UK100

UK 100 equity research

Explore the most viewed and latest equity research and media content for the top 100 largest listed companies in the UK.

UK 100 Equity Research

Broker research, valuations, & analysis on the UK 100

05 Jul 19

UK Housebuilding Sector in 2Q 2019

Dwight Barkley PhD is a Professor of Mathematics at the University of Warwick. He studies waves in excitable media such as the Belousov-Zhabotinsky reaction, heart tissue and neurons. In 1997, Dr Barkley and Dr Laurette Tuckerman, a Paris-based mathematical physicist, developed ‘bifurcation analysis for time steppers’, which is a technique for modifying computer codes to perform bifurcation analysis. More lyrical, perhaps, Dwight is also known for formulating an equation to estimate how long it will be until a child in a car asks the question “are we there yet?” And, it is shown on the image on page 3 of this report. Herein, there are three factors which decide the timing of this wearisome question i.e. one plus the number of activities, divided by the number of children in the car squared. That figure is then added to the time it took the family to get into the car and set off on its journey. Crucial in putting off the first query as to the proximity of the destination are onboard activities for children i.e. no activities equals a question before leaving the driveway. Dr Barkley says: “Mathematics can help answer many of life’s questions”. If only the Brexit journey were that simple. It is not. We are all children now stuck in the back seat; and, maybe, we are still on the driveway with a dearth of on-board activities. Yes, three years on Brexit-resolution-fatigue is making itself felt across the board, including the UK Housebuilding Sector, where the fall in value in 2Q’19 was 7%. Berkeley said something similarin its final results, on 20 June, when it lamented an uncertain operating environment and “a lack of visibility in the political outlook”; and its PBT is expected to fall by a further third this fiscal year. The daily Sector value chart is also lurching from top-left to bottom-right (as is the British Pound versus the Euro). Yes, there were two palpable positives in 2Q from the NHBC and UK Finance about building activity and mortgages; plus, on the third day of 3Q, CBRE’s bid for Telford Homes. Nonetheless, prospective earnings growth for the Sector is now flat in both 2019 and 2020. This is about the journey.

Companies: MCS TW/ PSN BDEV ABBY CSP WJG BVS TEF INL GLV GLE CRST BWY BKG

17 Jul 19

Moving ahead slow and steady

Ocado managed to clock a healthy top line but EBITDA was below our expectations in H1 19. Going forward, the performance of both core segments (retail and solutions) is expected to gain strength. Ocado Zoom continues to be a promising proposition but is still in its early stages. We will tweak our estimates slightly but maintain the stock recommendation.

Companies: Ocado Group

17 Jul 19

Despite a soft start, the full-year guidance remains unchanged

Experian’s top-line growth moderated in Q1, largely due to the tough comparable in the‘Decisioning’ segment. Despite this soft start, management remains confident about the business prospects, maintaining its full-year guidance. We will tweak our estimates slightly, but do not expect a material change in the target price.

Companies: Experian

03 May 18

The Money Bin

In the week to 1 May the FTSE All Share rose 1.2% vs. the Insurance Index at +0.5% and 0.9% for the Lloyd’s Index. The best performer was JLT (+2.5%); Beazley (-0.2%) was the worst performer. The Q1 reporting season has begun: newsflow has been mixed with a number of US insurers reporting improved PBT/rates, but also loss creep, higher Q1 losses and warnings from brokers about stalling rate rises ahead of the key Jun/Jul US renewals. The 2018 hurricane season starts 1 June with consensus for slightly raised activity.

Companies: BEZ HUW HSX JLT LRE

14 May 19

Is the dividend cut a buy signal?

Vodafone has released its annual results. Although there was not much new on the operational side, the dividend was cut to €0.09, as was unfortunately expected (but it was probably the right thing to do). This corresponds to 6% of yesterday’s stock price (vs 10% previously). The major telcos, offering a 4.5-5.5% yield, lend it some upside if the market has confidence, like us, in the sustainability of the dividend. We maitain our Buy on the stock.

Companies: Vodafone Group

16 Jul 19

Organic growth better than expected in Q1

Sales were up 4% organically, beating the consensus of 2%. Tisci’s first collections are showing positive growth signs but are still too weak to confirm a take-off for Burberry. Guidance was unchanged.

Companies: Burberry Group

18 Jul 19

Weak top line still an issue

Despite a weak start to the year, management is trying to revive consumer demand. This includes steps like investing in essential goods and groceries. While it is a positive step, much more needs to be done. Confirmation of FY19 PBT consensus is a comforting factor. No change in stock recommendation.

Companies: J Sainsbury

04 May 16

Good H1 with encouraging signs coming from the US

IB reported its H1 results. The reported net revenue was up +15.4% (+2.5% on an underlying basis which excludes the +16.1% impact of acquisitions in the US, -1.8% impact of Syria & Iraq and FX -1.4% ). Tobacco volume was down -3.1% (-9.2% excluding acquired US brands, Iraq & Syria had a -3.2% impact on volumes). Reported tobacco operating profit margin was up +50bp. Growth Markets’ net revenue at constant FX was up +2.1% (+9.7% excluding Iraq & Syria), whereas the Returns markets delivered -0.5%. Growth Brands’ volumes were up +0.2%. Growth & Specialist Brands contributed to 58.6% of the revenue for the period. The EPS was down to 30.4p (vs. 89.5p last year) due to the amortisation of acquired brands and linked to acquisitions’ cost optimisations. The proposed dividend is up 10% (47.0p).

Companies: Imperial Brands

11 Jul 16

Life Science Sector review

And then worst of all, you never get approval when you say you will. There is nothing that causes investor whiplash more than a sudden announcement of an unsuccessful clinical trial. Whether you are the onedrug wonder on AIM or the multi-drug portfolio NASDAQ darling, the market never takes too kindly to unsavoury news from the FDA on clinical results. But should investors lambast these two scenarios similarly based on poor trial results? The variables are endless but in this example the clear answer is no. Investors who invest in one-drug companies edging ever closer to FDA decision day do not have much cause for complaint as they are rolling the dice. But what of the company with many drug candidates in the clinic? Surely the usual knee-jerk reaction of a mass selloff is not rational when a company has a singular failure amongst a well-developed and advanced portfolio?

Companies: AZN BTG CYAD CIR ETX GSK GTCL GWP INDV SHP VER VRP

30 Apr 18

Sainsbury merges with Asda

The UK grocery sector is set for a big shake-up. The second largest player Sainsbury has decided to merge with third-ranked Asda (owned by Walmart). The deal values Asda at £7.3bn on a debt-free, cash-free and pension-free basis (EV/FY17 EBITDA multiple of 5.8x). Sainsbury’s will issue shares worth c.£4.3bn (based on Friday’s closing price of 269.8p) and pay the remaining amount in cash (c.£3bn) to Walmart. The US giant will hold 42% of the combined business (with c.29.9% voting rights and two seats on the board) with a lock-up period of two years post deal completion. The deal is expected to be completed in the second half of 2019, subject to approval from all concerned parties and the CMA. Sainsbury’s largest shareholder Qatar Investment Authority has already lent its support to the proposal. The combined business will be chaired by Sainsbury’s current chairman and led by Sainsbury’s current CEO and CFO. The new entity plans to retain all stores if approved by the UK regulators. Management has pegged the merger-related cost savings at £500m, spanning over two years post the deal completion. Around 70% of this value is expected from enhanced buying scale / negotiating better with suppliers, while the remaining portion would be equally contributed by the opening of Argos concessions in Asda stores and other operational efficiencies. This comes with a one-off cost of c.£150m and incremental capex of c.£600m (primary related to IT system migration and property opportunities for Argos within Asda stores).

Companies: J Sainsbury

06 Nov 18

FY18: stronger second half; ramping up efforts to expand NGP

The company posted strong H2 results with a better than expected operating margin. The results were reassuring and suggest that the company has a clear view about possible threats and opportunities in the troubled tobacco space and how to navigate round them.

Companies: Imperial Brands

19 Mar 19

Despite lower profits, dividend ‘payout’ was healthy

While Antofagasta’s 2018 profitability came under immense pressure, its copper production hit a record-high while efficiency measures over delivered by >80%. As a result, dividends weren’t slashed in proportion to profitability erosion. 2019 performance should improve on the back of healthier volumes, more cost controls and somewhat better prices. However, the near-term global copper markets are likely to remain volatile and, hence, further material upside on Antofagasta (after +20% ytd returns) – despite its inherent strengths – should be limited.

Companies: Antofagasta

20 Jun 18

Cenkos: Leisure Sector -- Suspend coverage

Due to a change in sector focus Cenkos Securities plc has suspended coverage of the following stocks (see table 1). Our previous recommendation and forecasts can no longer be relied upon. Please contact Cenkos for further information.

Companies: TUI CCL CPG DOM GNK JDW JE/ MARS MERL MAB FLTR PTEC RTN TCG WTB WMH IHG SSPG

02 May 19

Reiterated guidance and reduced capital consumption

The reported performance was under pressure but underlying trends were fully in line with guidance. This shows management’s strong confidence in the group’s ability to deliver a solid performance over the next quarters in the difficult Brexit context. However, although this is reassuring, one should not draw the conclusion that the group’s profitability would be immune to an economic downturn, on the contrary.

Companies: Lloyds Banking Group

03 May 19

Trying to revive in life without Asda

The FY18/19 ended on a positive note (earnings were ahead of consensus but in line with our expectations). Despite cost savings, the grocery business remains under pressure, and management needs to stem the market share erosion. Argos delivered synergies ahead of schedule and the reduction in net debt is also a positive development. A revival in banking profits and a grocery sales uplift would be crucial stock price triggers in our opinion. We maintain our positive stance due to the cheap valuation.

Companies: J Sainsbury

06 Jul 15

Alkane Energy - Trading update

26 Mar 19

Healthcare - Rebate reform could be just what the doctor ordered

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02 Jun 15

I Nexus - ELITE at London Stock Exchange

25 Jan 19

Capital Goods Value trap – 2019 Outlook

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14 Jun 17

NHAI - Market open

20 Apr 17

Geoff Drabble, Ashtead Group CEO

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09 Sep 15

Alkane Energy - Interim Results

10 Feb 17

London Stock Exchange - Highlights from Cape Town

02 Jun 15

Independent Vetcare - ELITE at London Stock Exchange

03 Jun 15

Celtic Renewables - ELITE at London Stock Exchange

02 Jun 15

Swoon Editions - ELITE at London Stock Exchange

02 Jun 15

Smarkets - ELITE at London Stock Exchange

04 Jul 14

Executive Interview - Rolls-Royce

02 Jun 15

BE-Thinking - ELITE at London Stock Exchange

05 Feb 19

Consumer Staples: Our Best Ideas We expect sector rotation into defensives: Buy ABI, Imperial, Reckitt

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18 Jul 19
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18 Jul 19
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J Sainsbury

Weak top line still an issue

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18 Jul 19
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Experian

Despite a soft start, the full-year guidance remains unchanged

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17 Jul 19
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Ocado Group

Moving ahead slow and steady

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17 Jul 19
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Crh

CRH announces the divestment of Europe distribution

CRH announced today the divestment of the Europe distribution business, for good reasons. But we are disappointed, on our side, as we were expecting a higher transaction multiple. We expect to lower our target price by less than 5% and to drop the recommendation from Buy to Add.

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16 Jul 19
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Burberry Group

Organic growth better than expected in Q1

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16 Jul 19
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WPP

40% of Kantar shares retained finally

WPP will sell 60% of Kantar’s shares to Bain Capital and will receive £2.5bn in cash, o/w £1.0bn should be returned to WPP’s shareholders. This operation should be dilutive (mid single-digit percentage) on 2020E ‘headline’ EPS and does not change the group’s dividend policy. Under the new shareholding, Kantar should benefit from the Bain Capital’s expertise in M&A and WPP’s investment of $400m in the technology to the benefit of WPP, which retains 40% of the shares.

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12 Jul 19
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London Stock Exchange Group

London Stock Exchange Group - Executive interview

As part of Edison’s accessing the global capital markets interview series, Rachel Carroll, President and Managing Partner of Edison Inc., asks Chris Mayo, Head of Primary Markets (Americas) for the London Stock Exchange, for his views on the health of the UK IPO market post the EU referendum, and how UK corporates can most effectively access global pools of capital via a London listing, with a particular focus on the United States.