Most viewed research
‘Billions’ - UK Housebuilding Sector - Q2: Summer 2016
12 Jul 16
The pilot episode of the much-hyped new TV series ‘Billions’ raked up almost three million viewers on debut in January of this year, which was a new record for Showtime. It is a sort of ‘Wall Street’ for a post Global Financial Crisis (GFC) audience. Damian Lewis heads the cast together with Paul Giamatti - and, the often parsimonious, IMDb has awarded the programme a premium 8.4 score. Lewis’s character Bobby Axelrod is an ambitious hedge fund manager and the sole survivor of the part-eponymous, Axe Capital, during the 9/11 attacks. Bobby is clever, charismatic and charitable (but not whiter than white). He is also very rich, lives in a nice house and knows what ‘billions’ is/are - and has a few himself; albeit these billions tend to slip in and out of his grasp, as is their wont. The UK Housebuilding Sector is also ambitious and survived the collapse of Lehman Brothers and the ensuing Global Financial Crisis. Similarly, it is smarter and wealthier than it has ever been; and, yes, charitable but not atramentous. It is also in award- winning form, which is a good job as it acts out another palpable crisis - the Brexit vote - and a £9 billion loss of value in six trading days. But do not despair.
Support Services, a cornucopia of companies
01 Feb 16
Support services can mean many things to many organisations but essentially the sector can be seen as a lubricant that helps the wheels of the economy continue to turn. A common thread is outsourcing activities that are most economically and effectively performed by a specialist rather than keeping in house. Companies in the sector tend to provide business critical services to their customers, thereby providing an element of stickiness. The sector benefits when the economy grows, but also offers an element of defensiveness as client companies and public sector bodies strive to keep their own fixed cost bases down. However given the broad range of businesses within the industry it is difficult to apply a broad brush description, and stock selection according to one’s investment criteria is vital.
UK remains resilient; France set to improve in the near term
16 Jan 17
Kingfisher reported its Q3 FY16/17 trading update (ending October 2016) which was in line with our estimates. Lfl revenue increased by 1.8% (vs Q2 FY16/17: +3.0%, Q1 FY16/17: +3.6%; our estimate: +1.8%), largely on the back of a strong performance in the UK & Ireland (+5.8% vs our estimate: +4.8%; c.45% of group revenue). B&Q clocked 3.5% organic growth (Q2 FY16/17: +5.6%, Q1 FY16/17: +3.6%; c.2% benefit due to the sales transfer from closed stores), reflecting robust demand for both seasonal (+5.3% yoy) and non-seasonal products (+3.1% yoy). Screwfix continued its strong growth momentum (Q3 FY16/17: +12.7%, Q2 FY16/17: +13.3%, Q1 FY16/17: +16.2%), propelled by the enhanced digital capability and the new/extended ranges. Among other international markets, Poland was up 6.7% organically (Q2 FY16/17: +7.3%, Q1 FY16/17: +10.8%; our estimate: +5.5%; c.11% of group revenue,) benefiting from a supportive housing market and new ranges. However, ongoing sluggishness in the French home improvement market and subdued promotional activity worsened further Kingfisher’s organic growth in the country (-3.6% vs Q2 FY16/17: -3.2%, Q1 FY16/17: +0.2%; our estimate: -0.5%; c.38% of group revenue). Despite the negative scope impact (-0.5% yoy; closure of seven B&Q stores), strong FX tailwinds (+10.2% yoy; weaker pound vs euro and Polish zloty) led the total reported revenue growth to 11.5% (vs Q2 FY16/17: +8.4%, Q1 FY16/17: +5.1%; our estimate: +7.3%). The ‘One Kingfisher’ plan remains on track (59 out of 65 planned B&Q stores closed) and the transformation activity is scheduled to increase significantly in the next year. The company also completed share buy-backs worth £182m (target of c.£600m by end of FY18/19) during the period.
09 Mar 17
The apparent UK budget realisation that next year’s sugar tax may yield less government revenue than originally envisaged is pretty much in line with expectations. Moreover, it vindicates a recent statement made by AG Barr (BAG LN, HOLD, T/P 600p) and similarly comments made Nichols (NICL LN, BUY, T/P1760p) in the aftermath of preliminary results.
Videos and Podcasts
Logical on paper but in practice, we have our doubts.….
22 Mar 17
Having had some time to reflect on the Standard Life/Aberdeen merger (acquisition) we can’t shrug off our initial thoughts. Whilst we can see the strategic logic of the deal we also think that Standard Life is overpaying, would be better off waiting until Aberdeen becomes cheaper and that the Co-CEO management structure is a ‘fudge’ that could come back to haunt it. We drop our recommendation from Buy to Hold ahead of more detailed information and lower our target price from 433p to 364p/share.
SP Angel – Morning View
22 Mar 17
Alecto Minerals (ALO LN) Suspended – Update on Mowana | Antofagasta (ANTO LN) – Antofagasta wins latest round in compensation for Reko Diq project in Pakistan | BlueJay Mining* (formerly FinnAust Mining) (JAY LN – formerly FAM LN) BUY Target Price 15p – First production targeted for 2018 | Asiamet Resources (ARS LN) – BKM feasibility study update | Strategic Minerals* (SML LN) – Drilling underway at Redmoor | Stratex International (STI LN) – Drilling results from Thani-Stratex’s Anbat Project | Tertiary Minerals* (TYM LN) – Disposal of non-core gold exploration assets
Panmure Morning Note 20-03-2017
20 Mar 17
Last week Pru comprehensively beat expectations with its 2016 year end results. The beat was due to a combination of factors including better margins and an FX tailwind that has continued into this year. We have increased our 2017/18 IFRS EPS forecasts by 6% and our 2017F EEV NTAV by 7.0% to 1646p/share. We also note with interest that the word ‘Optionality’ has reappeared in its presentations suggesting to us that the UK business may be ‘on the blocks’. Irrespective of that, the improving trading outlook together with the better than anticipated EEV NAV has led us to increase our SOTP derived target price 1850p to 2061p/share. Buy.
GMP FirstEnergy ― UK Energy morning research package
20 Mar 17
Valeura Energy (VLE CN)1,6: BUY, C$1.50: 4Q16 results and reduced 2017 guidance | JKX Oil & Gas (Not covered): FY16 results | SDX Energy (SDX LN/CN)1; Buy, £0.65: Commencement of drilling operations at South Disouq | WesternZagros (WZR CN)8; Speculative Buy, C$0.50: 4Q16 results and prepares to drill Sarqala-2 | Tullow Oil (TLW LN): HOLD, £2.60: Forcing investors to double down | Royal Dutch Shell (RDSA/B LN) (not covered) and ENI (ENI IM) (not covered): Recovering control of OPL245 in Nigeria
Creation of a new mobile Indian leader
20 Mar 17
Vodafone will combine its subsidiary Vodafone India (excluding its 42% stake in Indus Towers) with Idea, which is listed on the Indian Stock Exchange. The implied EVs are $12.4bn for Vodafone India and $10.8bn for Idea. This is a merger of equals with joint control of the combined company between Vodafone and the Aditya Birla Group (which controls Idea), governed by a shareholders’ agreement. Vodafone will indeed own 45.1% of the combined company after transferring a stake of 4.9% to the Aditya Birla Group for $579m in cash concurrent with the completion of the merger. The Aditya Birla Group will then own 26% and has the right to acquire more shares from Vodafone under an agreed mechanism with a view to equalising the shareholdings over time. Until equalisation is achieved, the voting rights of the additional shares held by Vodafone will be restricted and votes will be exercised jointly under the terms of the shareholders’ agreement. Vodafone India will be deconsolidated by Vodafone, reducing Vodafone’s net debt by c.$8.2bn and lowering Vodafone Group’s leverage by around 0.3x the EBITDA. The transaction is expected to close during 2018, subject to the customary approvals.