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News & Tips: Superdry, AA, Sophos & more

Equities have given up some of last week's gains
October 14, 2019

A downbeat assessment from the EU on the chances of securing a Brexit agreement in the short term at least have dampened spirits across London's markets after the exuberant end to last week with the pound also slipping back in tandem. Click here for The Trader Nicole Elliott's latest thoughts on the markets. 

IC TIP UPDATES: 

Superdry (SDRY) has announced Julian Dunkerton will become chief executive officer permanently, having served in the role on an interim basis since April this year. Mr Dunkerton - who founded the group - rejoined the company following an acrimonious standoff with previous management, and is now seeking to “restore the brand to its design-led roots”. We are not surprised to see Dunkerton staying on, but will need to see more evidence of turnaround before vacating our sell recommendation.

According to a Sky News report, AA’s (AA.) chairman John Leach is to step down next summer. Appointed in August 2017, Mr Leach replaced Bob Mackenzie who was sacked for gross misconduct. The roadside assistance and insurance provider is said to have hired the consultancy group Korn Ferry to search for Mr Leach’s successor, aiming to install a chairman-designate in early 2020. We remain sellers.

Shares in Sophos (SOPH) rocketed by over a third this morning on the news that it has received a $7.40 (583p) per share takeover offer from Thoma Bravo, a private-equity firm. This represents a 37.1 per cent premium to Sophos’s closing price of 425.5p on 11 October, and implies an enterprise value of $3.9bn. Sophos’s directors intend to recommend the offer to shareholders. Thomas Bravo reckons that the acquisition “represents an attractive opportunity to increase its exposure to the large and growing cybersecurity market”. Good news for Sophos, dreadful news for our sell tip. Await documents.

Oxford Metrics (OMG) has signed a contract with Imperial College London, a global top 10 university, to upgrade to both its flagship Vantage solution and flexible Vero solution. The Human Performance Group, part of the MSK Lab at Imperial, has been a customer for nearly a decade – using Oxford Metrics’ Vicon offering to research and analyse human performance. Buy

John Menzies (MNZS) has appointed Alvaro Gomez-Reino as chief financial officer. Due to join the board on 1st December, Mr Gomez-Reino has previously held senior financial positions at Amey and Swissport. In addition, Mervyn Walker has been promoted to chief operating officer. Together, the appointments complete Menzies’ executive management board. Sell.

CLS Holdings (CLI) has acquired a 57,086 sq ft multi-let office building in Reading for £14.9m, less costs. The deal, which provides the commercial landlord with a net initial yield of 7.3 per cent, is 92 per cent let to seven tenants, with a weighted average unexpired lease term of four years. Chief executive Fredrik Widlund described Reading as “an exciting location for offices as companies continue to look for more affordable alternatives to London”. Buy

In its first disposal from the recently-acquired Mucklow portfolio, LondonMetric Property (LMP) has banked £11.6m through the sale of an office and a distribution warehouse “at material premiums to book value”. The assets are located in Leicester and Doncaster respectively, and have been sold at net initial yields of 6 and 7 per cent, respectively. We remain buyers

Keywords Studios (KWS) has announced a new €140m (£123m) revolving credit facility. Chief executive Andrew Day said the facility - which replaces the group’s previous capacity of €105m - would allow it to invest in organic and acquisitive growth. The group also welcomes Jon Hauck as chief financial officer today. Buy.

KEY STORIES: 

Emerging markets-focused Ashmore (ASHM) has posted a meagre 0.1 per cent increase in assets under management in the three months to September, as negative investment performance of $2.3bn largely offset net inflows of $2.4bn. The latter was sourced from a wide range of institutional clients, which pushed money into “every investment theme except alternatives, which was flat, and a small net outflow in multi-asset”.

The CBI estimates the up-front cost of Labour’s plans to renationalise water and energy utilities, train companies and Royal Mail (RMG) would be at least £196bn. Describing the sum as “beyond eye-watering”, Rain Newton-Smith, the CBI’s chief economist, believes it could increase further. “It doesn’t take into account the maintenance and development of the infrastructure, the trickle down hit to pension pots and savings accounts, or the impact on the country’s public finances.” The CBI calculates bringing industries back into state ownership could push up national debt by 10.7 per cent, costing around £2bn a year to service. Criticising the CBI’s methodology, Labour has characterised the estimate as “incoherent scaremongering”.

Bacanora Lithium (BCN) has completed the deal that hands major Chinese player Ganfeng Lithium 29.9 per cent of the company and 22.5 per cent of its Sonora project. The deal comes as a recovery for Bacanora, which pulled a $100m (£80m) equity raise last year that was to be a cornerstone of its project finance. The Ganfeng deal was announced in May and so far the Chinese company has paid £21.9m for the company and project stakes. Bacanora said Ganfeng would “proactively advance” the Sonora project in Mexico now the deal is done. 

Real estate investment trust Urban Logistics (SHED) reports that its net asset value (NAV) has risen by 3.8 per cent on a like for like basis since March to £195m with the company enjoying 100 per cent occupancy across its portfolio of 38 logistics properties. During the period Urban Logistics acquired six properties from Connect Group for £9.9m and also sold on three properties in Nuneaton, Bedford and Dunstable for £18.4m, at an average of 7.9 per cent ahead of book value.