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News & Tips: Moss Bros, Revolution Bars & more

Today's market overview

After yesterday's slip equities in London resumed their upward climb yesterday.

IC TIP UPDATES:

Moss Bros (MOSB) shares dipped this morning, but perhaps partly in response to a previous share spike over the last week or so. An AGM statement from the company revealed like-for-like sales rose 2.3 per cent over the first 15 weeks of the financial year or 3.7 per cent on a total basis. As previously announced at the results in March, cash deposits have been reduced, leaving like-for-like hire sales are down 14.2 per cent on a ‘cash taken’ basis. However, the total value of hire orders is only down 1.6 per cent. The re-introduction of the April sale has also had a 50 basis point knock on gross margins, but analysts have said that still marks an outperformance compared to the wider sector. We knew to expect margin pressure this year given the tougher trading environment, and taking into account the shares generous dividend yield, we remain buyers.

Shares in Revolution Bars (RBG) fell 32 per cent after the group warned that the impact of the living wage, the double increase in the minimum wage, the apprenticeship levy, and the increase in business rates, along with five of its new bars taking longer than expected to become profitable, will weigh on underlying earnings in its full year results. But like for like sales are up 1.7 per cent year to date and gross margins are as expected. Our buy tip is under review.

Quadrise Fuels International (QFI) has been advised by Maersk that Wartsila is expecting to deliver the interim letter of no objection (LONO) to Maersk by the end of this month, which would then be provided to the company. In March, Quadrise confirmed the trial of its MSAR emulsion bunker fuel with Maersk had been suspended as the trial vessel was to be redeployed. At that time, Quadrise said it doubted the trial would be resumed before the end of 2017. It represents a positive beat, but investors need clarification on Maersk’s intentions. Buy.

Close Brothers (CBG) reported growth across all its divisions during the three months to April. The banking business grew its loan book 2 per cent during the quarter to £6.7bn, while the asset management segment also benefited from net inflows and market gains. Wealth manager Winterflood also improved its performance, although management cautioned it still remains sensitive to market conditions. Management also flagged more modest growth in retail and commercial finance, as it focuses on maintaining its margin and prudent underwriting. We remain buyers.

KEY STORIES:

The consortium bidding for Shawbrook (SHAW) - led by its largest shareholder Pollen Capital - has extended its deadline for acceptances to 26 May. The bid vehicle said it had so far received 45.5 per cent acceptances of its 330p a share takeover. It requires 50 per cent acceptances to complete the deal. The shares are trading at a slight premium to this unrecommended offer price and we continue to think it represents poor value for shareholders. Reject.

Gemfields (GEM) has received an unsolicited takeover offer from 47 per cent shareholder Pallinghurst Resources, in an all-share deal that essentially values Gemfields stock at last night’s closing price of 38.1p a share. Pallinghurst – which called its offer “a logical step in consolidating and simplifying the group structure” has received the support of the second and third largest shareholders, which together with other individuals takes the offer to over 75 per cent of the register. Gemfields has advised its shareholders to take no action.*

*This article previously incorrectly said Gemfields has rejected the offer. As of 19 May, the company board had made no recommendation to shareholders.

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By Graeme Davies,
19 May 2017

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