On the first day of trading after the extended Lunar New Year break in China shares sold off heavily, with the CSI300 index closing down almost 8 per cent. But the sell off appears to have been contained to the mainland with indices elsewhere, including Hong Kong, showing more resilience. In London, traders have shrugged off the Chinese sell off and all the main indices are in positive territory in mid-morning trading. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
With the suspension of the UK capacity market now lifted, Drax (DRX) has provisionally secured agreements to provide a total of 2,562 megawatts of capacity from its existing gas, pumped storage and hydro assets. The T-3 auction relates to the delivery period to October 2022, and with a clearing price of £6.44 per kilowatt (kW), these agreements are worth £15m. This price is below the £8.40/KW seen at the last auction two years ago. The group did not secure agreements for its two coal units or its new-build projects. Buy.
Mears (MER) has disposed of its England and Wales domiciliary care business to Cera Care Operations for a cash consideration of £4m. A further £1m will be received over the next 12 months and the proceeds will be used to pay down net debt. As part of its exit from standalone care, the group is also looking to sell its Scottish domiciliary care business this year. Chief executive David Miles says “the sector remains underfunded and it has proved impossible to generate an adequate financial return”. Sell.
Knights (KGH) has acquired Croftons Solicitors, a specialist housing, regeneration and commercial real estate law firm in Manchester, for a total consideration of up to £2.8m. The payment comprises £1.4m in cash upon completion, the issue of £0.7m in 163,086 new shares and a deferred cash consideration of up to £0.7m. Croftons is an adviser to over 50 housing associations, providing a stable stream of case work throughout the economic cycle. The acquisition adds a further 33 fee earners to the group. Buy.
Tritax Big Box (BBOX) reported a 1.8 per cent like-for-like valuation increase last year, taking the total portfolio value to £3.94bn at the end of December. The weighted average purchase yield since inception of 5.5 per cent, against a valuation yield of 4.5 per cent at 31 December 2019. The industrial property specialist completed five pre-let forward funded developments totalling 4.3m s/ft, along with three Tritax Symmetry developments totalling 0.4m sq/ft. Buy.
Resolute Mining (RSG) has paid off the $130m (£99m) loan taken to buy Toro Gold last year for its Mako gold mine in Senegal. Its shares were off 5 per cent in London on the publication of the offer booklet for the oversubscribed two-part equity raise, which was announced on 21 January. The raise was split between institutions and Resolute’s existing largest shareholder ICM Limited, and brought in $114m. Resolute chief executive John Welborn said paying off that debt - which was due on 31 January - allowed for a broader refinancing to be done by the end of March. Buy.
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Litigation funding group Burford Capital (BUR) expects net realised gains to be $20m-$30m lower in 2018, compared with the prior year, with net unrealised gains – that is positive movements in the fair value of its case investments – to be down by $50-70m. “We are entirely unconcerned by that,” says management, pointing to a strong January for its portfolio, a rise in cash proceeds and the uncontrollable timing of court procedure. Shares are down today to just above the low hit six months ago, when the stock plummeted on the publication of a bearish report by short-seller Muddy Waters.
Future’s (FUTR) market value plunged on Friday afternoon, after Shadowfall launched a short report on the publishing group - noting that “we’re left with the impression that Future is little more than a collection of generally low quality, often distinct and shrinking assets which carries significant execution risk”. But the shares were up by around 8 per cent this morning, after Future released a trading update, stating that it expects full-year results to be materially ahead of current market expectations - despite some uncertainty in the macroeconomic environment. It said that its media division has seen continued growth in audience numbers, underpinning good organic revenue growth .
Ofgem has published a ‘Decarbonisation Action Plan’ to support the government’s efforts to reach net zero carbon emissions by 2050. It aims to facilitate a fourfold increase in offshore wind and 10m electric vehicles on the road by 2030 and establish an “innovation fund” to promote investment in climate change solutions. The regulator is due to publish its draft termination for the RIIO2 price control in June and RBC Capital Markets notes that current proposals from companies “have not been set with net zero in mind”. If this had been the case, it calculates that National Grid’s (NG.) total expenditure (totex) for the period 2021-2026 would be more than £2bn higher than its £7.1bn plan. RBC believes Ofgem is likely to introduce “flexible options in RIIO2 rather than…sanctioning a greater level of baseline totex”.
