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News & Tips: Imperial Brands, Moss Bros, RPC & more

Equities continue to struggle for momentum
September 28, 2017

Shares in London are in the black in morning trading, but only marginally so. Click here for The Trader Nicole Elliott's latest take on the markets. 

IC TIP UPDATES:

Imperial Brands (IMB) has confirmed that it is involved with the rescue deal of wholesaler Palmer & Harvey, which has been in search of new backers in recent months. The tobacco company stated that it is looking to “create a sustainable future” for the UK wholesaler but have no further details of what this would involve. Imperial also provided a trading update that it is investing in building its market share in combustible cigarettes and added that the growth brands have continued to outperform. New next generation products, including the blu vapour line, will launch in the coming year. Shares fell more than 2 per cent in early trading. Buy.

Half year results from Moss Bros (MOSB) came in ahead of some analysts’ expectations, although the hire business continues to struggle as customers express their preference to buy suits rather than hire them for big occasions.  Management expects revenues from that division to recover by the end of the wedding season at the start of October, although some analysts have nudged longer-term forecasts down for this segment. Overall, the share price is largely flat on our original tip, and a 6.5 per cent forward dividend yield is enough to keep us interested for now. Buy.

Plastic products packager RPC Group (RPC) revealed that profit and margins for the first half of the year are expected to be ahead of management expectations, with revenue expected to be "well ahead" of the corresponding period last year. Buy

Euromoney (ERM) continues to struggle with the dwindling demand for business to business publications. Underlying revenue is expected to drop by 2 per cent due to poor advertising revenues and a disappointing reversal of the growth in the events business. The recent acquisition of RISI is due to push reported revenue up by 6 per cent. Sell

Finally, some good news for Petra Diamonds (PDL). The government of Tanzania has said exports from the Williamson mine can resume, and though the exact timing of the next diamond parcel export is yet to be finalised, the market has cautiously greeted the news as a sign that a resolution is approaching. We remain buyers.

VP (VP.) has released a positive trading statement this morning, though the shares haven’t reacted. The UK division has benefitted from increased demand in the construction, housebuilding and infrastructure sectors. Performance in the international division was mixed, with oil and gas “slow but stable” and the Asia Pacific-based test and measurement business trading well. Buy.

Bus operations were a struggle for Stagecoach (SGC) in the four months to August. The travel company lost contracts with Transport for London, and so revenues in the London bus division are expected to decline more quickly. The company has put up some prices in the regional bus operations, but like-for-like sales growth in this division still fell slightly. The company is in the process of handing over the South West rail franchise to the new operators, a joint venture between First Group and MTR Corporation. Excluding this franchise, comparable revenue growth in UK rail improved by 3.8 per cent. Shares were up 1.5 per cent in early trading. Sell.

KEY STORIES:

Strip out the ongoing costs of last year’s acquisition, and there is a lot to like in final results from Clinigen (CLIN). Earnings rose by a quarter - after stripping out £29m of finance costs - on a 28 per cent rise in gross profits. Net debt has nearly halved thanks to the group’s ever impressive free cash flows, which has given management the confidence to attempt another big acquisition, this time for fellow listed group Quantum Pharma. The deal, which was announced earlier this month, is awaiting approval from Quantum’s shareholders.

CMC Markets (CMCX) has reported that profitability has been significantly higher during the six months to September than during the prior year. Both net operating income and revenue per client were higher, driven by increased client volumes. However, active client numbers were slightly lower, following the short-term interest around the EU referendum.

Management at Tui (TUI) have assured investors that the recent hurricanes that hit its sites in the Caribbean and Florida will not impact its expected 10 per cent growth in full year underlying cash profits. Overall revenue for the summer period is up 8 per cent with 97 per cent of holidays sold. Despite weakness in sterling, the number of customers visiting UK destinations was flat, though revenue here was up by 7 per cent. Going into the winter season holidays are so far about a third sold, in line with last year. Shares fell one per cent.

As well as successfully drilling the Ntorya-2 appraisal well, and a revision in the field’s unrisked resource estimate, Aminex (AEX) swung to a half-year profit in the six months to June. Debt was also paid off during the period, which ended with net cash of $6.9m, though the shares dropped on these results, likely due to a potential issue with production decline at Kiliwani North.   

OTHER COMPANY NEWS: 

Shares in 4D Pharma (DDDD) are down more than 4 per cent this morning following release of its half year results. Net assets declined to £75.3m at the end of June 2017 from £92.1m for the same period last year, while the loss attributable to the owners of the parent undertaking climbed to £11.3m from £10.3m.