The dollar is benefiting from hopes for a stronger US economy. The FTSE 100 was boosted by the weaker pound and a bounce for Tesco shares. Click here for The Trader Nicole Elliott's latest views on the global markets.
IC TIP UPDATES:
Paragon Group (PAG) has reported total new loans and investments were £381m for the three months to the end of December, up from £254m the same time in 2015. Strong growth from Idem Capital, which grew its loan book to £95m, meant buy-to-let accounted for just under half of the group’s total loans and investments from 87 per cent in the prior year. The group’s buy-to-let pipeline also picked-up to £640m, almost double what it was in September. Buy.
Shares in Mortgage Advice Bureau (MAB1) have rebounded sharply since the referendum and these pre-close figures should provide further some comfort for investors. Sales last year were up almost a quarter on the previous year, driven by an increase in its adviser network by the same amount. However, average revenue per adviser was flat due to a lull in activity around the referendum, but management expects to see growth this year. Buy.
Shares in luxury brand owner LVMH (MC) are also up marginally this morning following an in-line set of results. Revenues rose 5 per cent over the course of last year, with organic revenues up by 6 per cent. The fourth quarter was particularly strong, with good momentum across America, Europe and Asia. Operating margins reached 18.7 per cent, while the group share of net profit was close to €4bn, representing growth of 11 per cent. Although the shares are already 19 per cent to the good on our original buy advice at the end of last year, we remain buyers for now. Buy.
KEY STORY:
Well who saw that one coming? Tesco (TSCO) and Booker (BOK) have announced a £3.7bn mega-merger, which, at 205p per Booker share, equates to a 12 per cent premium for investors relative to last night’s closing price. The only issue with that is Booker shares have spiked this morning, trading as high as 212p at last look. Analysts seem unconvinced about what’s in it for Booker shareholders long term. They should own around 16 per cent of the enlarged entity, and chief executive Charles Wilson will have a place on the new board, but Tesco’s the real winner here. The recovering supermarket chain will reap serious efficiency benefits - around £200m worth - thanks to the supply chain and is likely to be more cash-generative thanks to Booker’s reputation in those areas. For now, our recommendation is under review, but there’ll be more to follow.
OTHER COMPANY NEWS:
Consolidation is still alive in the pharmaceutical industry. Giant Johnson & Johnson (US:JNJ) has finally managed to secure a deal with Swiss biotech Actelion. But it’s set the US group back $30bn - one of the largest pharma takeovers in the last few years. J&J has made no secret of its desperation to buy a biotech company to make up for the gaping hole in its drugs development pipeline. In 2016 it was outbid for blood cancer specialists Pharmacyclics by competitor AbbVie (US: ABBV) and its talks with management at Actelion have lasted more than a year. But have management settled for less than initially desired? The deal does not encompass the entire Actelion pipeline. The remaining drugs will fall into a new Zurich-based group run by the current management at Actelion, although J&J will hold a 16 per cent stake in this new company and so will still benefit if one of its drugs turns out to be a big money maker.
Sticking with US companies news and there could be change atop the roster of the tech giants. Google owner Alphabet (US: GOOGL) is heading towards the $100bn revenue milestone significantly faster than Microsoft (US: MSFT) and analysts think that 2017 will be the first year the upstart from the dotcom era will overtake the software stalwart. For now though, Microsoft remains in the lead. Fourth quarter earnings from both companies were reported yesterday and while Microsoft smashed its targets - thanks to the excellent performance of its cloud computing division - Alphabet missed earnings expectations due to a ramp up in tax costs.
Sports nutrition focused business Glanbia (GLB) is looking to beef itself up with a US milk deal. The Irish-based group said it was seeking to launch a joint venture with Dairy Farmers of America, Michigan Milk Producers Association and Foremost Farms. Glanbia would own 50 per cent of the standalone business, with the other half owned by the American trio. The plan is to build a facility in Michigan which would produce 3.6m litres of milk a day. The deal makes sense, chief executive Brian Phelan said, as it would allow it to build on its position as “the number one producer of American style cheese and simultaneously expand our global position as a supplier of advanced technology whey protein to the nutritional sector.
