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News & Tips: AstraZeneca, Interserve, Carpetright & more

Equities are lacking direction
May 11, 2018

After decent gains this week, London shares are taking a breather today and are flat in morning trading. Click here for The Trader Nicole Elliott's latest thoughts on the markets. 

IC TIP UPDATES:

AstraZeneca’s (AZN) new chronic obstructive pulmonary disease (COPD) drug has failed a final stage clinical trial. The drug is also being assessed in a separate human study and the outcome of that second trial will determine the next steps for the product. The extent to which investor hopes are pinned on the oncology business (rather than the respiratory division) were demonstrated by a muted response to this trial failure. We agree that the group’s future cancer products could be very exciting for long term revenue growth and maintain our buy recommendation.

Paragon Banking (PAG) has appointed former senior independent director Fiona Clutterbuck as its new chairwoman. Ms Clutterbuck replaces Bob Dench, who stepped down in March after taking up the role of chairman at The Co-Operative Bank. Buy.  

Shares in Interserve (IRV) are down 4 per cent this morning after it announced the Financial Conduct Authority has opened an investigation into the outsourcer’s handling of inside information and market disclosure relating to the energy from waste business, which Interserve has now exited. No timeline has been given for the investigation and investor most likely will not hear anything new until is has been concluded. Sell.

KEY STORIES:

Struggling retailer Carpetright (CPR) has announced this morning that one of its prominent shareholders, Meditor European Master Fund, has agreed to loan it £15m to cover short-term funding issues. The group is still hoping to raise a further £60m via an equity raise around the 18th May, although plans are unconfirmed at the moment. The placing was dependent on the group’s lenders agreeing to extend the repayment date on Carpetright’s revolving credit facility. This has now been done; the new date is set for 31 December 2019. Shares were down 5 per cent in early trading.  

Shares in ZPG (ZPG) jumped over 30 per cent after the online property portal received a recommended cash offer from Silver Lake Management, a US investment firm focused on technology related businesses, and with around $39bn under management. The deal values ZPG at £2.2bn with an offer price of 490p a share. The offer is also good news for the Daily Mail and General Trust (DMGT), which owns a 30 per cent stake in ZPG. DMGT’s two ZPG board members have voted in favour of the deal. Await documents.

OTHER COMPANY NEWS:

BBA Aviation (BBA) reported a 9.7 per cent increase in revenue in the four months to April, or 2.9 per cent on a like-for-like basis. This was mainly driven by its flight support business Signature where sales increased 13.9 per cent, or 5.5 per cent in comparable figures. This outperformance stems from agreements reached in mid-2017, but should moderate during the second half due to tougher comparatives. In aftermarket services like-for-like revenue fell 3.8 per cent due to the phasing of sales, but management was optimistic that this would improve later in the year. Shares were flat in early trading.