Join our community of smart investors

News & Tips: Astra, Reckitt, Punch & more

Barcelona attack and US political turmoil drag down European stocks
August 18, 2017

IC TIP UPDATES:

Good news for AstraZeneca (AZN) and its US peer Merck (US:MRK). The US regulator has given Lynparza - the ovarian cancer drug sold by both companies - the green light for expanded use in patients with a recurrent  form of the disease who have responded to platinum-based chemotherapy. It also approved a new oral tablet form of the medicine. We remain buyers of both AZN and MRK. Buy.

Reckitt Benckiser (RB.) has completed the sale of its food business, which includes French’s mustard and Frank’s RedHot, to US-based seasonings business McCormick. The $4.2bn (£3.3bn) earned on the sale will be used to pay down some of Reckitt’s debt. The sale of the foods business is part of Reckitt’s strategy to position itself as a health and hygiene company. Shares fell one per cent in early trading. Buy.

Morses Club (MCL) has secured an additional £15m loan facility from Shawbrook, increasing its overall revolving facility to £40m. The facility has also been extended from its existing expiry date of March 2019 to August 2020 and will be used to fund the sub-prime lender’s expansion. Buy.   

A flurry of releases from Shanta Gold (SHG) highlighted the before and after-effects of the Tanzanian government’s stand-off with its mining industry. Half-year results, as foregrounded, showed narrowing post-tax losses and a stable borrowing position. But changes to the country’s legislation have already led to a change in CEO, a slight lowering of full-year production guidance, and the cancellation of a deal to acquire Canada-listed Helio Resources Corporation. Our buy recommendation is under review.

KEY STORIES:

The UK Competition and Markets authority has approved the sale of 1,895 locations from Punch Taverns (PUB) to Heineken for £403m. The regulator had been investigating concerns that the range of beer and ciders on offer to customers would be reduced by the deal. Heineken has now offered to sell pubs in the 33 affected areas to help preserve competition. Private equity firm Patron Capital will buy the remaining 1,329 pubs from Punch. Shares in Punch Taverns were flat on the announcement.

OTHER COMPANY NEWS:

Like-for-like sales growth in the casual dining market was 0.6 per cent during July, according to industry monitor the Coffer Peach Tracker. Analysts at Numis called this “relatively disappointing” and likely reflects the emerging squeeze on consumer disposable income. The “lacklustre” sales growth comes despite around 80 per cent of operators putting through some price increases in an attempt to pass costs on to consumers. The restaurant category marginally outperformed pubs, and London ended its three-month outperformance of the rest of the UK.