PRESS TIPS:
Tempus in The Times writes that long-suffering shareholders in Invensys will be celebrating the near-100p rise in the shares, up another 25p to 305p last night, since the company announced the £1.7bn sale of its rail communications business.
Shorn of rail and the pensions liability and with £400m or so of cash in the bank to fund expansion, analysts have had to take a closer look at what is left in Invensys. About 80 per cent of the remaining business is in operations management, the rest controls. The company, previously dependent on large projects with the danger of these going awry, will henceforth be a provider of software and controls for industrial businesses, with about a third of the revenues going to oil and gas and utilities and power.
Barclays Capital has done some preliminary work on the financial year starting next April, when the rail deal will have been done. It sees sales of about £1.86bn and pre-tax profits of £164m. This suggests an earnings multiple for the year, stripping out the special dividend from the rail sale, of about 14. Aveva, the software producer that is the closest comparator, is on about 20, excluding its cash pile. Investors keen to recognise a profit can do so, but Tempus thinks there is further upside in the Invensys price (Last IC rating: Hold, 15 Nov).
Tempus says that those who queried the 'Olympic effect', and doubted whether the Games would provide a long-term boost to the London economy should ask Shaftesbury. The property company, which is entirely focused on prime locations such as Covent Garden and Soho in the West End, says that although demand in the summer was soft, it has picked up strongly since.
Shaftesbury is for the patient investor and provides few surprises. The company resolutely refuses to move out of its home territory and instead gradually makes small purchases as these come on the market. Adding to a portfolio worth more than £1.8bn, it spent only £44m in the past financial year.
Net assets per share, though, rose by 7.6 per cent to 498p in the year to end-September, with a 5.8 per cent rise in the second half. Rental income grew by 2.5 per cent on a like-for-like basis, and the reversionary potential, the difference between current rents and what these would be on the open market, rose by a whopping 29 per cent, indicating strong growth from rental income in future. Total dividends are up 6.7 per cent to 12p. The shares stand on a 10 per cent premium to net assets, one of the highest in the sector, which suggests no rush to buy, but they remain a good long-term bet (Last IC rating: Hold, 29 Nov).
Questor in The Telegraph writes that utility group Pennon has seen its shares plunge in recent weeks - hit by the double whammy of regulatory uncertainty in the water sector and a profit warning from its Viridor waste unit.
Yesterday's interim results were in line with guidance from the recent warning. Weakness in Viridor was offset by strength at its water business. Group pre-tax profits rose 3.7 per cent to £111.1m. Profits at South West Water rose 10 per cent, with Viridor's profit sliding 27 per cent. The interim dividend was raised by 6.6 per cent to 8.76p and will be paid on April 4th next year. This is in line with the group's policy of raising the dividend by 4 percentage points higher than inflation in the current regulatory period.
The regulatory period runs to 2015 - and there is uncertainty after that with regard to the Ofwat regulatory regime. Still, Questor suspects a sensible compromise will be reached before the situation has to be referred to the Competition Commission. It is in every party's interest to sort this out.
Questor considers the shares are once again a buy despite regulatory uncertainty, as South West Water is performing strongly and Viridor offers unregulated future growth as the energy-for-waste plants come on line. The falls mean that the shares are now yielding an attractive 4.6 per cent, rising to 4.9 per cent. "Trading on a 2013 multiple of 14.2, falling to 13.3 next year, the shares are a 'buy'." (Last IC rating: 29 Nov)
Business press headlines:
Direct Line has announced another 236 job cuts as the newly-floated insurance giant moves towards slicing costs by £100 million by the end of 2014. The fresh round of streamlining comes on top of previously-announced plans to shed 970 jobs across the group's UK operations, which employed about 15,000 prior to the cost-saving drive. However, spokeswoman Jennifer Thomas said this latest phase would have a "very minimal impact" in Glasgow, where Direct Line has nearly 1,000 people working mainly in call centre activities. [The Scotsman]
British banks will have to raise £20bn-£50bn of new capital or dramatically restructure their businesses after the Bank of England made it clear it did not trust the way they value their books. The BoE's new Financial Policy Committee yesterday said banks must report capital ratios which reflect a "proper valuation" of their assets and a "realistic assessment" of the cost of recent scandals, such as the manipulation of Libor and mis-selling of insurance products. [Financial Times]
Millionaire businessman David Rowland is in the running to take over The Independent and The Independent on Sunday, it has emerged. The Tory party donor is understood to have held talks with current owners, the Lebedev family, about a £10m to £15m deal for the loss-making newspapers. Any deal could separate the titles from their sister publication, The Evening Standard. News of the bid follows increasing speculation about the future of the struggling titles and comes a day after Alexander Lebedev admitted he was looking for investment to support the papers. [The Telegraph]
Not content with dominating the e-book market, Amazon is planning to muscle in on the physical book publishing industry in Europe by releasing original works under its own imprint. The online retailer is to launch a European publishing wing which will pitch it against the might of Bloomsbury, Random House and HarperCollins, owned by News Corporation, parent company of The Times. In a letter to literary agents, Amazon said that the new division was part of its European expansion and would be based in Luxembourg. It will include a team of editors and marketers. [The Times]
The EU's general court has blocked an attempt to force the European Central Bank to release files showing how Greece used derivatives to hide its debt in the run-up to the financial crisis. The case was brought by Bloomberg News under the EU's freedom of information rules in August 2010 but was thrown out on Thursday by the court in Luxembourg. "Disclosure of those documents would have undermined the protection of the public interest so far as concerns the economic policy of the EU and Greece," the EU's general court said. [The Guardian]
Coventry Building Society has become the latest High Street lender to pull the plug on borrowers who want to take out an interest-only mortgage. It announced today that it will no longer offer these once popular loans to new borrowers. It follows hot on the heels of Royal Bank of Scotland, NatWest, Nationwide and Co-operative Bank, which have already pulled out of interest-only lending. Other lenders have tightened the screw on borrowers by making it much more difficult to take out these loans. Woolwich, the mortgage arm of Barclays, now offer loans on this basis only if the amount is £300,000 or more, and Santander will only lend up to 50 per cent of the property's value. [The Times]
Accounting giant Ernst & Young is to be sued over the collapse of Anglo Irish Bank in 2009. In what is the first time an Irish bank has taken legal action against its ex-auditor, the firm is being taken to court by the state-owned Irish Bank Resolution Corporation (IBRC), which took over the running of the collapsed Anglo three years ago. While full details of the case have not been revealed, it is believed the accountant will be accused of failing to spot Anglo's massive exposure to the Irish property bubble, which led to it being nationalised. [The Independent]
Hong Kong Exchanges & Clearing raised $1bn from equity markets on Thursday, after receiving clearance from the UK's Financial Services Authority for its $2.2bn acquisition of the London Metal Exchange. The blessing of the UK regulator for the deal clears the way for the closure of the transaction after a court hearing to confirm capital reduction plans on December 5, after which the deal will become unconditional. [Financial Times]
The United Nations has laid the finger of blame for food price rises on trading in agricultural commodities, but says it is the trade in futures contracts - an agreement to buy at a set price sometime in the future - rather than the actual food stocks that causes the most damage. David Bicchetti, associate economic officer at UN conference on trade and development (UNCTAD), said "enormous, humongous" amounts of money are traded on commodities that don't actually exist. "Over $400bn [of paper money] is traded - that's 20-30 times the physical production of the commodity." [The Guardian]
