All Cineworld cinemas closed amid COVID-19
Cineworld (LON:CINE) updated the market on Tuesday on its current position amid the evolving COVID-19 crisis.
Shares in the cinema chain soared above 40% during trading on Tuesday.
The company said that all 787 of its cinemas in 10 countries have been closed as a result of the virus outbreak.
Many governments have closed non-essential shops and outlets in an attempt to contain the spread of the illness.
Cineworld stressed the importance of conserving cash where possible and decided to suspend payment of its fourth quarter dividend, as well as upcoming 2020 quarterly dividends.
Additionally, the executive directors have voluntarily agreed to defer payment of their full salaries and any bonuses which they are entitled to, Cineworld added.
“Every effort is being made to mitigate the effect of the closures, to assist our employees and to preserve cash,” the cinema chain said in a statement.
“These efforts include discussions with our landlords, the film studios and major suppliers, as well as curtailing all currently unnecessary capital expenditure,” Cineworld continued.
“This is a painful but necessary process as before the onslaught of the COVID-19 virus, we were excited and confident about the Group’s future prospects. We are also discussing the Group’s ongoing liquidity requirements with our RCF banks.”
The COVID-19 outbreak continues to develop in the UK, and people are being encouraged to stay indoors in order to help contain the spread of the illness.
With most of the country coming to a standstill, these are difficult times for many businesses.
Shares in Cineworld Group plc (LON:CINE) were up on Tuesday, trading at +40.12% as of 10:57 BST.
FTSE 100 travel shares surge as German DAX enters bull market
The FTSE 100 and European shares rallied for a second day on Tuesday after Asian shares continued a risk-on rally over night.
A rally in global stocks has been sparked by optimism the number of coronavirus cases were falling in European epicentres.
Both Spain and Italy have recorded a consistent drop in new coronavirus cases over the past five days.
“The market is front running what it believes is a peak in the virus case count with Europe leading the way,” said Chris Weston, head of research at Pepperstone.
The German DAX has today entered a technical bull market from the 18th March low as its moved above 10,400.
A technical bull market is a market move higher of 20% or more.
The drop in cases has led to European governments laying out plans for a return to normal life. Austria has said it expected business to open again a1st May whilst Italy was working on a programme to start manufacturing again.
However, the rally in shares came as JP Morgan boss, Jamie Dimon, warned over the up coming recession and implications for the financial system.
“We don’t know exactly what the future will hold — but at a minimum, we assume that it will include a bad recession combined with some kind of financial stress similar to the global financial crisis of 2008,” Dimon said.
Travel shares surge
The FTSE 100 was buoyed by travel shares who have been destroyed during the spread of coronavirus. Carnival shares were up over 24% to 890p building on yesterdays gains following the news the Saudi Arabian Public Investment Fund had taken a 8.2% stake in the cruise liner. Carnival also announced it had successfully raised $1.95 billion through the issuance of convertible senior notes. easyJet shares also cheered the apparent peak in coronavirus cases, rallying over 16%. Intercontinental Hotels and International Consolidated Airlines were both up over 10%.GVC optimistic amid COVID-19 crisis
GVC (LON:GVC) shares rose on Monday after it provided an optimistic update concerning the outbreak of COVID-19.
Shares in the British sports betting company were up by 19% during trading on Monday.
The owner of Ladbrokes had previously warned that COVID-19 would impact its EBITDA by a reduction of roughly £100 million each month.
However, the company provided investors with hope on Monday, announcing that this damage has been reduced.
“Following the initiation of a number of mitigating actions the Group now expects to reduce this EBITDA impact to approximately £50m per month,” GVC said in a statement.
Many fear the economic impacts of the COVID-19 outbreak, as shops have been made to close in order to adhere to government guidelines.
“While our global and product diversification is standing us in good stead during the current uncertainty, the COVID-19 pandemic is posing an unprecedented challenge to our business and our industry,” Kenneth Alexander, GVC’s CEO, said in a statement.
“We are responding decisively, and have put in place a range of measures to keep our people safe, strengthen our financial position, limit cash outflow, preserve jobs and maintain a compelling customer offer,” the CEO continued.
“I am confident that we will emerge from this period in a position of strength, and we will be well placed to take advantage of a range of attractive growth opportunities which we believe will be available to us.”
The CEO said: “We are also sensitive to the fact that at this time of economic stress and isolation, it is vital that we ensure a safe, responsible and enjoyable gaming environment for our customers and do everything that we can to minimise the potential for harm.”
Shares in GVC Holdings plc (LON:GVC) were up on Monday, trading at +18.88% as of 12:21 BST.
UK new car registrations plunge 44%
Data revealed on Monday that UK new car registrations plunged in March as the evolving COVID-19 outbreak caused showrooms to close.
The Society of Motor Manufacturers & Traders (SMMT) said that UK new car registrations fell by 44% in March, which is a steeper decline than during the financial crisis.
Last month was the worst March since the late nineties, the SMMT added, with 203,370 fewer sold across the month.
Following government advice to contain the spread of the illness, showrooms have been closed.
Additionally, the SMMT downgraded its 2020 outlook to 1.73 million registrations. This is a 23% drop compared to the earlier outlook made in January, and 25% less than the 2.31 million registrations in 2019.
“With the country locked down in crisis mode for a large part of March, this decline will come as no surprise,” Mike Hawes, SMMT Chief Executive, commented on the data.
“Despite this being the lowest March since we moved to the bi-annual plate change system, it could have been worse had the significant advanced orders placed for the new 20 plate not been delivered in the early part of the month. We should not, however, draw long term conclusions from these figures other than this being a stark realisation of what happens when economies grind to a halt,” the Chief Executive continued.
The Chief Executive said: “How long the market remains stalled is uncertain, but it will reopen and the products will be there. In the meantime, we will continue to work with government to do all we can to ensure the thousands of people employed in this sector are ready for work and Britain gets back on the move.”
FTSE 100 rises inline with European shares as coronavirus cases dip
The FTSE 100 started higher on Monday after data over the weekend revealed a slowdown in cases in European epicentres such as Italy and Spain.
The FTSE 100 pushed up as high as 5,590 in early Monday trade, before the rally faded.
Europe indices such as the German DAX, French CAC, Spanish IBEX and Italian FTSE MIB were all stronger in a broad European rally.
The move to the upside was sparked by optimism European countries were past the current peak in coronavirus cases. Italy and Spain have registered the steepest incline in deaths globally but over the weekend the number of new cases and deaths fell in both European countries.
Italy registered 525 deaths on Sunday, the lowest number of deaths since March 19th. 15,887 people have now sadly died with coronavirus in Italy.
This fall in deaths suggests the lockdown measures had their desired effect more a month after they were implemented.
However, while Italy and Spain seemed to be moving past the peak, the United States were bracing for what experts predict will be their worst week. However, this didn’t have an impact on US equities as the Dow Jones and S&P 500 rose in the premarket.
Legal & General was the FTSE 100’s top risers after it said it was going to ignore Bank of England warnings and pay its dividend. UK banks scrapped their dividends last week on advice from the Prudential Regulatory Authority to cease all payouts including buybacks and senior staff bonuses. Shares in Legal & General were up more than 17% on Monday.
Coronavirus testing kit producer Novacyt shares were also stronger following an announcement on approval from France. Novacyt have recently supplied Public Health England with a test order and have FDA approval to distribute through the United States.
Oil shares were weaker as oil retreated from Friday’s sharp rally on the decision to push the OPEC + meeting to Thursday and reports of rifts opening up again between Russia and Saudi Arabia.
Hobbyist shares may benefit from lockdown
As large proportion of the developed world’s population become confined to their homes, people will naturally seek ways to entertain themselves. Video games will be the go-to choice for most of the younger generations but there will be a huge demand from hobbyists for the models offered by Hornby and Games’ Workshop.
At the time of writing, a large number of products on Games’ Workshop’s Warhammer website were sold out, suggesting a surge in demand.
Warhammer is commonly known among enthusiasts as ‘plastic crack’ due to the addictive nature of collecting and painting the models, and evidence points to people stocking up for long days inside.
The creation of an almost cult-like Warhammer following has been reflected in consistently strong growth for Games’ Workshop in recent years.
In the half year to 31st December 2019, Games’ Workshop revenue grew by 19% to £148m from £125m the year prior, and profit before tax grew by 43% to £58.6m.
Shareholders have reaped the rewards of Games Workshop’s popularity and increasing profits with share rising from lows of 2,200p in 2018 to 2020 highs of 7,350p.
Shares have since fallen to 4,230p which presents an interesting entry point given the biggest problem the Games Workshop will now have is ensuring their website and order processes can meet demand.
Hornby
For the more traditional model producer, Hornby, which owns Airfix, Scaletrix and Corgi, the lockdown may signal a change in the company’s fortunes. The company has undergone a years long restructuring which has been painful for investors but losses declined sharply in 2019 FY. In addition, Hornby has recently raised £15 million to ‘reinvigorate’ their offering and invest in digital marketing. This has proved particularly timely given the likely boost to demand in the short term but it also provides a key marketing opportunity to target younger generations. If Hornby are able to win over new consumers who embark on their collecting careers whilst in lockdown, it could provide revenues long into the future.Consider these three exciting energy shares
EQTEC
We kick things off with a company driving forward the circular economy with waste-to-energy technology. London-listed EQTEC operates a multi-channel revenue model that sees them earn revenue from technology licensing, engineering support and output sales. EQTEC’s waste-to-energy technology uses inputs such as refuse and farming waste to create energy in the form of gas. Driven by an experienced management team, the company has announced a number of strategic partnerships in recent months which has seen their operations expand into North America and numerous locations across Europe. The company’s technology is providing a positive environmental impact by keeping waste out of landfill and increasing the use of greener fuels.
Hurricane Energy
Despite the oil sector being the subject of pressure from a shift in investment trends away from fossil fuels towards greener forms of fuels, the drop in oil prices has heavily hit the oil sector and there are a plethora of companies offering great value.
With a market cap of just £258 million, Hurricane Energy does just that.
Hurricane Energy is operating fields just west of the Shetland Islands and has had much success with their exploration programme, which still ongoing offers potential for further discoveries.
Hurricane Energy is in the favourable position of having $164 million cash as of 18th March 2019 which will ensure funding for the drill programme in the foreseeable future.
In addition, Hurricane had revenues of $170 million and profit after tax of $58.7m in 2019 almost eradicating the need to raise capital a dilute shareholders in the pursuit of their long term goals.
Despite the lower price of oil, shares look very cheap considering the potential for good news from their ongoing exploration program which could sees further increases to production and revenue.
ITM Power
ITM Power provides specialist Hydrogen Power Stations that utilises Proton Exchange Membrane (PEM) technology.
The UK-listed company products includes both power storage and fuels with a wide range of applications ranging from powering buses through to storing and providing hydrogen energy for entire islands.
ITM is receipt of government funding, the most recent tranche was £7.5 million from the Department for Business, Energy and Industrial Strategy to develop the next phase of the Gigastack Hydrogen project.
Gigastack is a renewable hydrogen project that uses wind power and demonstrates the forward thinking nature of ITM and how their business is facilitating the UK’s drive towards becoming net-zero by 2050.
During the development stage of the business ITM has understandably posted losses in recent years. However, the company has a strong balance sheet having recently raised £58.8 from placings and the receipt of strategic investment from their partners. One for the future.
The Lloyds share price is too hard to ignore at current levels
The Lloyds share price (LON:LLOY) has suffered terribly since the onset of the coronavirus crisis, having more than halved since the beginning of 2020.
The writing of a letter by the Bank of England to UK banks effectively instructing them to cease all unnecessary payouts, including ordinary share dividends and buybacks, was the final straw for the market and shares fell beneath 30p.
However, with most of the ‘bad’ news now currently priced into shares, there is the argument that the sellers have been shaken out, leaving plenty of opportunity for a share price recovery.
To make a case for entering Lloyds shares at current levels investors should refer back to the fundamentals of the company in 2019. This will provide a reference to where Lloyds’ underlying business should return to as the UK economic recovery takes place over the next 12-24 months.
One should note that the much touted ‘V-shaped recovery’ to the coronavirus crisis in the early days of the spread is unlikely to happen due to the structural changes to the employment market.
Sharp increases in unemployment across the globe means the recovery will be slightly more protracted. Nonetheless, animal spirits will return and this will untimely drive Lloyds’ operations back up to prior levels.
Lloyds share price
Highlighting the opportunity for investors at current levels is the valuation of Lloyds shares based on historical earnings. Lloyds net profit was £3 billion in 2019 meaning at 28p, Lloyds is trading at a 6.5x earnings multiple. However, it is entirely feasible that Lloyds profit is completely wiped out in 2020 making PE ratios utterly useless to judge Lloyds in 2020. The reduction in interest rates by the Bank of England in an effort to support the economy will have an impact on Lloyd’s net interest income so investors should expect this to reduce earnings while rates remain low. In addition, banks including Lloyds are providing payment holidays while ceasing the provision of mortgages which will also hit revenue. Investors should look past 2020 and to the period when the economy has been resuscitated. This is where the value in Lloyds current share price lies as this is when earnings return and will make 28p look cheap. It is also the period that Lloyd will start paying dividends again. With a PE Ratio of 6.5x historical earnings Lloyds shares are too hard to ignore given the potential for recovery, notwithstanding heightened volatility while we wait. The Lloyds share price was 28p in morning trade 3rd April.Oil jumps as much as 35% lifting FTSE 100 after Saudi/Russia production cut reports
The price of oil soared on Thursday afternoon following reports Russia and Saudi Arabia were to agree on a production cut that could amount to 10 million barrels a day.
The news was first unveiled by President Trump who put out a tweet following a telephone conversation with ‘his friend’ the Crown Prince of Saudi Arabia.
Russia and Saudi Arabia have been locked in a price war following the decision by Russia to increase production which has rocked global oil markets.
Oil prices ripped higher with both Brent and WTI up over 25% and Brent Crude rose over $30. Following Trump’s tweet, reports emerged of Saudi Arabia requesting an emergency OPEC meeting. In an interview with Bloomberg, Ryan Sitton, Texas Railroad Commissioner , said before the US lockdown the global oil market was 18 million barrels a day oversupplied which he thought was now at around 22 million barrels a day. This would mean cutting 10 million barrels would still leave an oversupply in the oil market and could pressure oil prices as storage facilities continue to become full. Nonetheless, equities surged on the back on the news with oil heavy weights BP and Royal Dutch Shell adding to gain in the immediate reaction. Shell was up over 10% on Thursday afternoon adding a significant number of points to the FTSE 100. Shares had been trading towards their lows before the announcement following the largest rise in US unemployment figures in history. Initial jobless claims rose by 6.6 million, doubling last week’s 3 million. This is the sharpest increase in unemployment figures in US history. During the financial crisis it took 19 weeks for 10 million to register unemployed in the US and the same amount have been recorded in just two. The FTSE 100 had rallied to highs of 5,547 before the rally faded into the close.Just spoke to my friend MBS (Crown Prince) of Saudi Arabia, who spoke with President Putin of Russia, & I expect & hope that they will be cutting back approximately 10 Million Barrels, and maybe substantially more which, if it happens, will be GREAT for the oil & gas industry!
— Donald J. Trump (@realDonaldTrump) April 2, 2020
Equity Funds to buy to navigate the coronavirus crisis
Equities have sunk during the coronavirus-indiced selloff and now offer a range of opportunities that haven’t been seen since the financial crisis.
Those choosing to use the services of fund managers are being presented with a plethora of options to take advantage of the low prices in equities.
ETFs that follow the price of indices offer low-cost exposure to indices such as the FTSE 100 for investors who want to passively track any broad recovery in stocks.
iShares Core FTSE 100 UCITS ETF does just that with an ongoing cost of just 0.07% and a 5.8% distribution yield at the end of March 2020 when the FTSE 100 was around 5,500.
The passive versus active approach to money management rages on and actively managed funds in the UK are as still as popular ever, despite the growth of ETFs. This has, however, created benefits for investors in the form of lower costs for OEICs, Unit Trusts and Investment Trusts.
In the actively managed space, we would point to high income funds in Shroders Core UK Equity and the Aberdeen Standard Equity Income Trust that yield 6% and 10% respectively.
Expect these yields to change as we learn of more dividend cuts but both funds are dominated by high-quality FTSE 100 companies such as Shell, BP, GSK, AstraZenec and British American Tobacco, so we wouldn’t expect the adjustments to the fund yields are overly dramatic.
A theme we feel that will be as important beyond the coronavirus crisis as it was before is sustainability and making investments that provide a positive impact.
With this in mind we continue to be impressed by JLEN Environment Assets that reaffirmed its dividend as many FTSE 100 companies scrapped them all together. At 109p JLEN yields in excess 5.8%.
The JLEN Investment Trust invests in a portfolio of renewable energy assets including hydro, biomass, solar and wind. Demonstrating the forward-thinking nature of management, JLEN announced the acquisition of a biomass plant as the UK moved towards the peak of coronavirus, a decison investors should take confidence in.