PRESS TIPS:
Tempus in The Times writes that anyone who supported Great Portland Estates' last fundraising, an eight-for-eleven rights issue to raise £166m in May 2009, will not be complaining. The issue was at 133p; the shares closed last night at 458p. The company spent £644m, at a time when its Chief Executive Toby Courtauld was convinced that the London property market represented a once-in-a-lifetime opportunity; this has since generated an annual rate of return of approaching 18 per cent.
Great Portland's approach is to buy less valuable, second-tier property, which may be let on low rents, be in need of refurbishment or be subject to a complicated ownership structure and so is unattractive to those trophy buyers.
There is little bank lending available for such investments, so that market is less competitive. The company, therefore, went back to the market to place new shares equivalent to about 10 per cent of the issued capital, to raise almost £141m to invest in such properties. The placing went through the market like a dream, at a price of 450p a share.
Great Portland also issued its halfway trading statement, which showed a 4 per cent rise in the value of the portfolio and a good performance against the rest of the London market. The shares are on an 8 per cent premium to net assets, but it would be a brave investor to bet against Courtauld and his team (Last IC rating: Hold, 14 Nov).
Tempus writes that there were two views on Amec's trading statement yesterday. One was relief that it did not contain bad news. Amec has been the subject of recent profits downgrades amid fears that the global economic slowdown may hit the projects it is working on. In the event, the update was reassuring.
The second view is one of continuing unease over the recent resignations of two key executives. Amec says that with its new corporate structure, which focusses on key geographies rather than areas of operations and allows it to grow further in emerging markets, there was simply no space for them.
The shares, off by 10 per cent since the start of October, rose 23p to £10.56. At this level, they sell on a little over 13 times' earnings, which looks about right for now (Last IC rating: Buy, 9 Aug).
Questor in The Telegraph writes that J Sainsbury, the UK's third-largest supermarket group, has posted a good set of interim numbers.
In the first half of the year, Sainsbury outperformed the wider sector and increased its market share to 16.7 per cent - the highest in almost 10 years. Same-store sales also rose 1.7 per cent, the 31st consecutive quarter of like-for-like growth. In the first six months of the year, group revenues rose 4 per cent to £12.2bn, with pre-tax profits up 2.5 per cent to £405m. The interim dividend is 4.8p, up 6.7 per cent, and it will be paid on January 4th. It is reassuring to note that, despite the discounting, margins have not fallen. The operating margin was flat year-on-year at 3.4 per cent.
Sainsbury shares are now trading on a 2013 earnings multiple of 11.6, a premium to Tesco, which trades at 10.1 times forecasts. The shares were recommended essentially as a yield play at 283.5p, 297.6p, and 302.1p earlier this year. At the lower end of this range investors have locked in a prospective yield of between 5.8 per cent and 6.1 per cent in the year ending March 2014. These yields are attractive given the low-interest-rate environment, so the rating is now a hold but the valuation looks full given the uncertain backdrop (Last IC rating: Buy, 14 Nov).
Business press headlines:
BP is expected to pay the largest criminal penalty in US history to resolve the investigation arising from the 2010 Deepwater Horizon disaster in the Gulf of Mexico. Details of a settlement with the US Department of Justice were still being finalised on Wednesday night but an agreement could be announced on Thursday afternoon, according to people with knowledge of the talks. The settlement would mark another step forward for BP as it attempts to determine the cost of the disaster, which killed 11 people and caused the world's largest-ever accidental offshore oil spill. [Financial Times]
John Lewis says that it could be put out of business if foreign multinationals such as Amazon are allowed to continue paying tiny amounts of tax in Britain. Andy Street, managing director of the retailer, said last night that the Government must urgently "address the Amazon problem" and create a level playing field for business. His comments come two days after MPs on the Public Accounts Committee lambasted executives from Amazon, Google and Starbucks for paying practically no corporation tax in the UK. [The Times]
Global banks operating in London have been warned by the top UK bank supervisor that this year's staff bonuses must reflect the mis-selling and market manipulation scandals that have damaged the sector in the past 12 months. Andrew Bailey, head of the Financial Services Authority's prudential business unit, wrote to bank chief executives in late October ahead of this year's bonus round warning them that the watchdog would be looking for evidence they had "clawed back" deferred bonuses from people involved in scandals. [Financial Times]
Billions of pounds invested by pension funds, City institutions and retail investors could be hit by a looming "Armageddon" in the bond markets, it emerged yesterday. Experts warned that a bubble is building in the £250bn corporate bond sector, which has become a popular way to invest because it offers safer returns than most traditional savings and investment products. According to industry figures, 40 per cent of assets in the market are owned by five large funds and 30 per cent by the three largest. Fears have been raised that these funds could struggle to meet investors' demands to withdraw money because of illiquidity in the market. [The Independent]
The European Commission yesterday stopped short of imposing legally binding quotas to increase the number of women on company boards. Instead, it is proposing a target for large plc boards to be made up of at least 40 per cent women by 2020 but it would be up to individual EU countries whether there would be penalties for failing to achieve it. Under the proposed directive, companies would also only face sanctions if they failed to have procedures in place to increase female representation rather than just missing the target. [The Scotsman]
The violent protests and strikes that flared up across the European Union on Wednesday are a sign of things to come as frustration grows over austerity measures and Europe's recession peaks. A popular backlash is building against cuts to public services and the "internal devaluation" policies that have targeted wages and Europe's high levels of social protection with the aim of restoring competitiveness to the EU's highly indebted economies. [The Telegraph]
Manchester United has trimmed its debt pile by 18 per cent and moved into the black following this summer's flotation in New York. The club also revealed that the nine football matches staged at Old Trafford during the London Olympics helped boost its matchday revenues by 13.3 per cent to £19.6 million in the three months to 30 September. Total debt dropped to £359.7m by the end of the quarter, down from £436.9m at 30 June, as the controlling Glazer family used some of the flotation proceeds to reduce its borrowings. A £26.5m tax credit helped deliver a profit from continuing operations of £20.5m, compared with a £5m loss a year ago. [The Scotsman]
