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News & Tips: Grainger, Antofagasta, Sports Direct & more

Equities are lacking direction
July 15, 2019

Shares in London started the week in circumspect mood with little momentum in either direction. Click here for The Trader Nicole Elliott's latest thoughts on the markets. 

IC TIP UPDATES: 

Grainger’s (GRI) 216-home build-to-rent development has started on site in Leeds, which is being forward funded for around £34m. The group expects the scheme, which has full planning consent, to complete in 2021 and generate a gross yield of more than 6.5 per cent. Buy

A World Bank arbitration board has ordered Pakistan hand over $5.8bn (£4.6bn) to Antofagasta (ANTO) and Barrick Gold (CAN:ABX) joint venture for the “unlawful denial of a mining lease” covering the Reko Diq copper and gold project in 2011. The bill includes $4bn in compensation, the value of the project when the permit was denied, and $1.75bn in interest. The joint venture’s chairman William Hayes said a negotiated settlement was possible, and Pakistan is reportedly interested in farming out some of the payout to a new developer of the project.  Antofagasta’s share price was up 4 per cent on Monday morning. Buy. 

Versarien (VRS) has secured permission from the European Chemicals Agency (ECHA) to manufacture between one and ten tonnes of graphene per year. All chemicals manufacturers seeking to import chemical substances in quantities of one tonne or more into the European Union must secure approval from the agency. The advanced engineering group releases its full-year results on Wednesday 17 July - we await a progress report on sales before reviewing our rating. Sell.

KEY STORIES: 

Shares in Sports Direct (SPD) fell by as much as 16 per cent after the retailer announced results for the year to 28 April would be delayed due to uncertainty around the performance of House of Fraser and increased regulatory scrutiny of audits and auditors. Grant Thornton has also required additional time to complete its audit work. What’s more, there are a number of key areas to conclude on which could materially affect the guidance given in Sports Direct's announcement of 13 December 2018 Management now expects that audited results will be published between 26 July 2019 and 23 August 2019.

OTHER COMPANY NEWS: 

Shares in Ceres Power Holdings (CWR) are up 6 per cent this morning after the group announced a collaboration and licensing agreement with Doosan, a South Korean developer of fuel cell power systems. The two companies will jointly develop a solid oxide fuel cell power system, initially targeting the Korean commercial building market. Worth £8m to Ceres over two years, the agreement includes licencing, technology transfer and engineering services (subject to attainment of key milestones). There is also the potential for expansion into broader applications within South Korea and internationally as well as manufacturing. 

That’s good news for intellectual property firm IP Group (IPO), which counts Ceres among its investments. IP’s second positive announcement to kick off the week concerns headline results from Istesso’s Phase 2a study of its rheumatoid arthritis drug. The trial confirmed the safety and tolerability of the drug, as well as “evidence of clinical benefit”. Shares in IP are nonetheless flat this morning. 

Bank of Georgia (BGEO) has signed a five-year, GEL28m (£7.8m) loan agreement with the European Bank for Reconstruction and Development, in a push to provide further local currency funding for micro, small and medium sized enterprises in the Caucasian state. The arrangement, which has been billed as further aligning Georgia with the European Union's free-trade requirements, is the bank’s second capital injection from the EBRD.

US president Donald Trump has decided against putting a quota on domestic uranium supply, in a call welcomed by major miner Kazatomprom (KAP). The US commerce department had recommended he use a national security rule, already brought in to limit steel and aluminum imports, to increase local mined uranium supplies. Kazatomprom, majority-owned by the Kazakh sovereign wealth fund, said any quotas would have incentivised “uneconomic production that relies on government support”. Uranium prices have been low for several years and global players have cut production. Now, Trump’s decision could push up prices as the market has been waiting on his verdict before signing new supply contracts. 

Balfour Beatty (BBY) has launched an investigation into allegations its US military housing business historically falsified records. Coming under pressure from US Democratic presidential candidate Elizabeth Warren, the group has appointed law firm Hunton Andrews Kurth to assess claims about Tinker Air Force Base in Oklahoma, which is part of a 50-year $410m private finance initiative contract to manage almost 2,500 family homes for three US air force bases. This follows accusations that Balfour (as well as other developers) has been providing substandard housing and falsified maintenance records to help secure incentive fees. Shares are down over 1 per cent.