Renewed trade war concerns have prompted some mild profit taking in London after last week's gains. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
Investors in the water utilities are currently focused on the companies’ business plans, which were published in early September as part of the preparation for the next asset management period, which begins in 2020. This means less focus is given to current trading performance, but Pennon (PNN) seems to be doing well anyway. The group traded in line with expectations in the six months to September, and remains on track for the full year. It continues to generate an enhanced return on regulated equity and its energy recovery facilities in Glasgow, Dunbar and South London are all receiving waste and ready to begin ramping up, tying the group into the growing trends of waste management and renewable energy. Buy.
Drax (DRX) has confirmed rumours that it is in discussions with Iberdrola for the acquisition of its UK portfolio of pumped storage, renewable hydro and gas-fired generation. The discussions are still in the preliminary stages, so there are no details on timing or terms, but Drax said any deal would be debt-funded and subject to shareholder approval. Buy.
Shares in Anglo Pacific Group (APF) are up 3 per cent this morning, after the mining royalty group announced it had refinanced and increased the size of its banking facilities. The three-year term provides Anglo with a $60m revolving credit facility and which can be extended by $30m for “certain transactions”. Barclays, Investec and Scotia Bank will provide the loan at a margin of Libor plus 275 basis points, and have attached no restrictions to Anglo’s dividends. We remain buyers.
KEY STORIES:
Randgold Resources (RRS) has announced its intention to merger with Barrick Gold, to create the world’s largest gold company. Under the terms of the deal, Randgold investors will receive 6.128 New Barrick shares for every Randgold share they own, and the FTSE 100 group will lose its London listing. Although Randgold will own just a third of the combined company, investors have not been offered a premium, and instead have had their shares valued at £49 each, Friday’s closing price.
Shares in Thomas Cook Group (TCG) fell by a quarter during early trading after the holiday company announced that full-year underlying cash profits were now expected to be £280m, around 12 per cent lower than analyst consensus. Chief executive Peter Fankhauser said warm weather in Europe had discouraged travellers from booking last minute holidays, leading to “even tougher competition and higher than usual levels of discounting” during August and September. Chief financial officer Bill Scott will step down from his role after the company’s preliminary results at the end of November. Sten Daugaard will take over as CFO on an interim basis after he joins the board in October.
OTHER COMPANY NEWS:
Boku (BOKU) has signed an initial deal with Rakuten Collection – part of the Rakuten Group – to provide carrier billing services for its e-commerce site, with a focus on the Japanese market. This marks Boku’s first significant agreement to provide such services in physical e-commerce in Japan.
SSE (SSE) has announced a gas discovery. Preliminary tests of the Glendronach prospect, of which SSE is a 20 per cent owner, confirmed good reservoir quality, permeability and well-production deliverability. What’s more, its proximity to existing infrastructure means it should be developed quickly. The recoverable resources are estimated at about one trillion cubic feet. This is a major boon for SSE’s gas production business.
OptiBiotix (OPTI) has announced the formation of a 100 per cent owned subsidiary called ProBiotix. This follows the group’s announcement in July 2016 that it would develop its tech platforms into separate divisions, which could ultimately become separate legal entities and could potentially seek separate public listings. The company has already seen the separate flotation of Skinbiotherapeutics on Aim in April 2017, in which it still holds a 41.9 per cent stake. Adam Reynolds has been appointed as non-executive chairman to ProBiotix’s board. Shares in OptiBiotix were up 3 per cent this morning.
easyHotel (EZH) has opened new owned hotels in Leeds, Sheffield, and Barcelona, and two franchised locations in Reading and Belfast. The budget hotel chain has also conditionally acquired a 999-year lease on a site in Blackpool to develop a purpose-built 103-room easyHotel, subject to receiving planning permission. Shares were up 1 per cent in early trading.
