IC TIP UPDATES:
There will be intensified scrutiny on NMC Health (NMC) following the release of a highly critical note from Muddy Waters Research, highlighting “doubts about the company’s financial statements, including its asset values, cash balance, reported profits, and reported debt levels”. The due diligence based investment firm cast doubt upon NMC’s acquisitive strategy, specifically investments in “large assets at costs that [Muddy Waters] find too high to be plausible – including from parties we believe are de facto under common control”. What’s more, it posited that “NMC also deliberately understated its debt by approximately $320m as of FY2018”, made possible by lax corporate governance and no independent director influence. The Middle East healthcare group’s shares have been decimated in the aftermath. Recommendation under review.
Mineral sands miner Kenmare Resources (KMR) will miss its production guidance for 2019. The company produces titanium and minerals from the Moma operation in Mozambique, and said it had run into issues while automating one of its dredges. With only two weeks left in the year, Kenmare says it will produce between 870,000 tonnes (t) and 900,000t of ilmenite, down from 900,000-960,000t previously guided. Power cuts in Mozambique have also hit production. Kenmare’s share price was down 3 per cent on the news, to 211p. Buy.
Springfield Properties (SPR) expects to report an increase in completions and revenue in both private and affordable housing over the first half of the year, along with an improvement in the gross margin. The housebuilder also made a strategic land acquisition of a private housing development in Inverness. Buy.
Trainline (TRN) group revenues are up 26 per cent for its nine months to 30 November to £198m. International turnover rose 90 per cent to £20m, although the ticketing group expects some disruption to ticket sales from French strike action in the near term. UK Consumer revenue grew by 31 per cent, which was driven by net ticket sales growth and the roll-out of new revenue services in the last 12 months, which generated “a higher than anticipated revenue take-rate”. Sell.
Oil and gas services company Hunting (HTG) says it needs a strong performance in December to reach its expected cash profits for the year. The US onshore slowdown has hit its largest division, Hunting Titan, and the company said “capital budget exhaustion” of clients had combined with seasonal slowness to cut revenue this quarter. Consensus forecasts compiled by Bloomberg had Hunting’s cash profits for 2019 flat on the year before at £142m. Hunting said there was more positive news in its offshore business, with “modest improvement” outside North America. The company’s share price was down 3 per cent on the news. Sell.
Unilever (ULVR) revealed that annual sales growth would come up short of expectations. Faltering demand in its south Asian and west African markets means that growth will fall below the lower end of the previously guided 3-5 per cent growth rate. Hold.
KEY STORIES:
The UK’s largest banks – Barclays (BARC), Lloyds Banking Group (LLOY), Royal Bank of Scotland (RBS) among them – are sufficiently-capitalised to handle a worst-case UK exit from the European Union. That’s the finding of the Bank of England’s latest stress tests, which posed a scenario which probed the lenders’ resilience to a major UK recession with GDP dropping 4.7 per cent, interest rates ballooning to 4 per cent, and unemployment more than doubling. Moody’s said the tests underlined its view that banks’ capital ratios will “remain stable over the next 12-18 months, as banks will likely offset lower organic capital generation by reducing their shareholder distributions”.
