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News & Tips: HSBC, Polymetal, Warpaint & more

London shares have started the week with a bang
October 29, 2018

Shares in London were up strongly mid morning as investors reacted to contrasting political news from Latin America and Germany. Click here for The Trader Nicole Elliott's latest thoughts on the markets. 

IC TIP UPDATES:

Shares in HSBC (HSBA) were up 5 per cent in early trading after the banking group reported adjusted pre-tax profits of $6.19bn during the three months to the end of September, up 16 per cent on the prior year and above management’s estimate of $5.7bn. Operating costs fall to just below $8bn, from $8.5bn the prior year. Buy.

Late on Friday, Polymetal International (POLY) confirmed press speculation that it is in discussions with Chaarat Gold (CGH) over the sale of its Kapan mine in Armenia. Chaarat has previously said the asset would cost it $75m, and give Chaarat access to an asset that produced 50,000 gold-equivalent ounces last year and a pre-tax profit of $19m in the same period. The Russian precious metals group, which said there could be no guarantee the deal would complete, remains a buy.

Shares in Warpaint (W7L) fell 40 per cent in early trading after the company stated that trading in the UK, which made up 44 per cent of group sales in the first half, has continued to be soft with retailers reducing stock levels and Christmas orders. The international business has fared better, with US sales up 60 per cent compared to the same time last year and EU sales up 13 per cent year-on-year. Sales for 2018 are now expected to be between £48m to £52m, compared to £32.5m last year, while pre-tax profits will be between £8.5m and £10m, compared to £6.86M in 2017. Our recommendation is under review.

KEY STORIES:

Spain’s Nuclear Safety Council has said told Berkeley Energia (BKY) “it was not the source of the widely-circulated media reports that the government was intending to deny the permits for the Salamanca mine”. Approvals for Salamanca, which a Reuters report suggested will not be granted by the government, have plunged the prospective uranium miner’s future into doubt, and wiped two-thirds off its share price.

OTHER COMPANY NEWS:

Energean Oil & Gas (ENOG) has started trading on the Tel Aviv stock exchange. As we previously flagged this month, analysts at RBC International believe 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. Shares are up 3 per cent in early trading.

Shares in President Energy (PPC) are up by more than a tenth this morning, after the Argentinian oil and gas firm posted a 21 per cent boost in third turnover and a 59 per cent free cash generation (before general and administrative costs). At the same time, well operating costs fell a fifth to $27.18 per barrel.

Flooring and decor company Victoria (VCP) warned that group margin would miss market consensus forecasts by around 1 percentage point to 1.5 percentage points, but are still expected to be ahead of last year. This was due in part to slower performance in the Australian business and pricing pressure in hard flooring. The company also announced it has issued €450m (£400m) worth of new debt in order to pay off an existing facility. Shares fell 10 per cent in early trading.

Pendragon (PDG) announced that Tim Holden will step down as finance director after 11 years at the company, 10 of which have been on the board as finance director. He will be replaced by Mark Willis from Ten Entertainment Group (TEG), where he was chief financial officer. Shares were up 1 per cent in early trading.

Budget hotel owner easyHotel (EZH) has acquired a freehold site in central Bristol to develop a 145 bedroom hotel. The location is expected to open in 2020 and should cost around £12m, including costs of acquisition and construction.