impending first round of presidential elections there this weekend have dampened investor enthusiasm, leaving markets off marginally in London this morning. Click here for The Trader Nicole Elliott's latest thoughts on the markets.

IC TIP UPDATES:

Sports Direct (SPD) has announced its intention to move into the US this morning, via the acquisition of US sports clothing and outdoor equipment chains Bob's Stores and Eastern Mountain Sports in a deal worth $101m (£79m). Parent company Eastern Outfitters filed for bankruptcy earlier this year, so Sports Direct has procured the chain via a Chapter 11 process in the US. But it seems the market isn’t overwhelmed with the news - the shares are down around 1 per cent. Sell.

Restaurant Group (RTN) chief financial officer Barry Nightingale will leave the company with immediate effect after less than a year in the job. The owner of Frankie & Benny’s is in the middle of an overhaul under new boss Andy McCue, which is set to include store closures and promotions to draw customers back into its restaurants. Shareholders appear to be spooked by further management issues as the share price fell more than 6 per cent in early trading. This is not completely unsurprising given Restaurant Group’s recent troubles, but shouldn’t undermine Mr McCue’s long-term plans. We maintain our buy tip.

Aviva (AV.) has bought the remaining 50 per cent of its life assurance joint venture with VietinBank, making it a wholly-owned subsidiary of Aviva. The company has signed a new distribution agreement with Aviva to sell life and health insurance products through VietinBank’s network of 1,100 branches, the second largest in Vietnam. Buy.

Vernalis’ (VER) quest to launch a second cough and cold product before the start of the 2017 winter has, this morning, received a setback. The drug - which was filed with the US Food and Drug Administration (FDA) earlier this year - has not yet been granted approval due to ‘outstanding items’ in the company’s new drug application (NDA). Investors have, unsurprisingly, reacted badly to this news, sending shares down 14 per cent in early trading. But, we think this movement may be an over reaction. The FDA did not raise any concerns about the drug’s formulation or chemical make-up and so it would appear that approval will ultimately be granted. The only concern is that this delay may prevent launch before the start of the US cough and cold season. We place our buy recommendation under review.

KEY STORIES:

A first quarter update from Reckitt Benckiser (RB.) revealed the group is on track to reach its revenue target this year, but warned of a “challenging” market environment. The consumer goods company expects to complete its acquisition of Mead Johnson by the end of the third quarter in an effort to expand its presence in consumer health and emerging markets. The group is also considering selling off its food business, which contributed around 4 per cent to overall sales. The share price slipped slightly by just over 1 per cent in early trading.

Shares in engineering company WS Atkins (ATK) are up 5 per cent in early trading following a recommended offer from SNC-Lavalin. The boards of both companies have agreed on a price of 2,080p in cash for each share in Atkins. The offer values the group’ share capital at £2.1bn and is expected to become effective in the third quarter of 2017.

Charles Stanley (CAY) enjoyed a 3 per cent bump in its share price during early morning trading, after reporting a 6 per cent increase in assets under management to £24bn during the 12 months to the end of March. The wealth manager reported a 21 per cent rise in discretionary funds, while execution-only was up almost a quarter. This surpassed the performance of the WMA Balanced index during the period, which rose 16 per cent. However, as the wealth manager shifts increasingly towards discretionary management and away from advisory management, funds under the latter declined 4 per cent. Overall net inflows were £200m, while market gains were £400m.

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By Graeme Davies,
21 April 2017

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