The overnight news that the OPEC group of oil producing countries have finally agreed to cap production in an effort to support the oil price have given the resources-heavy FTSE100 index a leg up this morning. Click here for The Trader Nicole Elliott's latest thoughts.
IC TIP UPDATES:
It’s been a rough ride for theme park owner Merlin Entertainments (MERL) this week what with it being fined £5m for the Smiler rollercoaster accident in June last year. And things haven’t got any easier after its shares fell 5 per cent on the back of a middling trading update. Its Midway attractions, which include Madame Tussauds and the London Dungeons, saw like-for-like sales fall 0.4 per cent, although the performance of Legoland and theme parks meant total group sales on the same basis rose 1.3 per cent. Chief executive Nick Varney said there had been some recovery in the theme park division. He added the company had always accepted full responsibility for the accident and “strived to support all those injured in every way possible”. He said the company had “made a number of technical and procedural improvements to make sure that an accident like this cannot happen again”. Buy.
Tobacco company Imperial Brands (IMB) continues to puff away and expects full-year profits to be on target. It said at current exchange rates, the translational benefit to full-year earnings would be 4-5 per cent. The full year impact of currency transaction on earnings remains at around 3 per cent for the full year. This impact alongside its US acquisition has helped tobacco net revenue rise and the full year trend for total tobacco volumes and operating profit margin is “broadly in line with the first half”. Winston and Kool have helped it gain market share in the US, but price increases in countries like the UK have been partly offset by its mix of sales, suggesting consumers have traded down to less expensive brands. Buy.
Shares in KAZ Minerals (KAZ) are up today after the copper producer said it had finished construction of the clay plant at Bozshakol, increasing its annual processing capacity by five million tonnes of copper ore. KAZ said the plant would begin sales of copper concentrate from the plant this year. Buy.
In the context of today’s sharp rise in oil prices, LekOil (LEK) picked a good day to issue its half-year results, less than three months after posting preliminaries for 2015. During the period, cash balances fell from $26m to just $7.6m, though the group still has some headroom with the facility it took out with Sterling Bank over the summer. All efforts will now be on getting the Otakikpo field producing as soon as possible; LekOil still believes it can hit a rate of 10,000 barrels a day by the end of the year. Our buy recommendation is under review.
West End landlord Shaftesbury (SHB) delivered a solid performance in the three months to the end of September, and, crucially, revealed that in the wake of the EU referendum there has been no discernable effect on occupier demand or trading. In fact, acquiring new assets has been made more difficult by a reluctance on the part of existing owners to sell, although it did pick up four shops and three apartments for £19.5m, bringing total additions for the year to £62.7m. All major development schemes, including Thomas Neal’s Warehouse, the Charing Cross Road/Chinatown scheme and a site in Broadwick Street, Carnaby, are proceeding to plan. Finances have also been strengthened with the proposed issue of secured sterling bonds, the proceeds of which will be used to redeem the 8.5 per cent debenture and also to cancel interest rate swaps. Buy.
Shares in WS Atkins (ATK) rose 3 per cent after the engineering services provider delivered an upbeat trading update for the six months to September. Management reported a strong performance from the UK and Europe infrastructure business, a newly-formed division including ground, water, engineering and environmental businesses. The group has started work on two major projects in the US and while the energy business continues to be challenged by rocky oil and gas markets, trading for the first-half is in line with expectations. Buy.
A combination of factors have affected trading at agricultural products and fuel distribution specialist NWF (NWF). Outlook for the full year remains within management’s expectations but first quarter trading has proved difficult with low milk prices affecting demand from farmers for feed products, although milk prices have begun to tick back up. Meanwhile in fuels, the prolonged mild weather has dampened demand for fuel oil. NWF shares reversed sharply at the open but have since stabilised. We place our recommendation under review.
Shares in QinetiQ Group (QQ.) ticked up slightly after the defence contractor said it was on course to meet its full-year expectations and that it plans to complete the previously announced buy-back program by the end of this year. EMEA Services has continued to perform as set out in the Q1 trading update, with revenues under contract at the division similar to a year ago. Buy.
KEY STORIES:
Oil stocks are surging this morning following an OPEC meeting in which the cartel agreed to reduce output to between 32.5m and 33m barrels a day. The news, which sent Brent crude up by more than six per cent overnight, has resulted in big gains for the likes of Royal Dutch Shell (RDSB), BP (BP.) BHP Billiton (BLT), Cairn Energy (CNE) and Tullow Oil (TLW), all of which saw their stock rise by at least four per cent. There were bigger gains at the more leveraged North Sea plays Enquest (ENQ) and Premier Oil (PMO) – up eight and six per cent respectively – both of which are reliant on higher short-term oil prices as part of renegotiations with lenders.
Capita (CPI) has suffered a massive 28 per cent fall in its share price after revealing it now expects pre-tax profits for the full-year to be around £50m lower than previously guided to. A slowdown in decision-making by customers during the second-half, a slowdown in its IT enterprises services division and a delay in the implementation of its TfL congestion charging contract have all contributed.
Shanks (SKS) has proposed a merger with Van Gansewinkel to create a Benelux waste-to-product company. Management expects synergies of €40m in the third full-year following completion of the deal. The waste management group will pay shareholders of VGG €482m for the deal, which would be financed through €286m of in cash and debt facilities and €141m in equity issuance.
Directors at Plus500 (PLUS) have placed around 15.5m shares in the group for 650p a share, raising £101m. The shares subsequently declined around 14 per cent.
