Global equities romp ahead of US election and COVID lockdowns

Jamie Gordon
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Global equities romp ahead of US election and COVID lockdowns
Shrugging off some of last week’s losses, global equities decided Monday was a time to be bullish. Given the broad macroeconomic and political outlook, you’d think they wouldn’t have much to be positive about, but perhaps that’s just it – they priced in potential downsides too hard before trading. Alternatively, things are set to get messy later in the week, and they just took an opportunity to let loose. Having opened excitedly, the Dow Jones now sits up was up over a percent, sitting at around 26,780 and managing to shrug off some losses posted by big tech, which saw the Nasdaq fall around 0.60%. Regardless, tomorrow we’ll sit through the most tense US presidential election in recent history, with claims of pre-mature declarations of victory, postal voting and delays set to make the outcome a messy, contested and likely prolonged affair. This uncertainty will likely lead to days if not weeks of volatility, which would make us wonder: why were people buying equities on Monday? Echoing that sentiment, IG Senior Market Analyst, Joshua Mahony, commented:

“The expectation is that we will see a fresh bout of stimulus unlocked once the US election has been overcome. Until then, traders will likely lessen their exposure given the significant uncertainty over what could turn out to be one of the messiest elections of all-time should Trump fail to respect the mail-in vote.”

Likewise in Europe, and ignoring the blaring warning lights of a COVID second wave and new lockdown restrictions, equities soared. Storming ahead and seemingly taking their lockdown restrictions in their stride, French and German stocks flourished, with the CAC and DAX up by 2.11% and 2.01%, to 4,691 and 11,788 points apiece. Following behind was the FTSE, up 1.39% to 5,654 and spurred on by notable rallies from Rolls-Royce, Fresnillo, and most importantly, Ocado (LON:OCDO). The latter increased its profit guidance for the full-year by 50% and announced two robotics acquisitions worth over $300 million, as it gears up to meet online shopping demand during lockdown part two. On the other hand, and leading the fallers during Monday trading, were FTSE travel stocks, who are likely to keep shedding points as lockdown begins (and perhaps even extends). Mr Mahony adds on travel equities:

“Perhaps unsurprisingly, we are seeing travel-related stocks under pressure in response to expected second-lockdown due to come into effect on Thursday night.”

“The incessant rise in Covid-cases in the UK made a nationwide policy highly probable, with a number of mainland-European nations leading the way over recent weeks.”

“However, the fear from a UK perspective is just how long we will see this policy take hold, with Michael Gove already highlighting the possibility of an extended lockdown that will last beyond the intended four-week period.”

“With many suffering from lockdown fatigue, the potential for a less diligent approach in the UK could lead to an extended closure of businesses as they try to get the virus under control in time for Christmas.”

“With the government stating that travel is advised against, the declines seen for both national bus travel and international air travel stocks reflect the fact that most journey will have to be cancelled until these restrictions are lifted.”

PPHE Hotel Group shares down as revenue plunges 74%

Safiya Bashir
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0
PPHE Hotel Group shares down as revenue plunges 74%
PPHE Hotel Group shares (LON: PPH) were down almost 7% on Monday morning after the group revealed a sharp fall in revenue. In the three months ended September 30, the group’s revenue was 74% from £121m to £31.2m. Most properties were closed between March and May and demand for the following months fell amid the travel restrictions. For the nine months to September, total revenue was down 66% at £93.1 million from GBP276.3 million the year previously. “Following the onset of COVID-19 and its unprecedented impact on the trading environment, including enforced lockdowns in some of our markets, we were pleased with the Group’s improved performance throughout the summer months which was driven predominantly by domestic leisure travel and resulted in market outperformance,” Boris Ivesha, President and chief executive of the group said. “Whilst this demand unfortunately slowed following further government restrictions imposed during the second half of August and September, the performance during this period is testament to the Group’s excellent customer proposition, flexible model and readiness to capitalise on customer demand once the trading environment normalises. “While our operations continue to be impacted by ongoing uncertainty across markets, the Group has clearly proven its ability to anticipate, react, adapt, and has ultimately, demonstrated resilience. “Looking ahead, we remain focused on positioning the business well for long-term growth, underpinned by our unique model, well-invested portfolio and strong customer proposition,” added Ivesha. PPHE Hotel Group shares (LON: PPH) are trading -6.67% at 938,00 (1621GMT).  

Pathfinder Minerals shares fall with litigation against Mozambican Government likely

Jamie Gordon
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0
Pathfinder Minerals shares fall with litigation against Mozambican Government likely
Zircon and titanium-focused mining company, Pathfinder Minerals PLC (LON:PFP), announced on Monday that should it fail to reach an amicable arrangement on disputed licences, it will seek recourse to the Bilateral Investment Treaty (BIT) between the UK and Mozambique, signed in 2004. The news follows a move by local actors in 2011, to take away Licences covering approximately 32,000 hectares of land on the Indian Ocean coast of the Zambezia province of Mozambique, from Pathfinder Resources. In the company’s view, the Government of Mozambique has acted improperly by allowing this to occur, without its knowledge or consent. And in which case, it says, the action to remove its licences ‘had no legal validity’. In 2014 the Group said that it was advised that it has a valid claim under the terms of the 2004 BIT that would ‘most likely succeed’ and that the most most likely outcome of successful litigation proceedings would be the return of Licences to its control as well as a cost award in its favour.

In 2015, Pathfinder Minerals served a Notice of Dispute under the BIT on the Government of Mozambique. Having demonstrated that that all legal avenues in the UK and Mozambique have been exhausted – including the Mozambique Supreme Court’s rejection of the Company’s rejection of an English High Court judgment – the company will now continue to attempt diplomatic resolution before commencing litigation proceedings.

Members of the Board have met with the UK Government to seek support for their diplomatic efforts. Should these fail, and in preparation for formal proceedings, the company has performed an analysis of its likelihood of success, and its Board has commenced discussions with prospective litigation funders. Considering a benchmark for a potential claim, a 2019 Scope Study conducted by independent technical consultants estimated: “pre-tax net present value at a 10 per cent discount rate of US$1.05 billion; with projected annual revenues of US$323 million over a mine life of 30 years; and a project internal rate of return of approximately 25 per cent.”

Speaking on the strategic update, Peter Taylor, Chief Executive Officer of Pathfinder, commented:

“Having satisfied all conditions prior to initiation of BIT proceedings, and exhausted attempts to negotiate an amicable resolution with the Former Local Partners, Pathfinder has no option but to look to the Government of Mozambique to put right the transfer of the Licences which we believe was unlawful.”

“It remains our preference to avoid treaty litigation by resolving the dispute through constructive dialogue with the Government of Mozambique and to conclude such resolution swiftly. Such a timely resolution would allow us to resume development of the Licences which, in turn, is expected to deliver substantial associated social and economic benefits to the region through employment, infrastructure, royalties and taxation.”

In anticipation of the expected return of the Licences to the company’s control, the Group has engaged with prospective partners whose financial and technical capabilities may aid in the future development of the licences. Following the news, Pathfinder Minerals shares are down by over 22%, at around 0.52p on Monday afternoon 02/11/20. This is well short of its year-to-date high of 0.98p, but ahead of its nadir of 0.43p a share. Marketbeat reports that company “insiders have bought more of their company’s stock than they have sold. Specifically, they have bought £276,800 in company stock and sold GBX 0 in company stock.” The Marketbeat community has a 54.12% “underperform” rating on the stock.  

Serco shares implode as it loses its stake in nuclear weapons management

Jamie Gordon
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0
Serco shares implode as it loses its stake in nuclear weapons management
Service-provider and logistics giant, Serco Group plc (LON:SRP), announced on Monday that it will be losing its stake in managing the Atomic Weapons Establishment – the body responsible for the supply and upkeep of the UK’s nuclear warheads. The AWE plc consortium, made up of Serco (24.5%), Lockheed Martin (51%) and Jacobs (24.5%), was informed by the Ministry of Defence that control of the Atomic Weapons Establishment back under the direct management and control of the MoD from 30 June 2021. The news comes after Serco and its consortium partners managed the nuclear weapons body since the year 2000, with the company’s statement reading: “Serco is proud to have been involved with AWE for the last 20 years, and will work with the other shareholders and the Ministry of Defence to ensure a smooth transition to the new arrangements.” The company added that it expects the AWE to make a contribution to its underlying trading profit, and profit after tax, of approximately £17 million in 2020. It added:

“Whilst our budgeting process is yet to be completed and the pandemic makes forecasting extremely difficult, assuming a smooth transition of AWE at the end of June 2021, we would expect both Group Underlying Trading Profit and Profit after Tax in 2021 to remain broadly in line with current consensus and at similar levels to our expectations for 2020, representing growth of around 35% over 2019.”

The news follows something of a mixed 2020 for the company. While growth and lucrative contracts for the UK Government’s Test and Trace can be seen as positive, their reputation with British consumers doesn’t appear to have moved in a positive trajectory, and today’s nuclear weapons management development takes one contract off of the company’s roster. Following the update, Serco shares fell at one point by more than 13%, though moving roughly between 112p and 113p for most of the day on Monday. Its current price is some 58% beneath analysts’ target of 178.38p a share and higher only than its March nadir. Marketbeat has the company’s p/e ratio at 11.50 while Hargreaves Lansdown cites it as 19.79, both of which are below the services sector average of 26.03. Analysts currently have a consensus ‘Buy’ stance on the stock, while the Marketbeat community gives it a 70.98% ‘Underperform’ rating.

Superdry shares down as retailer appoints new CFO

Safiya Bashir
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0
Superdry shares down as retailer appoints new CFO
Superdry shares (LON: SDRY) were down 7% on Monday as the group announced the appointment of Benedict Smith as Interim Chief Financial Officer. Smith has 18 years of experience as CFO of a wide range of both quoted and privately owned businesses, most recently served as the Interim CFO at the Dennis Publishing Group. His previous experience has been at businesses including Harrods, Hunter Boots, Game Digital and Spirit Group. Smith will commence his role at Superdry from today. Peter Williams, Chairman of the Board of Superdry, said: “I am delighted we have secured an Interim CFO with such extensive experience in senior finance roles in the retail sector. This is an important step in giving Superdry leadership and stability in a critical area of the business during an important time.” In September, the group warned that the coronavirus pandemic would continue to affect its trading after profits dropped 210% in the year to April 25. The retailer posted a pre-tax loss of £166.9m in the 52 weeks to 25 April. “We remain cautious on the shape of the economic recovery, and the impact this may have on our ability to turnaround performance in line with our plan. Consequently, we recognise there is a material uncertainty, and are not providing formal guidance,” said Superdry. Superdry shares (LON: SDRY) are currently down 7.60% to 13.60p. This year, shares have fallen from highs of 525.50p.

Whisky Casks Outperform Bitcoin, Gold And S&P 500

UK Investor Magazine
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2
Whisky Casks Outperform Bitcoin, Gold And S&P 500
Sponsored by Tomoka Casks During one of the most challenging years in recent decades, whisky is one of the few investments bringing comfort and cheer both to investors’ pockets and to their glasses. Whisky is now a top-performing alternative asset, with Scotland exporting £4.9 billion-worth of this literal liquid gold each year. “According to the Knight Frank Rare Whisky Index the whisky sector has surged 586% over the last 10 years, the highest growth of any luxury asset”, explains Jass Patel, CEO of whisky investment company Tomoka Casks. “Even during the ongoing Covid-19 pandemic whisky has remained very buoyant with consistent 5% growth across the sector..” While investors may be familiar with the burgeoning market for rare whisky bottles, the most lucrative and secure part of the sector is whisky cask investment. Returns on whisky casks over the past two years have outperformed Bitcoin, gold and the S&P. “By purchasing a cask of whisky direct from a well-known distillery”, Jass elaborates, “investors are able to enter the market at the earliest possible moment. Owning your own bespoke cask of whisky not only appeals to whisky connoisseurs and collectors, it also makes very sound economic sense.” A key advantage of investing in cask whisky over bottles is the remarkable transformation that the whisky undergoes as it ages in the cask. Unlike bottled whisky, cask whisky continues to evolve and develop in the barrel. As the whisky takes on the rich, smoky character of the barrel, it becomes both more complex and more desirable, driving an average annual gain by value of at least 9%. Along with this remarkable transformation of the liquid itself, cask whisky also increases in rarity as it ages as the number of similar casks in existence dwindles. A cask of whisky is truly a unique work of art since the whisky inside will mature slightly differently in each individual cask. Purchasing a cask of whisky gives you access to something no one else on the planet has, and that rarity factor commands a premium on the secondary market if you do eventually decide to sell. Jass notes that the whisky cask market also offers investors much greater peace of mind and security. “Most of our casks are securely stored at the original distillery which ensures impeccable provenance and authenticity. This also comes with significant tax benefits as VAT only becomes payable when the whisky is actually bottled and moved from the distillery.” If you’re thinking about investing in a cask of whisky, Jass points out that another important consideration is the age of cask that you choose to invest in. “New make casks will provide a higher growth rate by percentage of around 15% per annum, whereas older casks will typically provide a larger monetary return. The caveat is that the initial investment required to acquire a more mature cask will be significantly higher compared with a younger cask.” Investors should also carefully consider the origins of their whisky cask. While Scotch remains the classic choice for many collectors and Japanese whisky has surged in value in recent years, the highest-performing casks right now actually come from the Emerald Isle. “Irish new make is providing an even better return closer to 16% as Japanese whiskey is in such short supply”, explains Jass, “so we would definitely advise spreading your bets across a range of investments to get both medium- and long-term returns.” Knowing exactly which cask to invest in to secure the highest returns can be tricky for those of us who aren’t seasoned whisky experts. Jass strongly recommends that investors speak with a trusted whisky investment company like Tomoka Casks who can guide you through every step of acquiring your very own cask. “Purchasing your own cask isn’t as simple as approaching a distillery with an offer,” Jass explains. “At Tomoka Casks our team has decades of experience in the whisky sector and we use our industry-leading network of contacts to source high-performing casks for our clients. I always recommend that investors do their homework when deciding to invest in whisky casks. That is why our door is always open to those wanting to discover more about whisky investment.” For more information about investing in whisky casks, please visit www.tomokacasks.com.  

Oil prices slump to 5-month low

Safiya Bashir
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0
Oil prices slump to 5-month low
Oil price fell to a 5-month low on Monday morning over fears of another Covid-recession. Brent crude slid by 4% this morning to $36.41 per barrel whilst US crude slumped by over 4.5% as more country’s go into lockdown. The price of Brent crude is down 45% this year. “Covid-19 cases continue to break records in the US in election week, with its impact only muted by the fact that 90 million Americans have voted early, including the President,” explained Jeffrey Halley from OANDA. “Europe continues to be of deep concern, with Britain announcing its new national lockdown lite Saturday, and by my count, Belgium, Greece, Austria and Portugal all joining them to varying degrees. The jury is still out on whether the have-your-cake-and-eat-it approach will work. The downstream effects on consumption though have manifest themselves most obviously on oil.” “Oil prices were stretchered off at the Asian open today, and are still receiving treatment on the side-lines.” Energy companies have been hit hard this year, with both BP and Shell cutting thousands of jobs. BP is axing 10,000 jobs in an attempt to save costs amid slumping demand, whilst Shell will cut between 7,000 to 9,000 jobs. Stephen Innes, Chief Global Market Strategist at Axi, said: “Traders had priced the initial downward adjustments to European road fuel demand. “I suspect their initial Eurozone 2nd wave forecast was too optimistic after France intensified the lockdown measure, forcing analysts to quickly downgrade their Q4 economic outlooks, which likely intensified the selling pressure. “OPEC+ manages the supply-side to ensure a March rollover repeat in November remains unlikely. “Nonetheless, traders appear to be setting up for a re-run of the associated price collapse we saw then, as uncertainty around the end of the month OPEC meeting has the oil complex hedging that it might be too premature for OPEC+ to make adjustments at this stage.”  

Ocado shares jump as group hikes profit forecast

Safiya Bashir
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1
Ocado shares jump as group hikes profit forecast
After strong trading, Ocado (LON: OCDO) has hiked its profit forecasts. Whilst many other retailers are struggling amid the pandemic, the online grocer said on Monday that trading remains strong. “Ocado continues to see high demand as consumers migrate to online grocery in record numbers. Sales are in line with the trends reported in the Third Quarter although growth rates reflect the seasonality of the quarter,” said the group. “As a result of this strong performance, Ocado Group today announces that it expects full year EBITDA for the group to be over £60m, versus previous guidance of over £40m,” it added. The firm has also announced plans to buy robotics specialist Kindred Systems and Haddington Dynamics for $262m and $25m respectively. “Given the market opportunity we want to accelerate the development of our systems, including improving their speed, accuracy, product range and economics,” said chief executive, Tim Steiner. “I am delighted to be welcoming Kindred Systems and Haddington Dynamics to the Ocado group, as we believe they have the capabilities to allow us to accelerate delivery, innovate more, and grow faster. I am also excited by the opportunity to enter new markets for robotic solutions outside of grocery that is demonstrated by Kindred Systems’ robust growth, with existing customers such as Gap and American Eagle across the general merchandise and logistics sectors.” Ocado shares (LON: OCDO) jumped 9% to 2,479p on Monday. They are currently trading 8.86% higher at 2.477,74 (0957GMT).

Primark warns of £375m sales hit amid second lockdown

Safiya Bashir
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1
Primark warns of £375m sales hit amid second lockdown
Primark owner, Associated British Foods (LON: ABF), has warned that the second lockdown will hit sales £375m. As the retailer prepares to close stores across the UK, AB Foods said that 19% of its retail space is already closed across the UK and Europe amid Covid restrictions. “As of today, all Primark stores in the Republic of Ireland, France, Belgium, Wales, Catalonia in Spain and Slovenia are temporarily closed, which represent 19% of our total retail selling space,” said the group. “The announced period of closure varies by market. The UK Government announced its intention to close non-essential shops in England for one month from 5 November to 2 December. Assuming that this will be passed by the UK Parliament on 4 November, 57% of our total selling space will be temporarily closed from 5 November.” “Our estimated loss of sales for these stores, including the stores in England, for the announced periods of closure is £375m.” Earlier this year, the group reported the full-year update ending September 2020, with emphasis on Primark’s “strong” performance in the fourth quarter. Cumulative sales were predicted to reach £2bn by the end of the year. The group will publish full-year results on 3 November. AB Foods (LON: ABF) shares are trading 2.68% lower at 1,653.50 (0937GMT).

Ryanair swings to €200m loss and expects a worse H2

Safiya Bashir
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1
Ryanair swings to €200m loss and expects a worse H2
Ryanair (LON: RYA) has reported a €197m (£177.8m) loss in the first half of 2020. The budget airline saw 99% of its fleet grounded from mid-March to the end of June. Since the end of lockdown, Ryanair has flown just 20% of passengers compared to last year’s summer period. Revenue fell by 78% to €1.18bn as traffic fell 80% to 17.1m. Profit for the first half of the year fell from £1.2bn to the £177.8m loss. Looking forward, Ryanair warned that it could see greater losses for the second half of the year. The group said in a statement: “FY21 will continue to be a hugely challenging year for Ryanair. Given the current Covid-19 uncertainty, Ryanair cannot provide FY21 PAT guidance at this time. The Group expects to carry approx. 38m passengers in FY21, although this guidance could be further revised downwards if EU Govts continue to mismanage air travel and impose more uncoordinated travel restrictions or lock downs this winter. The Group expects to record higher losses in H2 than in H1.” Chief executive Michael O’Leary told the BBC: “We’ve already stripped out the schedule for most of November and the December, we have really just a skeleton schedule for the services between UK airports and continental European destinations.” The airline cut flights throughout September and October after a drop in bookings. Ryanair shares (LON: RYA) opened almost 3% lower on Monday morning.
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