After yesterday's muted recovery, sellers are in the ring in London again this morning. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
Shares in Drax (DRX) are up 4 per cent this morning after the group announced plans to buy renewable generation assets from Scottish Power. The group plans to pay £702m in cash for a portfolio of pumped storage, hydro and gas-fired assets. Drax has secured a fully underwritten £725m acquisition bridge facility to fund the deal. Shareholders must approve the acquisition, and Drax is planning to hold a general meeting shortly. Buy.
A month on from its initial investment in SolGold (SOLG), BHP Billiton (BLT) has paid £45m for 100 million shares in the Ecuador-focused copper-gold company, setting a 28 per cent premium to yesterday’s closing price. Under the terms of the deal, which brings BHP’s holding in SolGold to 11.2 per cent, the commodities giant will have the right to appoint a director to the explorer’s board, will retain anti-dilution rights for two years to ensure it has at least a tenth of the business, during which time it will not increase its holding above 247 million shares. However, BHP has retained the right to make a bid for SolGold during the period, should it wish. Our buy call for SolGold is under review.
Perennially unloved mineral sands group Kenmare Resources (KMR) is using a capital markets day to introduce a dividend policy, and that shareholder distributions will start with the publication of interim results in 2019. Third quarter production figures, also out today, were less promising, as management has now refined its full-year forecasts for ilmenite output to the lower half of the 900-1,000kt range. Buy.
Dotdigital (DOTD) saw revenues rise 35 per cent to £43.1m for the year to June, with pre-tax profits up 14 per cent to £9.2m. The group’s ‘Comapi’ omni-channel acquisition has been fully integrated and is performing in line with expectations. Regionally, Europe, the Middle East and Africa (EMEA) saw sales rise 11 per cent (excluding Comapi); sales cycles here returned to normal after the implementation of the EU’s new data privacy rules, GDPR, in May. The first months of FY2019 have “started very well” and in line with management’s plan. The shares were up as much as 5 per cent in morning trading; buy.
A further delay to the recognition of commercial revenues at Nanoco (NANO) has sent the share price down 7 per cent in early trading. Sales Investors had been hoping the 2018 financial results would include a big chunk of commercial revenues from its partnerships with display companies, but sales were, once again, largely comprised of sales of products and services to those partners. The group is gaining traction in the electronics market, but we place our speculative buy call under review.
KEY STORIES:
Shares in McCarthy & Stone (MCS) jumped over six per cent after a Government consultation paper revealed that retirement flats will be exempt from any cap on ground rents. Part of the reasoning behind the decision is that retirement properties include a substantial amount of community space. The government is also keen to see retirement home construction expanded.
In total, Rio Tinto (RIO) has boosted its output across most of its continuing operations so far in 2018. Copper production is up 38 per cent compared with the first nine months of 2017, and the key Pilbara iron ore division has produced 4 per cent more during the same time frame. However, third quarter production showed a drop in Pilbara shipments and output, as well as Canadian iron ore, titanium dioxide, aluminium and bauxite. Two deaths during the period, both of which are under investigation, are unusual for a group with a strong track record of mine safety.
Merlin Entertainment (MERL) shares fell almost 7 per cent in early trading. Sales in the midway division were flat, or down 0.7 per cent on a like-for-like basis. But next year management hope that two new big attractions - The Bear Grylls Adventure in Birmingham and Peppa Pig World of Play in Shanghai - will bring midway back to sales growth. Midway has been a tough are for them in recent years after tourists were put off by terrorist attacks. Legoland like-for-like revenue declined 0.3 per cent, but was up 6.4 per cent on an organic basis thanks to a new opening in Japan. The Legoland division had been a big driver of growth in recent years. Hold.
British American Tobacco (BATS) updated markets ahead of analyst meetings today. Management are still expecting cigarette volumes to decline, as they have done in recent years across the industry. Market share of tobacco heating products has continued to increase with good growing in Japan. They're expecting vapour revenue growth to be in the double digits, though now expect £900m in sales (down from previously expected £1bn by FY) due to reduction in stock in Japan. Shares fell just over 1 per cent in early trading.
OTHER COMPANY NEWS:
“Steady overall demand for rough diamonds, reflecting ongoing consumer demand for diamond jewellery in the US,” was De Beers’ summary of its eighth tender of 2018, which raised $475m. The haul is short of the total raised in the Anglo American (AAL)-owned group’s last cycle, but $99m up on the figure raised this time last year.
As previously flagged, FTSE 250 group Energean Oil & Gas (ENOG) is to complete a secondary listing on the Tel Aviv stock exchange later this month. According to analysts at RBC International, this could create a large bid for the shares in the coming weeks, as index tracker funds have a limited time to build a weighting that reflects Energean’s likely 2 per cent holding in the Tel Aviv premium segment market.
