After a wobble amid concerns over the fixed income martkets, London equities are ending the week on a relatively positive note. Click here for The Trader Nicole Elliott's latest views.
IC TIP UPDATES:
The financial repercussions from historical phone hacking claims are still ongoing at Trinity Mirror (TNI). The Express publishers have this morning announced they are setting aside another £7.5m to deal with the allegations. Trading in the first half of the year has been tough at the publisher as it - likes many of its peers - continues to battle the drop off in demand for print advertising. Even so, management expects interim results in line with expectations. The group also confirmed its new contract to print the Guardian and Observer newspapers in their new tabloid form. The Guardian’s struggles in the evolving media world have seen it cut costs wherever possible, including closing down its own print facility. Trinity Mirror’s shares have fallen 2 per cent in early trading and, though they still look cheap based on historic metric, we place our buy recommendation under review.
Hurricane Energy (HUR) looks set to develop the early production system at its Lancaster field, after the North Sea oil firm raised $520m last night. The fundraising was made up of $300m in new equity at 32p a share and $220m in convertible bonds, which Hurricane acknowledges “represents significant dilution to Shareholders”, explaining that incorporating a pre-emptive offer to all shareholders “has not been practical”. That’s despite last month’s issue of warrants at 51p, which now feels like something of a misdirection. Analysts at Panmure Gordon also noted that the deal “strongly suggests that, contrary to previous indications, no deal is likely, at least in the near to medium term”. Our tip is under review.
There was better news for another of our natural resources tips. San Leon Energy (SLE), which owns a stake in the world-class OML 18 field in Nigeria, this morning confirmed it had received an offer of 67-76p a share from China Great United, which is conditional on the satisfactory completion of due diligence checks and should be made within 45 days. Shares are up 28 per cent this morning at 38p. Buy.
Outsourcer Serco (SRP) is expecting revenues to be roughly flat on last year when it reports its interim results in Early August. Order intake on the other hand has been strong, with £2.4bn of order intake helped in large part by its winning of the £1.5bn contract to operate Grafton Prison. It also makes the last 12 months the largest order intake for the group since 2012, with £4bn of work won. We stay at buy.
BHP Billiton (BLT) has approved a $250m pay-out for the current year, as part of remediation and compensation programmes connected to the Samarco disaster. A final date for negotiation of a settlement of public civil claims with Brazilian prosecutors - amounting to $47.5bn and $6.1bn – has been pushed back to 30 October 2017. The mine, whose tailings dam collapse in 2015 led to 19 deaths, is not expected to re-open in 2017. Our buy call for the stock remains unchanged.
Although results had been scheduled for next week, Supergroup (SGP) released its full year results early on fears of a document leak. The group stated that it had found out an external party may have had access to a draft of the results following “a random theft from an employee”, and so released some highlights of the report early. Revenue was up 27.4 per cent to £752m while retail like-for-like sales growth was up 12.7 per cent. The underlying margin fell130 basis points to 60.2 per cent as its wholesale channel gained traction. Underlying pre-tax profit increased 18.4 per cent to £87m while EPS rose 17.4 per cent to 84.5p. Shares fell just over 2 per cent the morning after the announcement was made. Buy.
Shares in Wincanton (WIN) fell more than 9 per cent yesterday and a further 3 per cent in early trading today after the logistics company announced in a trading update that it has experienced weaker than expected performance in some of its transport related contracts, which have created some “profit headwinds” in the first quarter. But it added that operational efficiencies across the business should mitigate this throughout the rest of the year and so pre-tax profits for the year should meet expectations. Buy.
Infrastructure specialist John Laing (JLG) has released an pre close update, putting to rest its battle with the Australian government over the New Royal Adelaide Hospital. The project has now reached commercial acceptance. Discussions are ongoing for its other troublesome project, the Greater Manchester Waste Disposal Authority. Besides those, the investment portfolio is performing in line with expectations and market conditions look to be positive. We stay buyers.
KEY STORIES:
Some bad news for BP (BP.). Ahead of the publication of half-year numbers, the oil major said it would book a second quarter non-cash exploration impairment of $750m, after relinquishing its 50 per cent interest in the non-commercial Katambi gas discovery in Angola.
Old Mutual Asset Management chief executive Peter Bain announced he will be stepping down from his role at the top and as director. He will be replaced by chairman James Ritchie on an interim basis until a new chief is found. The US asset management arm recently listed on the New York Stock Exchange, after separating from parent Old Mutual (OML).
OTHER COMPANY NEWS:
Tim Haywood, group finance director of Interserve (IRV) has stepped down from the board. Mr Haywood is staying with the company until the end of November, when he will leave to pursue other interests. The group is currently going through the process of appointing a new finance director.
Finally, tech specialist Nanoco (NANO) has got its first commercial sales off the ground. This morning the group announced that global manufacturing giant Wah Hong has placed its first order for the group’s quantum dots which have the potential to be used in televisions, solar panels and even cancer imaging. Shares in the tech group jumped 15 per cent in early trading and although there is still a long way to go for the group to fully recover its share price losses of the last year, we see this first order as the turning point in the road to recovery.
Trading in Andes Energia (AEN) has been suspended after confirming it is in discussions with regarding a possible reverse takeover of the company involving Mercuria Energy Group. Earlier this year, Mercuria provided Andes with $60m in two credit facilities and replaced Andes’ chief executive with Anuj Sharma, the head of the group’s energy investments in Argentina.
Gemfields (GEM) has been forced by Pallinghurst Resources to cancel its Aim listing, after the latter received sufficient acceptances for its nil-premium offer to be declared wholly unconditional.
