London equities are up this morning after confidence expressed by Bank of England governor Mark Carney in the UK economy's ability to bounce back boosted sentiment. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
Rockhopper Exploration (RKH) and lead operating partner Premier Oil (PMO), have appointed Standard Chartered as the pathfinder bank for the Sea Lion project in the North Falklands basin. Rockhopper chief executive Sam Moody described the lender as “a leader in the field of energy project finance”, that has played “a significant role in a number of bank and export credit agency led financings in recent years”. This news was expected, but we remain buyers.
Last month’s production from Colombian explorer-driller Amerisur Resources (AMER) was up 7.6 per cent on May, but that’s not necessarily saying much. Export volumes via the OBA export pipeline averaged 4,332 barrels per day (bpd), and it might have been more had the intervention at the Platanillo-22 well held at 650bpd for longer than it did. An operational update also included updates on the drilling programme: Pintadillo-1 is set to be spud this month, while the Indico-1 and Miraparriba-1 wells should spud this quarter, weather permitting. Our buy call is under review.
Halfords’ (HFD) chief financial officer Johnny Mason is leaving the business at the end of this month to join electricals retailer Dixons Carphone (DC.). Mr Mason’s resignation was first announced in March, but it has now been announced that he will leave the bicycle group on 31 July before joining Dixons on 13 August. Halfords has yet to appoint a successor. Sell.
Shares in Elecosoft (ELCO) were up 9 per cent this morning, after the construction software company announced its acquisition of Shire Systems – a UK provider of computerised maintenance management software – for a total consideration of £6.3m. The transaction will be funded by a new five-year fixed-term loan of £8m from Barclays. The group says the acquisition extends its software portfolio beyond early-stage project planning and construction applications, to asset maintenance management applications for building life cycle management. Buy.
Johnson Service Group (JSG) traded slightly ahead of expectations in the first six months of the year, prompting upgrades from analyst Investec. The outperformance was due to a combination of strong underlying performance and acquisitions made in the second half of last year. It appears this was priced in to the shares however, as they are flat this morning. Buy.
Frankfurt-based asset manager Shareholder Value Management has proposed resolutions to remove Bob Holt from the board of directors of Mears (MER). The manager owns 8.9 per cent of Mears, and the housing services group now has 21 days to call a meeting. Mr Holt was a long-serving chief executive of the group, and now sits on the board as a non-executive director
Primary healthcare centre landlord Assura (AGR) increased the size of its pipeline by £73m to £225m in the three months to 30 June, and also completed the acquisition of six medical centres and two developments. It now owns 525 medical centres, and the total annualised rent roll was £92.3m, up from £91m at the March 2018 year end. Buy
Regeneration and land specialist MJ Gleeson (GLE) delivered its fastest ever rate of growth, and in the year to June it sold 1,225 homes, a rise of 20.9 per cent. Land purchased took the land bank up to 12,852 plots, of which 6,377 have been purchased subject to planning permission. Buy
Keywords Studios (KWS) – a provider of technical services to the video games industry – has launched “Keywords Ventures”, which will invest in new ventures that complement Keywords’ own, and where Keywords thinks its clients could benefit from better access to the respective technologies. Marking its launch, “KWV” will invest up to £0.3m for a 45 per cent shareholding in the pre-revenue company AppSecTest. AppSecTest created AS Analyser, a cloud-based automatic testing product which analyses apps for compliance with the EU’s data privacy rules (GDPR). Keywords has also obtained an exclusive worldwide licence to commercialise AS Analyser. The shares were down 2 per cent this morning. Buy.
Good weather and the World Cup have been beneficial for C&C Group (CCR). The manufacturer and distributor of alcoholic and soft drinks stated at its annual general meeting that trading has been positive across all its key markets. Bulmers cider has returned to “moderate” volume growth in the year-to-date thanks to warm weather in Ireland. Customer reaction to the minimum unit pricing for alcohol in Scotland has been in line with expectations. Shares were up nearly 1 per cent in early trading. Buy.
KEY STORIES:
Shares in Sophos (SOPH) plunged by a fifth this morning, on the news that it expects first-quarter billings growth to come in at around 6 per cent – or 2 per cent at constant currencies. The cyber-security group said lower-than-expected billings growth for the three months to June stemmed from a “particularly challenging comparable” for its enduser security business. For the same period last year, this segment’s underlying billings growth exceeded 50 per cent at constant currencies, with demand driven by hacking events including “WannaCry”. Sophos expects to return to mid-teens constant currency billings growth in the second half of FY2019, and says its long-term outlook hasn’t changed.
As several analysts predicted this week, Glencore (GLEN) has responded to news of a probe from the DoJ (and a subsequent de-rating) by announcing a share buyback programme. The first part of the programme will involve £350m of purchases by 7 August, with the remainder of dealings set to complete by the end of 2018. Shares in the group are up 3 per cent in early trading.
Bacanora Lithium (BCN) has secured $150m debt funding to development the first stage of its Sonora lithium carbonate project in Mexico. The main portion of the funding, provided by RK Mine Finance, has been structured as a six-year Eurobond, carrying an interest rate of three months Libor plus 8 per cent on the drawn down principal. Chief executive Peter Secker described the debt package as “highly competitive when compared to other debt packages that have recently been reported for greenfield lithium projects in Canada and Australia”. Shares in the miner are 8 per cent to the good this morning.
There’s nothing like news of a special dividend to bolster shareholder support. That’s exactly what’s happened at clothing chain Superdry (SDRY) this morning, which announced a 25p special return alongside its full-year numbers. The group also confirmed its plan to focus on what it calls “capital-light” channels - read, wholesale and online - and will curtail additional space growth this year to between 4 and 5 per cent (previously 8 per cent).
Good cost control and operation efficiency meant that Persimmon (PSN) has been able to maintain operating margins despite continued input cost inflation. Trading in the six months to June saw completions up by 3.6 per cent and average selling prices by 1.2 per cent to £215,800. As prices are at the more affordable end of the scale, demand remains strong, and enquiry levels were up six per cent from a year earlier.
Great Portland Estates (GPOR) made 11 new lettings in the three months to the end of June, generating annual rent of £2.5m of which £1.6m comes to Great Portland. Nine rent reviews were settled at 20.8 per cent above previous passing rent and 5.1 per cent ahead of estimated rental value. Its Old Street development completed in April is now 71 per cent let with a further nine per cent under offer.
Shares in Associated British Foods (ABF) fell more than 4 per cent in early trading after it stated in a third quarter update that profits from the sugar business would be lower than expected after a surge in supply has pushed down the price of sugar. Profit growth at Primark is expected driven by higher margins. Group revenue in the 40 weeks to 23 June was up 3 per cent at constant currency, or 2 per cent at actual exchange rates. Strip out sugar and sales would have been 6 per cent ahead at constant currency.
OTHER COMPANY NEWS:
For the second day in a row, shares in Anglo American (AAL) are up on reports that Vedanta Resources owner Anil Agarwal plans to merge his soon-to-be-delisted company with Anglo’s South African operations. Most analysts have dismissed the idea.
Uranium market play Yellow Cake (YCA) has listed on Aim this morning, raising £151m from institutional and professional investors to purchase and store 8.1 million pounds of uranium oxide, in the hope that the depressed market will eventually rebound.
Direct carrier billing company Boku (BOKU) said revenues for the six months to June should range between $16.5m and $17m – reflecting more than 60 per cent growth year-on-year. Earnings are still on track to meet full-year expectations. The group’s ‘total processed value’ – the dollar value of transactions processed by its platform – reached $1.5bn – up 153 per cent year-on-year. By comparison, the total processed for 2017 was $1.7bn. As at the period-end, Boku had around $30m in cash, up from $20m year-on-year. The shares were up 6 per cent in morning trading.
Budget airline easyJet (EZJ) carried 7.9m passengers during June, a 2.3 per cent increase on the previous year, pushing load factor up 0.5 percentage points to 95.4 per cent. Over the rolling 12 months passenger numbers are up 6.6 per cent to 83.3m, with a 1.5 percentage point increase in load factor to 93.5 per cent.
Institutional Shareholder Services, a voting advisory service, has recommended that Premier Foods (PFD) shareholders vote for the re-election of Gavin Darby as chief executive at the annual general meeting later this month. Earlier this week Oasis Investments, which has just over a 9 per cent stake in Premier Foods, stated that it would vote against Mr Darby’s re-election.
