IC TIP UPDATES:
London Stock Exchange Group (LSE) has acquired a 4.92 per cent in Belgium-based settlement house Euroclear for €278.5m. A representative of LSE will join the board of Euroclear, which has €28.2 trillion in assets under custody. The transaction will be funded from existing cash and debt facilities and it is expected that LSE’s adjusted net debt to cash profits will remain within its target range of 1 to 2 times following completion. Buy.
Ever since it completed its secondary listing in London, one of the perennial issues for chrome-platinum miner Tharisa (THS) has been market liquidity. Now, the group hopes the inclusion of its shares on the A2X exchange in South Africa will attract new investors, thanks to the platform's lower trading costs. The stock will remain listed on the Johannesburg exchange. Buy.
Good news for insolvency practitioner Begbies Traynor (BEG) is rarely good news for the rest of UK plc. This morning, the group is out with its latest 'red flag' report, which suggests that the number of businesses in significant financial distress jumped by almost 15,000 in the fourth quarter of 2018. Sectors hit particularly hard by what Begbies described as Brexit-linked economic uncertainty include real estate and property, while the number of businesses in "critical" financial distress are up 25 per cent in a year. We remain buyers.
Tarsus US Holdings Incorporated, a subsidiary of Tarsus (TRS), has entered into an option agreement to acquire the remaining 19.9 per cent interest in Tarsus Connect that it doesn’t already own from Connect Holdco. The option is exercisable by Tarsus or Connect Holdco in March in any of the years 2022, 2023 and 2024, and the exercise price will be established by reference to Tarsus Connect’s cash profits (Ebitda) performance for the previous calendar year. It is capped at $18.8m, and payable in cash. Shares in Tarsus were down 4 per cent in morning trading. Buy.
Wizz Air (WIZZ) has not been immune to the cost pressures facing airlines. Total operating costs increased by 25.6 per cent to €513m (£447m) during the third quarter, mainly due to a 21.6 per cent increase in fuel costs and a one-off pay rise for pilots. These higher costs resulted in an 87.6 per cent decline in profit to €1.7m. Chief executive József Váradi said that due to higher fuel prices, Wizz “proactively adjusted growth capacity” to help offset the cost pressure with higher yields, resulting in a 6 per cent increase in unit revenues per available seat kilometre. Revenue for the period was up 21.2 per cent to €513m as the airline carried 14.9 per cent more passengers at 8.1m with a load factor of 91.4, two percentage points higher than last year. Wizz Air maintained its net profit guidance range of between €270m and €300m for the full year. Shares were up more than 2 per cent in early trading. Buy.
KEY STORIES:
It's official: Ophir Energy (OPHR) has agreed to be acquired by Medco for 55p a share, in a deal which values the London-listed group at £391m. Though the offer represents a 66 per cent premium to Ophir's closing price on 28 December (the last date before Medco's possible interest was first disclosed), it will likely arrive as scant consolation to long-term holders of the business. On 12 January 2018, when there was still some hope for the Fortuna LNG development, Ophir shares were trading at 72p each. In recommending the deal to shareholders this morning, chairman Bill Schrader said the offer "reflects the future prospects of Ophir's high quality assets". We'd recommend accepting, too.
Further to press speculation, RhythmOne (RTHM) and Taptica (TAP) have confirmed that they are in advanced discussions about a possible all-share offer for RhythmOne by Taptica. Taptica referred to this as an “all-share merger” which would be structured as an acquisition. Hypothetically, Taptica shareholders would hold around 50.1 per cent of the enlarged group, and RhythmOne shareholders would hold around 49.9 per cent. Taptica said that a combination of the businesses would create “one of the leading video advertising companies in the US, delivering significant economies of scale, product offering, revenue synergies and supply chains […]”. Shares in Taptica were up 16 per cent this morning. Shares in RhythmOne were down by around 3 per cent.
Shares in Staffline (STAF) are down 8 per cent this morning after the group delayed release of its annual results. Management announced the delay in a brief statement, saying only that presentations would be delayed and an update would be given as soon as possible, but it would seem many are fearing the worst.
Apple (US:AAPL) had already revised down guidance for the first fiscal quarter ending 29 December 2018 at the start of this month. Yesterday, after market-close, the tech giant issued its official first-quarter results. As per its revised expectations, revenues fell 5 per cent year on year to $84.3m. Notably, revenues from iPhones declined 15 per cent year on year. Total revenues from other products and services grew 19 per cent, while services’ revenues reached a record high of $10.9bn, up 19 per cent. Revenues from Mac and wearables, and home and accessories, also reached record highs. EPS rose 7.5 per cent to $4.18, while operating cash flow came in at $26.7bn. For Q2, Apple expects revenues of $55bn-59bn, a gross margin of 37-38 per cent, and operating expenses of $8.5bn-8.6bn.
Shares in Renewi (RWI) are up 4 per cent after a trading statement. The group noted the Dutch Secretary of State for Infrastructure and Water Management publicly confirmed thermal soil – which the group produces – is an important secondary material for future use. Permits for using thermal soil are currently suspended in the Netherlands, but the government looks likely to seek an interim solution.
OTHER COMPANY NEWS:
Prospective potash miner Danakali (DNK) has received a rare vote of approval from the United Nations' Development Programme. In a report funded by the body, independent consultants have suggested the Colluli project could "enhance the delivery" of the UN Global Goals for Sustainable Development in Eritrea. Delivery of the project, which still requires funding, also has the potential to "significantly boost the Eritrean economy", whilst helping the East African state to further its agricultural productivity, training and employment.
Though production dipped slightly, Bushveld Minerals' (BMN) core vanadium subsidiary saw cash profits rise 349 per cent to $107.5m last year, thanks to a surge in the average ferrovanadium price to $81.2/kgV. In 2019, prices have averaged $76/kgV, though shareholders will have to wait until a first-quarter operational update to know just how much more annual output can be expected from the ongoing transformation programme.
Smurfit Kappa (SKG) has announced an offering by one of its subsidiaries, Smurfit Kappa Acquisitions Unlimited Company, of €300m (£261.6m) of its euro denominated 2.875% senior notes, due 2026. The packaging group seeks to use €295m of the offering’s proceeds to repay borrowings under its current securitisation facilities, with the remaining €5m committed towards the fees and expenses associated with the offering. The company announced yesterday that it had signed a €1,350m revolving credit facility with 21 of its existing banks. The facility has been agreed for an initial five years, and may be extended up to a maximum seven years. Shares were up nearly 4 per cent in morning trading.
Inmarsat (ISAT) has announced a contract to provide its GX Aviation inflight broadband service to the Indonesian national carrier Garuda, in partnership with wireless technology provider Mahata Aero Teknologi, Lufthansa Technik and Lufthansa Systems. The shares were up by just under 1 per cent this morning.
