Markets seem to have read the runes wrong when it comes to housebuilders. Taylor Wimpey (TW.) is a case in point in that regard. There were no negative aspects to the firm’s trading statement. There was no negative impact from the Mortgage Market Review. The prices of homes rose by 9 per cent in the first six months of the year. Furthermore, total orders totalled £1.6bn by the close of the period, well above the £1.26bn seen in the previous year.
The company also has capital discipline and the wherewithal to maintain it. Taylor Wimpey will return another £200m to shareholders next year and it has approximately five and a half years’ worth supply of land, so it need not buy now. Only 10 per cent of its sales come from the south east, it has no exposure to the fragile London market and it is benefitting from the Treasury’s Help-to-Buy scheme. On about 12 times earnings the stock is a long-term buy, writes The Times’s Tempus.
At about 10 times operating profits, brewer SABMiller’s (SAB) divestment of its stake in South African hotel and casino chain Tsogo Sun fetched a decent price and will allow for greater strategic focus. However, the impact of the transaction on the company’s financial position should not be exaggerated as the £624m price tag amounts to under 2 per cent of the company’s total revenues and operating profits. More important is the slowdown that the firm is facing in beer sales in Europe, much like the rest of the sector. Business in the UK is under pressure from the craft beer revival and even Poland and the Czech Republic sales slumped under the weight of an economic slowdown and poor weather.
On the upside, the firm’s main markets are the US, Africa and Latin America. Put together, these three markets make up the lion’s share - about two-thirds- of group profits and they all saw increased profitability last year. The stock is a quality name for the long-term, but with the shares trading on 22 times forward earnings and on the basis of forecasts for earnings growth they look a bit expensive, says The Daily Telegraph’s Questor team.
BUSINESS PRESS HEADLINES:
The US Energy Department has issued a blistering indictment of the UK government’s tax raid on North Sea oil and gas revenues, warning that prohibitive costs threaten much of Britain’s energy industry. Washington said the increase in Britain’s petroleum revenue tax to 81 per cent of profits for old fields and 62 per cent for newer ventures pushed through in 2011, along with other penalties and a cap on relief for winding down old fields, have choked North Sea exploration and paralysed a string of major projects.–The Daily Telegraph
An aggressive American research group targeting Quindell (QPP) has accused the outsourcing company of “outright lies, lies of omission and 100 per cent irrelevant truths”. Gotham City Research has dismissed Quindell’s “so-called rebuttal” to a report it published in April in which it alleged the group was a “country club built on sand”. Quindell shares which plummeted by 40% on the day of the original report closed down 4.31 per cent at 205.5p yesterday as the latest comments coincided with a successful attack by Gotham on a Spanish quoted company.–The Times
The Bank of England should delay raising interest rates until the recovery is firmly established, the British Chambers of Commerce has said, amid signs of mounting concern over higher borrowing costs. The economy has continued to strengthen but not at the same pace as earlier this year, the BCC found in its quarterly economic survey, putting its forecast for 3.1 per cent growth this year at risk of a downgrade. -The Times
Dozens of banks are poised to enter the market in the wake of barriers to new entrants being lifted, according to regulators. The Financial Conduct Authority (FCA) and the Bank of England’s Prudential Regulation Authority (PRA) said five times as many businesses are currently applying for banking licences as were granted them last year. –The Daily Telegraph
Green MEPs have accused Brussels of capitulating to demands from leading banks that want to cut the cost of their contribution to an EU safety net at the expense of large building societies and other mutual financial institutions. According to the MEPs, a backroom deal will allow banks to calculate their contribution to the European rescue fund based on their balance sheet rather than on a previously agreed scheme that gauges the level of risk banks take. -The Guardian
The days when investment and exports were a one-way street from West to East are long gone, the Chancellor has said during a trip to India, as the British government announced £120m of new investment in the UK from the country. Speaking in Mumbai on Monday during the first day of a mission with William Hague to drum up foreign trade, George Osborne announced that pharmaceuticals company Cipla is to invest £100m in UK-based research on a range of drugs. - The Daily Telegraph
