(MENAFN- ProactiveInvestors) The Markets
Market opening: Markets are likely to open flat today. FTSE 100 futures were trading 0.50 points up at 7:00 am.
New York: Wall Street recorded sharp gains after the truce between Russia and Ukraine. Moreover rising oil prices and upbeat corporate earnings cheered investors. S&P 500 added 1.0% primarily led by the utilities sector.
Asia: Markets are trading mixed on agreement for a ceasefire in Ukraine and the resumption of talks over Greece’s bailout problems. Nikkei shed 0.4% on a stronger yen whereas the Hang Seng was trading 0.9% up at 7:00 am.
Continental Europe: Equities ended in the green over Russia’s peace deal with Ukraine to end the escalating violence in the region. In addition positive earnings reports from major sectors lifted investor sentiment. Germany’s DAX and France’s CAC 40 rose 1.6% and 1.0% respectively.
Crude Oil: Yesterday WTI and prices increased 4.9% and 4.4% respectively. The spread between the two varieties stood at US$5.8 per barrel.
UK small caps: The FTSE AIM All-Share index closed 0.16% higher yesterday at 698.05. To read our latest research click here.
Today’s breakfast menu:
- Beaufort Securities on – Speculative Buy; Zoopla Property Group – Buy; – Buy; and – Buy
- US retail sales advance ; and US initial jobless claims
Today’s news
ECB extends financial support to Greek banks
The European Central Bank (ECB) provided additional emergency funds worth €5bn to Greek banks by raising the cap of Emergency Liquidity Assistance to €65bn. Ewald Nowotny a member of the ECB’s Governing Council suggested that these funds may be replaced by cheaper direct ECB finance if Greece signed a reform programme.
BoE may cut interest rates if required
According to the Bank of England the UK may witness higher growth rates due to lower oil prices but it may negatively impact inflation. The BoE’s Governor Mark Carney assured that the UK was not facing any deflationary pressures but the bank may cut interest rates if inflation reduces below expectations in the near term.
DFS Furniture Share Offer
DFS Furniture has announced its intention to proceed with an initial public offering on the and Beaufort has been appointed as an intermediary for retail investors. The company has not announced when the Share Offer will open but the Offer Period is likely to be short and investors may need to act fast. Click here for more information
( 450.0p) – Buy
Yesterday BT announced its intention to raise around £1.0bn through the placement of new ordinary shares of 5p each to institutional investors. The proceeds would be used to fund a part of the cash consideration to be paid for the acquisition EE Limited (announced on 5th February 2015). The capital raised would account for nearly 3% of the company’s outstanding share capital. In case the acquisition does not go through the company would retain the proceeds for general corporate purposes.
Our view: ’s decision to raise £1bn through equity placement is a step in the right direction and is indicative of the fact that BT is taking all efforts to close the EE deal at the earliest. BT is acquiring EE a leading network provider in the UK for £12.5bn. We feel this is a well calibrated strategy by BT as the combination of EE’s advanced 4G network along with BT’s superfast broad band would not only provide seamless services to the customers but also create unprecedented product innovation opportunities. Moreover the company is also likely to witness cost and revenues synergies by selling broadband pay-TV services to EE customers. Eyeing the opportunity to provide an integrated platform to the customers the company has come a long way from being a telecom operator to a full-fledged media player. Thus in view of the underlying potential of this remarkable deal we maintain a Buy on the stock.
Zoopla Property Group (LON:ZPLA 186.0p) – Hold
Zoopla released its trading statement for the three months period ended 31st December 2014. The company’s websites and mobile apps saw an increase in consumer visits at an average of 42.3 million per month up 14% y-o-y. In the month of January the consumer traffic rose to a high of 50.5 million visits. The company’s investment in the new marketing strategies to search research and compare properties on the move resulted in the mobile platform contributing up to 60% of the monthly visits up 42% y-o-y. However the company’s advertising partners fell 11% to 16967 from 18999 in January 2014 after the launch of a new commercial channel by Agents’ Mutual. The company is trading in line with the expectations and expects to generate long-term growth.
Our view: The positive trading update reflects how Zoopla has made the most of the mobile platform to capture an important mind space among its customers. The swelling customer visits to the app and website are testimony to the fact that the company has paid great attention to the needs of the consumers in designing the features of the website and its marketing campaign. However the company lost some 3500 agents to the newly launched commercial real estate platform OntheMarket by Agents’ mutual. OntheMarket restricts the agents from listing on more than one platform other than itself. The company is facing stiff competition from the new website as most of the agents are choosing the market leader Rightmove over Zoopla. We believe that eventually the high customer traffic would help the company in winning new property agents but would like to wait to assess the impact of the new entrant in the market. Thus in view of the rising competition we change the rating to a Hold for now.
( 3066.0p) – Buy
Yesterday released its interim management statement for the three months ended 31st December 2014. Revenues declined 1% but increased 4% on a constant currency basis to £1.5bn. Volume of the Growth brands increased 11% to 35.4 billion and the net revenues from the division improved 15%. The Specialist brands also witnessed a revenue growth of 5%. The Growth and the Specialist brands together formed around 60% of the reported tobacco revenues. Successful brand migrations further facilitated the growth. On the other hand plans have been laid out to expand the footprint in the Growth markets including Italy Japan and Egypt. In the Returns Markets the company improved its net revenue in Australia Germany and Ukraine. During January Imperial acquired several US-based assets from Reynolds American subject to regulatory approval. Fontem Ventures the company’s standalone non-tobacco subsidiary improved its Puritane e-cigarette brand in the UK and launched a second e-vapour product in Europe. Moreover Imperial also concluded the consultations over closure of its cigarette factory in Nantes and consolidation of French R&D facilities. The company expects to save around £85m in 2015 and remains on track to save £300m per annum till September 2018 through its cost saving initiatives. It also confirmed a 10% increase in the dividend for this year.
Our view: The decline in revenues is majorly suggestive of the impact of a stronger sterling as the overall growth improved on a constant currency basis. The Growth brands did exceedingly well but most of the gains were offset by the unrest in Iraq timing of the price rise and a brand re-launch. Though the company is struggling with the falling sales due to growing health awareness and tighter household budgets we feel that the company possesses strong business fundamentals and several competitive advantages to survive the challenge. Moreover the company has reinvented its growth strategy by cutting down its core tobacco business and launching non-tobacco products like a caffeinated mouth strip and e-cigarette. With an ongoing focus on developing a sustainable business we retain our Buy on the stock.
( 3039.50p) – Buy
released its full year results for the period ended 31st December 2014. Consolidated revenue from continuing operations declined to US$47.7bn from US$51.2bn in 2013. On an underlying basis earnings totalled US$9.3bn 9% lower than last year’s US$10.2bn. However the operating profit improved 52% to US$11.3bn from US$7.4bn in the previous year while EBITDA margin remained steady at 39%. Consequently the pre-tax profit widened to US$9.6bn from US$3.6bn and the earnings per share climbed to 353.1c compared to 198.4c in the previous year. Iron-ore underlying earnings were down 18% despite record sales of 302.6 million tonnes (MT) reflecting lower iron-ore prices that slipped 30% y-o-y on average. Net earnings were US$6.5bn in 2014 vis-à-vis US$3.7bn in 2013 due to impairments of US$1.2bn and non-cash exchange losses of US$1.9bn. The operating cash cost delivered an improvement of US$1.4bn and the capital expenditure was reduced by US$4.8bn. Global production of Iron ore improved 11% to 295.4 MT. The production of Chinese crude steel increased to around 830 MT per annum in 2014 due to better export levels of the commodity. With an increase in the aluminium prices the division’s underlying earnings increased to US$1.2bn up 124% in 2014 while the thermal and metallurgical coal prices continued their declining trend. On the operational front the expansion at Pilbara iron ore system remains on track. The Kitimat Modernisation Project is progressing according to the revised plan with first production expected by the end of H1 2015. The Oyu Tolgoi and KUC showed a 69% rise in the mined gold production following the ramp-up. Refined copper production also improved 3% in 2014 despite the planned 65-day smelter shutdown at KUC. The company is targeting cash cost improvements of US$750m in 2015. Meanwhile the company also plans to return around US$6.0bn to the shareholders through a 12% hike in the full year dividend and a US$2.0bn share buy-back programme.
Our view: Considering the depressed commodity price scenario for most of 2014 reported robust results through larger shipments lower costs and higher volume sales. Meanwhile the company was also benefitted by the improvement in Aluminium prices and increased production of mined gold. Eyeing larger demand for iron-ore in China the facilities at Pilbara have been lined up for significant ramp-up for additional production and export. Despite tough trading conditions and indefinite economic trends is well placed to generate higher margin profits due to its cost and quality advantage over the industry peers. The announcement of a higher dividend accompanied by share repurchase programme marks a shift in the company’s strategy to focus on generating higher shareholder returns rather than invest in new mines. The streamlining of the capital and operating expenditures are indicative of the company’s adaption to the changing market conditions we reiterate a Buy on the stock.
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