After a third negative week in succession last week, shares in London have started the week on a brighter note with solid gains by mid-morning. Click here for The Trader Nicole Elliott's latest take on the markets.
IC TIP UPDATES:
Keywords Studios (KWS) has acquired ‘Gobo’ – comprising Studio Gobo Ltd and Electric Square Ltd – for up to £26m. Gobo provides games development services to video games developers and publishers globally, from three studios across Brighton and Hove. Keywords expects the company to add “considerable expertise and scale” to its video games development business. Gobo’s revenues rose from £6.2m for the year ending September 2017 to around £11.6m for the 12 months to July 2018. Underlying pro-forma cash profits for the respective 12 months should come in at around £3.6m. Keywords’ shares were up 4 per cent in morning trading. Buy.
The market reacted positively to half-year figures for NMC Health (NMC), sending the shares up 6 per cent in early trading. Strengthening performance through the period – a mixture of acquisitive and organic growth - was reflected in a near one-third increase in cash profits to $226m on a 200-basis point increase in the underlying margin. Healthcare continues to drive the group’s top-line growth, with the segment up 26 per cent during the period. Overall, NMC remains on track to meet full-year guidance. Buy.
As KAZ Minerals (KAZ) sunk to a fresh low on Friday afternoon, chairman Oleg Novachuk and a host of directors bought (or exercised options to purchase) shares in the copper miner. The move followed a negative report from analysts at Credit Suisse, which argued that KAZ’s acquisition of the Baimskaya project, means “any positive investment case [is] now too long dated”. We remain buyers.
The first half of 2018 has been free-cash positive for titanium dioxide miner Kenmare Resources (KMR), thanks to a 10 per cent surge in total shipments and increased prices. The $48.4m of cash flow generated in the period has been used to reduce net debt by $25m and progress the upgrade to the wet concentrator plant at Moma. Our buy call is under review.
KEY STORIES:
Shares in Mulberry (MUL) were down more than a fifth in early trading after the luxury handbag maker announced that during the first-half, it was not only providing for £3m in exceptional costs relating to 21 House of Fraser concessions, but UK sales also remained challenging. If these sales trends persisted into the second-half, management says group profit for the full-year will be materially reduced.
TBC Bank (TBCG) grew pre-tax profits by a quarter during the first-half, as net interest income of increased by around the same proportion. The net interest margin improved to 7 per cent, from 6.7 per cent the previous year, thanks to greater growth in the higher yielding retail lending book. However, that also meant the cost of risk increased to 1.6 per cent, from 1.1 per cent the same time the prior year.
The UK government has stripped G4S (GFS) of its HM Prison Birmingham contract. The Times reported the security group began running the £453m contract in 2011. The government will take over the running of the prison for at least six months and as compelled the group to take on 30 extra staff. The news will put further pressure on the outsourcing sector, which is widely viewed as flawed. Shares in G4S were down 2.5 per cent in early trading, though that quickly recovered. The group said in a statement the prison faced “exceptional challenges” and welcomed the government’s intervention.
OTHER COMPANY NEWS:
Premier Oil (PMO) is back to the project investment table. Together with its joint venture partner Dana Petroleum, the group has sanctioned the Tolmount gas project in the Southern North Sea. The project, which is estimated to produce 300 million standard cubic feet of gas per day (58,000 barrels of oil equivalent) at its peak, is expected to be online by the fourth quarter of 2020, and cost Premier $120m in capital expenditure.
