(MENAFN- ProactiveInvestors) The Markets
Market opening: Markets are likely to open lower today. FTSE 100 futures were trading 5.6 points down at 7:00 am.
New York: Wall Street witnessed light trading as investors focused on the mortgage and private sector payroll reports releasing today. Markets declined due to weaker-than-expected auto sales data. The S&P 500 slipped 0.5% with healthcare stocks leading the decline.
Asia: Equities are trading marginally lower with weak overnight leads from the US. The Nikkei slid 0.6% dragged down by an appreciating yen. The Hang Seng was trading 0.6% lower at 7:00 am as investors awaited the earnings results from after market close.
Continental Europe: Markets drew negative cues from poor data on Eurozone producer prices which fell the fastest since November 2009. However upbeat German retail sales numbers capped losses. Germany’s DAX and France’s CAC 40 fell 1.1% and 1% respectively.
Crude Oil: Yesterday Brent and WTI crude oil prices rose 2.5% and 1.9% respectively. The spread between the two varieties stood at US$10.5 per barrel.
UK small caps: The FTSE AIM All-Share index closed 0.55% lower
Today’s news
Scottish government goes back on assurance to cut corporation tax
The Scottish government decided to shelve the plan to reduce corporation tax which was assured during the Scottish National Party (SNP)’s campaign for independence referendum last year. Instead the party plans to put forward a new economic strategy to promote equality.
UK inflation expectation falls to six-year low
As per the monthly Citi/YouGov survey for the UK the one-year inflation expectation dropped to 1% in February from 1.2% in January the lowest since late 2008. Meanwhile the forecast for five-10 year inflation stood unchanged at 2.6%.
Company News
Infrastructure Holdings (LON:CFHL) – Speculative Buy
Yesterday Infrastructure Holdings signed an agreement with a Scottish network service provider Commsworld for the initial 50 km of deployment of pure fibre network infrastructure in Edinburgh. The total build is anticipated to be 150 km. Initial planning for this phase is already underway and construction is set to begin during summer. The company has a contractual agreement with Commsworld as per which the latter has committed to migrate a major proportion of its existing business customers to ’s new fit-for-purpose infrastructure. The total contract value to capex coverage ratio in this transaction is within comfortable limits for .
Our view: continues to strengthen its position as a leading designer builder owner and operator of fibre optic infrastructure in the UK. The initial project phase would help around 7000 businesses to use gigabit connectivity. ’s network design and deployment plan is likely to be able to fulfil current as well as future capacity requirements for Edinburgh. Flourishing financial technology and media industries in the city are likely to fuel the demand for ultra-fast connectivity further strengthening the growth prospects for . The company has attained many significant milestones in last one year; Edinburgh project marks the start of its biggest Gigabit City project yet. We reiterate a Speculative Buy rating.
Group () – Buy
Group reported results for the year ended 31st December 2014. Revenues including the share of joint ventures and associates climbed 16.9% to £1122.5m of which ~30% was contributed by activities related to support services. Underlying operating profit rose 4.7% to £28.7m while adjusted pre-tax profit dropped 8.1% to £28.5m as the sale of minority shareholdings in three joint ventures had boosted the base figure for 2013. As a result the adjusted basic earnings per share tumbled 32.2% to 27.8p. Revenue from Infrastructure and Natural Resources divisions stood at £785.2m and £335.0m respectively. Infrastructure division also reported strong operating profits and order book. In March 2014 the company raised £70.3m net of expenses to undertake new opportunities. At the end of 2014 size of the forward order book grew to £3.5bn from £3.0bn in the preceding year with repeat orders adding more than 90%. Group had already secured over £1.0bn of the revenue for 2015 by the year-end. It has been implementing its “Engineering Tomorrow” strategy to attract blue chip customers in areas like Energy Water and Transportation. The Board announced a final dividend of 6.25p taking the full year dividends to 9.5p as against 11.5p.
Our view: Group recorded strong revenues despite a poor show of the Natural Resources division. A forward order book of £3.5bn is indicative of its upbeat future revenue prospects. With the additional £70.3m capital secured during the year the company seems well-placed to undertake new business opportunities. We believe that the company’s standing in the domain of innovative multi-disciplined services would help it in winning substantial long-term contracts in the coming period. We remain Buyers of the stock.
() – Buy
Yesterday declared results for the year ended 31st December 2014. Revenue moved up 8.4% to £5.6bn with like-for-like (LFL) sales up 7.3%. The adjusted operating and pre-tax profit rose 10.5% and 12.8% to £384.0 and £362.3 respectively. On an adjusted basis the earnings per share spiked 14.9% to 119.0p during the year. Revenues for General Merchanting Contracts and Consumer divisions grew robustly with Contracts and Consumer delivering a substantial increase in operating profit as well. However the Plumbing and Heating business witnessed a downtrend due to fewer Energy Company Obligation contracts and a declining boiler market. In 2014 the company opened 54 new sites and 47 implants at existing locations. In November 2014 Primaflow a plumbing and heating distribution business was acquired for £16m to support the group’s existing F&P operations. In September 2014 the group issued a £250m seven year sterling denominated bond on investment grade terms. The Board proposed a final dividend of 25.75p taking the full year dividend to 38.0p up 22.6% from the preceding year.
Our view: has wide presence in the UK with over 1900 outlets and 18 brands such as Wickes City Plumbing Keyline Tile Giant trading under its name. During the year most of the divisions within the company displayed excellent profitability. The acquisition of Primaflow is likely to revive the currently ailing Plumbing and Heating. became a constituent of the FTSE 100 index in June 2014 and seems to be making good operational progress as of now. With strong fundamentals a healthy balance sheet and supportive scenario across housing commercial and industrial markets the medium-term outlook for looks bright. We assign a Buy rating for the stock.
() – Buy
announced unaudited results for the nine months and third quarter ended 31st January 2015. On a statutory basis revenue for the nine months increased 20% to £1.5bn with Sunbelt and A-Plant contributing around 84% and 16% respectively. In the three months period statutory revenue was up 23% to £512.9m. On an underlying basis (before intangible amortisation) rental revenue rose 25% to £462.9m and pre-tax profit jumped 33% to £113.9m during the same period. As a result earnings per share advanced 36% to 14.5p. The total rental only revenue growth of 26% for the nine-month period was facilitated through a 24% increase in fleet on rent. Capital investment in the business moved up to £783m from £564m last year. The company invested £162m on 15 bolt-on acquisitions during the period vis-à-vis £85m in the preceding year.
Our view: With a major increase in fleet on rent and some improvements in yield Ashtead’s rental revenues are on an upswing. The high level of capital investment undertaken by the company during the period would go a long way towards ensuring strong returns and business growth. The 15 bolt-on acquisitions undertaken in a short span of nine months would help the company in expanding its geographical footprint and broadening presence across specialty markets. Besides strong same-store growth and greenfield openings are also expected to add to Ashtead’s future prospects. With these positives Ashtead’s medium to long term prospects look attractive. We assign a Buy rating.
() – Buy
announced full year results for the year ended 31st December 2014. Revenue increased 17.0% to £2.7bn supported by improved selling prices (up 11.5% to £213000) and better volumes (up 6.5% to 12294 completions excluding joint ventures). Average selling prices for private completions in the UK grew 11.4% to £234000 as a result of higher sales of better quality locations and supportive market sales price. Pre-tax profit before exceptional items climbed 67.7% to £450.1m taking the adjusted basic earnings per share to 11.2p (up 67.2% from last year). In 2014 the company returned £49.7m cash to the shareholders (1.54p per share) with additional £250m is planned to be returned in July 2015. Currently the company has an optimum land bank scale of 75000 plots of which more than 50% are sourced from the strategic land pipeline. At the year-end had an order book of 6601 homes valuing £1.4bn. As of 1st March 2015 the company is 51% forward sold for private completions for the year and holds an order book of £1.7bn. The Board proposed a final maintenance dividend of 1.32p per share as against 0.47p per share last year.
Our view: continues to benefit from its land investments made over the last five years substantiated by improving profitability and shareholder returns. The company’s solid start to the spring season in 2015 with better demand and trading scenario further validates its lucrative outlook for the coming period. Meanwhile macro economic factors such as strong consumer confidence and low interest rates are likely to play the role of key catalysts towards augmenting the UK housing market growth in the coming period. ’s strong land bank and order book strategic investments and attractive trading numbers are likely to generate significant shareholder returns. We recommend a Buy.
Petards Group (LON:PEGS) peculative Buy
Yesterday Petards Group received an order valuing more than £1.5m to supply its eyeTrain products to Siemens Mobility Division. The company’s eyeTrain on-board digital CCTV systems would be fitted into Siemens’ new Desiro City Electrical Multiple Unit (EMU) trains. Besides supplying the Driver Only Operation (DOO) capability in these trains the equipment would also provide CCTV coverage of the internal saloon areas. The company plans to begin engineering activities for the project immediately. The first equipment would be delivered in H2 2015 and majority of the equipment is scheduled for delivery in 2016. The entire project is expected to complete in 2017.
Our view: Petards’ growing association with Siemens is reflective of its business generating potential from existing customers. Earlier in 2014 Petards had entered into another key agreement with Siemens to supply its train related products and services for the latter’s world-wide rail vehicle business. With a stable financial performance and some important longer-term contract wins in the past one year adding to the forward order book we remain hopeful of attractive shareholder returns. We retain a Speculative Buy.
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