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News & Tips: Keywords Studios, Inland Homes, Thomas Cook & more

London's blue chips are up
April 23, 2019

Shares in the FTSE100 started the week positively. Click here for The Trader Nicole Elliott's latest thoughts on the markets. 

IC TIP UPDATES:

Keywords Studios (KWS) has completed the acquisition of Wizcorp for JPY120m (£826,000). The Japan-based game developer focuses on mobile technologies, HTML5 in particular and has worked with many of the field’s best-known players such as Square Enix and Bandai Namco. The deal will expand KWS’s operations in Japan, and management said the acquisition was particularly interesting in light of Snap’s (NYSE:SNAP) acquisition of a HTML5-based gaming platform. Broker Numis said it expected to raise its longer-term earnings forecast by 0.8 per cent following the deal. Buy.

Inland Homes (INL) confirmed that it would receive £13.3m upon the completion of its Premier Inn development on West Cliff Road in Bournemouth, after satisfying the conditions of its forward sale agreement with Aviva Investors. That agreement has a starting yield of 4.15 per cent. Buy.  

Shares in easyJet (EZJ), Ryanair (RYA), and International Consolidated Airlines (IAG) were all down around 3 per cent respectively after it was reported that French pilots have threatened to strike for a week in May to protest a potential new law that would limit the union’s powers of representation. The new rule has yet to be passed, and so the strike will only go ahead if it becomes law. We maintain a buy on easyJet, hold on IAG, and sell on Ryanair.

KEY STORIES:

Shares in Thomas Cook (TCG) were up around 17 per cent in early trading after Sky News reported over the long weekend that the company has been approached about the acquisition of its tour operations business, or potentially for the entire company, by “several parties”. Potential bidders are said to include Chinese company Fosun, with which Thomas Cook already operates a joint venture in China, as well as private equity firms KKR and EQT. Any potential takeover of the airline portion of Thomas Cook would need to satisfy the EU’s ownership rules that airlines must be majority owned by European investors. In February Thomas Cook initiated a strategic review of its airline, with the potential to sell it. The company has yet to make a statement regarding the takeover offers.

Despite a 15 per cent dip in net profits, rising cash costs and a 35 per cent hike in capital expenditure, iron ore pellet group Ferrexpo (FXPO) has lifted its total dividend for 2018 by 39 per cent to approximately $135m. Non-executive chairman Steve Lucas said further strengthening of the group’s balance sheet has created “a platform to deliver the next stage in our planned expansion”, and increase production by 13 per cent by 2021. An investigation into the potential misappropriation of donations made to the Ukrainian charity Blooming Land is ongoing, and that auditors “have been unable to conclude” whether chief executive Kostyantin Zhevago has significant influence or control over the charity.

OTHER COMPANY NEWS:

Topps Tiles (TPT) is acquiring Strata Tiles, paying £3.3m for 80 per cent of the Guildford-and-Bermondsey-based company. Up to a further £2m will be paid to cover the remaining 20 per cent, through put and call options that will be exercisable in 2021. The board expects the deal to be earnings accretive in the current year.

In an AGM trading statement for the first quarter, STV (STVG) said “performance continues in line with expectations and the guidance in the previous trading update of 28 February 2019”. Total advertising revenues across national, regional and digital is expected to be up 1 per cent to 2 per cent. Within that, national advertising revenues are expected to be ahead of previous guidance, down 1 per cent to 2 per cent. Regional advertising is up 20 to 25 per cent, while digital revenues are expected to be up 15 per cent to 20 per cent.