Tesla shares bounce 8% – the feel-good factor outweighs sources of friction

Jamie Gordon
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Tesla shares bounce 8% – the feel-good factor outweighs sources of friction
After claiming the top spot as the shorters’ widow-maker in 2019, and watching its share price bounce by over 100%, Tesla (NASDAQ:TSLA) shares once again rallied by a minimum of 8% in pre-market trading on Wednesday, despite a series of worrying developments.

Tales of Tesla woe

In the last 24 hours alone, several announcements should have acted as headwinds for a Tesla stock rally, but appear to have been overlooked. Stock in Virgin Galactic (NSE:SPCE) has gone supersonic, bouncing 13.10% as Wall Street pundits dub the company a safer and more attractive alternative to Tesla. Further, despite a widely publicised 2.2% revenue growth in the fourth quarter, fears over the longevity of Tesla’s profitability could potentially be roused by the announcement that its US revenues were down 34% year-on-year, while its Q3 revenues were likewise down 39% on-year. These fears could perhaps by compounded by Tuesday’s announcement that Tesla was ordered to stop working on its Berlin Gigafactory. This set-back – though perhaps temporary – should possibly grind the gears of onlookers at least to some extent. Its Shanghai factory has acted as a source of joy in recent months – a delay in its chance to access the European market with greater ease certainly isn’t good news. Additionally, and recanting an age-old problem Tesla seems to encounter, it is struggling with the supply side of its expanding solar business. After acquiring SolarCity for $2 billion in 2016, the company has sought to increase its stake in the solar energy market. The recent launch of its long-anticipated solar roof has been crowned with long waiting lists and warnings of equally long installation processes. While we can somewhat celebrate the demand for Tesla products and the strength its innovative prowess offers to its product pipeline, its recurring difficulty to expand its output and struggle to expand its manufacturing sites limit its potential – deterring future customers with long waits and doing no favours in proving its business acumen. Lastly, reports have come out of two Tesla cars being tricked into speeding by vandals. The vandals, who were inappropriately over-credited as ‘hackers’ stuck black tape on a speed sign, changing the number form 35 to 85, and in essence giving the Tesla onboard computers the impression they needed to speed up. Though many will feel this says more about human stupidity than functional problems, bad press, and fuel for the fire of luddite scepticism, are certainly harmful to the company’s mission.

The good mood trumps prudence

The problem is – I’d like to think – Tesla’s role as a disruptive company trying to do good, means consumers and investors alike will be naturally inclined to give the company the benefit of the doubt. The volume of news, and the personality of Elon Musk, guarantee the brand is never far off of the agenda, and this sheer overload of updates mean negative press tends to leave a lasting impact. As much as there are worries over malfunctions and hacks of Tesla’s trailblazing hardware, it has undoubtedly been a force for good, too. Only yesterday, two Tesla Model X cars were involved in the same crash, but both cars’ passengers lived to tell the tale because their autopilots activated their emergency breaks, saving the lives of eight people. Musk responded personally, with an understated but no doubt proud “I’m glad you’re all ok” (followed by a heart emoji). These kind of stories will likely become more and more common as time goes on – the company isn’t just in command of a niche by creating these safer vehicles, but investors will be attracted by the idea that they’re putting their money into something good, in the process of making money. The catalyst of the company’s rally today, though, was a new all-time high call on its stock by Piper Sandler (NYSE:PIPR), who gave the company a target price of $928 per share. This isn’t the first bullish call to come out of Wall Street on Tesla stock, with Argus Research’s $808 target seeing the company’s shares bounce 19%, but it does give some more credence to the idea that its price will have a sustained upwards direction of travel. The call was also seconded by Bernstein (NYSE:AB) analysts, who stated that they saw no immediate negative catalysts on the horizon for Tesla stock.      

Chaarat Gold note annual production increases and higher reserves

Ishen Patel
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Chaarat Gold note annual production increases and higher reserves
Chaarat Gold Holdings Ltd (LON:CGH) have seen their annual production rise in an update on Wednesday afternoon. Chaarat is a gold mining company which owns the Kapan operating mine in Armenia as well as Tulkubash and Kyzyltash Gold Projects in the Kyrgyz Republic. The gold miner noted that annual production had increased at its Kapan mine in Armenia – which shareholders should be impressed with in a highly saturated market. In addition to this, the Chaarat also reported that reserves had risen at the Tulkubash project in Kyrgyz Republic. The firm noted “The objective of the drilling programme was to test targets northeast of the prior Resource boundary, enhance the project economics by adding ore to the previously defined pits, and to increase understanding of prospectivity of the wider licence area.” Looking at gold production figures, the firm noted that gold equivalent output had increased at the Kapan project by 60,252 ounces in 2019 from 56,424 in 2018. Sales also surged by 8.5%, from 50,915 ounces to 55,255 ounce – Chaarat added. Going forward, Chaarat have forecasted gold equivalent production of 55,000 ounces in 2020. Notably, this would see an 8.7% dip year on year, however the firm has remained confident in delivering these expectations. At the Tulkubash gold project, proven and probable reserves were boosted by 14% to 25 million tonnes from 22 million tonnes, following a drilling programme. Artem Volynets, Chief Executive Officer, commented: “I’m pleased to report the results of the 2019 drilling programme at our Tulkubash gold project in the Kyrgyz Republic. The drilling programme followed the announcement of the 2019 Feasibility Study and has delivered a 14% increase in the ore reserve statement to 749koz at a higher grade of 0.95g/t, adding even more years of life to what was already an economically robust project, while also improving our understanding of this exciting asset. The next phase of the work programme is focused on further developing the mine plan within the next couple of months. First production is still expected in late 2021.” Shares in Chaarat Gold Holdings Ltd trade at 35p (-0.56%). 19/2/20 14:45BST.

Tertiary Minerals narrow loss as shares recover from 325% surge yesterday

Ishen Patel
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Tertiary Minerals narrow loss as shares recover from 325% surge yesterday
UPDATE: 15:52BST – Tertiary Minerals saw theirs shares fall today following a 325% surge post RNS yesterday. The share fall is not attributed to the loss but rather a recovery from the rise yesterday. Tertiary Minerals (LON:TYM) have seen their shares dive nearly 50% despite the firm narrowing its annual loss. The firm noted that reduced impairment charges was the main driver for the narrowed annual loss, however shareholders do not seem so optimistic. The Chairman of the firm commented on the loss by saying: “Whilst we raised a modest amount of money in early 2019 to fund our activities in the first half of the year, fundraising for Tertiary and its peers at near market prices has been nearly impossible in the second half of 2019 and we have not been prepared to accept opportunistic offers of heavily discounted share placings. Instead, following the end of the financial year, we accepted an offer of funding from Bergen Global Opportunity Fund, LP, a U.S. based institutional investment fund and raised an initial £232,000 before expenses through the issuance of zero-coupon convertible securities as part of a facility having a nominal value of up to £653,000. “ Shares in Tertiary Minerals trade at 0.39p (-49.02%). 19/2/20 14:17BST. The mineral miner told the market that it had reported a pretax loss of £831,507 in the year which ended in September. This was much better than the loss recorded a year before this, which stood at £2.3 million. Impairment charges fell considerably, from £2 million to £442,917. Despite impairment charges falling, revenues also fell to £189,742 from £218,841, which is what shareholders have seemed to note. The Chairman Patrick Cheetham commented: “As a Board we have faced some difficult decisions in 2019 as our fluorspar projects have not sustained the value they once added to the Company and our efforts to acquire a more advanced project are limited by our size and available financial resources. Consequently, the Board initiated a parallel back-to-its-roots strategy of gold and base metal exploration with an emphasis on low cost value adding acquisition and exploration of gold and base metal projects in Nevada, USA. Nevada is ranked as the most desirable mining jurisdiction in the world by the Fraser Institute and in 2018 produced 5.58 million ounces of gold … Market commentators are anticipating a better year for small cap companies in 2020 and we look forward to reporting news from our exciting new gold and base metal projects in Nevada over this coming year. Our Annual General Meeting for the year ended 30 September 2019 will be held in our offices in Macclesfield this year, on Thursday 19 March 2020.”

Tertiary see progress in Nevada

A few months back, Tertiary minerals saw their shares rally as they reported zinc mineralization in Nevada. The Company said that the two zones – the Valley Prospect and the East Slope Prospect – would now undergo follow-up exploration and drilling. Preliminary observation of the Valley Prospect revealed a thick skarn zone potentially 350 metres long and 8 metres thick. A rock sample taken from historic shaft spoil assayed 7.5% zinc, 4.3% lead and 180 g/t of silver. This included a 175 metre long 250-500 ppm zinc soil anomaly. Past rock sample assays display up to 20.9% zinc, 0.11% cobalt and 198 ppm silver. The narrowed loss for Tertiary is good news, however shareholders have not reacted in the most optimistic tone. The firm has work to do across 2020 to see whether it can swing to a profit and win over shareholder sentiment.

National Milk Records profits more than half on cyber attack

Jamie Gordon
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National Milk Records profits more than half on cyber attack
Supplier of dairy and livestock services National Milk Records (OTCMKTS:NMRPF) reported that its first half performance had been hampered, following a cyber attack on the 13th of September. The Group’s turnover was down from £11.7 million to £10.7 million year-on-year for the first half, though it added that 59% of this change could be attributed to one-off seasonal activity in 2018. The main change was in the company’s profits, which were down from £1.1 million to £0.4 million before tax, while its EBITDA also dropped from £1.3 million to £0.6 million. Aside from dealing with the adverse effects of the hack, the company reported that its debts had widened from £2.1 million to £2.4 million. However, it added that its investment in tangible and intangible assets jumped from £0.3 million to £0.7 million on-year, while its net assets increased from £2.8 million to £4.1 million.

National Milk Records dealing with the hack and looking ahead

Responding to the attack and the first half results, Managing Director Andy Warne commented:

“We are pleased to report that despite an interruption to our services following the previously reported cyber-attack, NMR has emerged stronger having protected our revenue streams and substantially reinforced our cyber protection and restoration capability. We are particularly pleased to note that revenues from our Disease Testing services have grown by 4% year on year as we pursue our strategy of focusing on our core customers and greater penetration of our milk testing services. […]”

“The financial impact of the cyber-attack has been via additional credit to customers for interrupted services, the over-provision of testing in the labs to protect revenue streams, and additional costs for system protection and cyber-consultancy services. Whilst the quantum has been greater than previously envisaged, the direct financial impact is fully contained in the first half of the year. During the second half of FY20 we expect to trade broadly in line with our prevailing growth expectations for this period, albeit some initiatives having been delayed by the cyber-attack. Taken together, this updates our previous guidance. […]”

“With regards to the British Dairy industry, calendar year 2019 saw the highest level of milk produced in Great Britain for 27 years. There is some consequent downward pressure on milk prices which may reduce milk volumes to a small extent, however we remain positive that the UK dairy market offers strong opportunities and look forward to a successful second half of the year and beyond.”

Investor notes

The company’s shares are currently trading at US $1.36 per share 10/02/20. National Milk Records has a market cap of $22.09 million, their dividend yield stands at 2.40%.  

Laura Ashley shares surge 45% as Wells Fargo approve lending

Ishen Patel
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Laura Ashley shares surge 45% as Wells Fargo approve lending
Laura Ashley Holdings plc (LON:ALY) have seen their shares bounce 45% on Wednesday afternoon. Shares in Laura Ashley trade at 2p (+45.45%). 19/2/20 14:03BST. The firm has seen a difficult period of trading over the last few months, and shares have been volatile. Questions were posed as to whether the firm could survive in an increasingly cutthroat British retail market. The British High Street has notably seen the collapse of a few different firms over the last few months, and Laura Ashley have seen trading mixed over recent times. The media put Laura Ashley under heavy pressure on Monday, when issues over company financing raised. Today, Laura Ashley have given shareholders a confident update and seem to have answered critics in the media. The homeware retailer said that it had secured approval to utilize funds from its working capital facility with Wells Fago. The funds that had been approved met its immediate funding requirements, following the statement issued on Monday. Laura Ashley further reenforced their position that this did not constitute a cash injection by MUI Asia into the company. The firm commented this afternoon “Laura Ashley Holdings PLC is pleased to announce that discussions between Wells Fargo and MUI Asia Limited relating to the Group’s immediate funding requirements have concluded and the Group should be able to utilise requisite funds from its working capital facility with Wells Fargo to meet its immediate funding requirements. As previously announced, this is not a cash injection by MUI Asia Limited into the Group.”

Laura Ashley face tough media critics

On Monday, the firm saw its shares crash 43% after they announced that trading had slipped over the festive period. The announcement was in response to “speculation regarding its financial position.” Laura Ashley said that in the 26 weeks up to 31st December 2018, total group sales were £109.6 million, which saw a 10.8% drop from £122.9 million in 2018. Notably, the firm said that the decline in total revenue was due to market headwinds and decreased consumer spending. The update today will alleviate some of the pressure that Laura Ashley have faced, and certainly will allow the firm some breathing space from the intense scrutiny which was raised on Monday.

Ebiquity shares surge 25% as its debts narrow consistently

Jamie Gordon
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Ebiquity shares surge 25% as its debts narrow consistently
Ahead of its preliminary results expected towards the end of March, marketing and media consultancy firm Ebiquity (LON:EBQ) has seen its shares bounce on Wednesday following an update for the year ended 31 December 2019, which showed that it had continued to improve its debt position.

The company said it traded in line with the Board’s expectations, with performance trends consistent between the first and second halves. Ebiquity said it continued to see revenue growth in its Advanced Analytics, AdTech and Contract Compliance practices, though its Media practice revenues dipped ‘slightly’ year-on-year.

The real talking point was that the company’s net debt position at the year’s end was £5.8 million, down from £7 million at the half year and representing an impressive turnaround from the £28 million debt position at the end of the previous year.

Ebiquity said the bulk of the improvement came from the disposal of its Advertising Intelligence division, and added that the significant improvement in its net debt had increased its financial flexibility and ability to support future developments, such as its recent acquisition of Digital Decision BV.

Ebiquity opportunities and outlook

Its statement continued: “We believe that the announced closure of Accenture’s media auditing practice highlights the need for independence in our sector and will provide opportunities for Ebiquity as the leading independent, global media consultancy to capture market share over the next year or so.”

“We remain confident that Ebiquity will be able to fulfil its potential and deliver improved performance in the medium term.”

Responding to the update, the company’s Interim CEO Alan Newman, said: “We are pleased to have met expectations in the last year in terms of profitability and grown high potential areas of our business. We continue to re-engineer the business to deliver profitable growth and seize market opportunities that reinforce our position as the leading, independent global media and marketing consultancy, including those arising from the closure of Accenture’s media auditing practice.”

Investor notes

Following the update, Ebiquity shares rallied 24.98% or 6.49p to 32.50p per share 19/02/20 11:54 GMT. The Group’s p/e ratio is 7.03, and their dividend yield is modest at 2.22%.

Puma and Adidas issue warnings over coronavirus impact

Ishen Patel
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0
Puma and Adidas issue warnings over coronavirus impact
Two of the biggest names in the sportswear industry in Puma (ETR:PUM) and Adidas (ETR:ADS) have issued warnings on their trading following the outbreak of the coronavirus. A few weeks back, it seemed that the coronavirus was spiraling out of control. Millions had been wiped off global equities, stock prices and indices. Many countries had faced business slumps, and many firms had even closed operations following concerns over the spread of the coronavirus. Today, Puma announced that the coronavirus will impact sales and profits within the first quarter of its financial year. The German sportswear firm also announced that it was forced to close more than half its stores in China following the outbreak of the coronavirus. The decline of Chinese tourism into other global markets has also hindered Puma’s trading, however the firm has taken an optimistic stance saying that they hope to hit 2020 targets despite ongoing issues with the coronavirus. On a better note, Puma said that fourth quarter sales had surged 18% to €1,=.48 billion, as earnings before interest and tax climbed 47% to €55 million. Puma chief executive Bjorn Gulden said: “The business in China is currently heavily impacted due to the restrictions and safety measures implemented by the authorities. Business in other markets, especially in Asia, is suffering from lower numbers of Chinese tourists. “Given the current uncertainty around the virus it is of course impossible to forecast its impact on the business”. Fellow rival, Adidas also gave a similar warning by saying that its business had been hampered by the coronavirus outbreak. Adidas said on Wednesday that its business in the greater China region had fallen 85% year-on-year in the period since Chinese New Year. China is one of Adidas’ and Pumas’ biggest markets, and China accounts for 20% of global adidas sales since 2018. The coronavirus is continuing to take its toll on global business – however developments are being made and the number of cases are leveling off. There is still much to do to stop the complete spread of the coronavirus, however the future does seem brighter than what was initially expected, when the first few cases were reported.

Pendragon appoint Bill Berman as new CEO

Ishen Patel
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Pendragon appoint Bill Berman as new CEO
Pendragon PLC (LON:PDG) have announced that they have appointed a new chief executive officer on Wednesday afternoon. The motor retailer said that Bill Berman would be taking up the chief executive officer role, which would take place with immediate effect. Berman is currently interim executive chair of Pendragon, and has held his role since October 2019. He joined the firm as a non-executive director in April lsat year, and has a variety of experiences in the industry and wider business, Pendragon said: “Prior to joining Pendragon, Bill served as President and Chief Operating Officer of AutoNation, the largest automotive retailer in America, where he was responsible for AutoNation’s 26,000 associates and the operational performance of the company’s 300+ new vehicle franchises, including new and used vehicle sales and aftersales. He has over 30 years’ experience in automotive retail.” Bill Berman, Chief Executive Officer, commented: “In my relatively short time with the business, it is already clear to me that Pendragon is a company with great potential and a talented team. As Chief Executive Officer, I look forward to building on strong relationships with our team members, customers, suppliers, our OEM partners and investors as we move forward together in a period of rapid change and innovation in the automotive retail sector.”

Pendragon change their senior management board

In December, Pendragon announced that they had appointed a new Non Executive Director. The firm has announced the appointment of Brian Small to their senior board with immediate effect. Small will serve on the board’s nomination committee, the remuneration committee, and will take over as audit committee chair from Richard Laxer from January 2 next year.

Need for change at Pendragon?

The car retailer has seen a mixed few months of trading, and the question rises as to whether this change was enforced. The firm saw a decline in total revenues by 8%, as like for like revenue dropped 3.6% and used car revenues dropped 19.6% in October. Total revenue from new car sales was strong however, and this climbed 4.5%. Additionally, new car like for like sales increased by 11%. Pendragon said overall sales volumes were lower as it focussed on rebuilding both the quantity and quality of the age-profile of the stock during the period. Pendragon held £458m worth of used car stock at the end of 2018, compared to £372m a year ago. A couple of new changes at Pendragon should allow the firm to fully assess their future strategy – whilst looking to suffice shareholders. The new board should give Pendragon a sense of optimism going forward, and shareholders will be keen to see what the firm can do over the next few months of trading. Shares in Pendragon trade at 12p (-0.64%). 19/2/20 12:43BST.

Supermarket Income REIT acquires Sainsbury store for £34 million

Jamie Gordon
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Supermarket Income REIT acquires Sainsbury store for £34 million
UK supermarket real estate investor Supermarket Income REIT (LON:SUPR) announced on Wednesday that it had agreed to acquire Sainsbury’s (LON:SBRY) store in Hessle for a consideration of £34.0 million. The site has been bought from Reassure Limited, and excluding acquisition costs, represents a net initial yield of 5.5%.

The 13 acre site was developed in the 1980s and has since hosted Sainsbury’s, with a ‘substantial’ refurbishment taking place in 2011.

The space is comprised of 50,000 sq feet of sales area, alongside 584 parking spaces and a 12-pump petrol filling station.

It has “purpose-built online fulfilment docks and supports Sainsbury’s online grocery fulfilment for the surrounding area” and has been acquired with an unexpired lease term of 14 years with annual, upward-only, RPI-linked rent reviews.

Supermarket Income REIT added that,

“Included in the purchase price is an adjoining Homebase store comprising 21,000 square feet net sales area with an unexpired lease term of four years. Sainsbury’s guarantee the Homebase rent for the duration of the lease. Consequently, the combined total net initial yield on this purchase of the Sainsbury’s in Hessle, including the rental income from the Homebase, will be 6.3%.”

Supermarket Income REIT comments

Responding to the update, Ben Green, Director of Atrato Capital, the Investment Advisor to Supermarket Income REIT, said:

“This Sainsbury’s superstore is ideally located for both online and offline grocery sales and adds to Supermarket Income REIT’s growing portfolio of omnichannel stores.”

Investor notes

Following the update, the company’s share price rallied 0.40% or 0.43p to 107.43p per share 19/02/20 11:59 GMT. The Group’s p/e ratio is 20.19, their dividend yield is 5.26%.  

Moody’s lower Renault’s long term outlook

Ishen Patel
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0
Moody’s lower Renault’s long term outlook
Moody’s (NYSE:MCO) have lowered Renault’s SA (EPA:RNO) outlook long term ratings to Ba1, and short term ratings to non prime. The french car firm have seen a tough year of trading across 2019, but this has been evidenced by the wider automotive industry – where big names have also seen slumps. Renault shares have dipped on the announcement, despite Moody’s retaining a stable outlook for the automotive firm. Moody’s said the downgrade was triggered by Renault’s “substantially weakened operating performance, reported for the year 2019, “to a level no longer commensurate with the Baa3 rating category”. “Based on the company’s 2020 guidance anticipating a further decline in the group’s operating margin and the continuing weakness of the market environment, we do not expect that Renault will be able to restore healthy operating margin levels in the medium term,” Moody’s said.

What has happened in Renault’s last few months?

At the end of November, the car maker cut their guidance as they saw their shares plunge. Renault said it now expects its group revenue to decline between 3% to 4%, “due to an economic environment less favorable than expected and in a regulatory context requiring ever-increasing costs”. Meanwhile, group operating margin is expected to be around 5%, the automobile maker said. Renault added that its revenue for the third quarter amounted to €11.3 billion, down by 1.6% from the €11.5 billion figure recorded in the third quarter of 2018. The car manufacturer continued to add that “the Automotive operating free cash flow should be positive in H2 while not guaranteed for the full year”. Moreover, Renault said that is management will review the “Drive the Future” mid-term plan targets introduced in 2017. The car market is tough for Renault, and the downgrade by Moody’s today will worry shareholders. However, some optimism has to be carried forward. The global economy and demand for cars is slipping, and there has been a massive shift towards electronic vehicles and environmentally friendly car usage. This market seems to have been captivated by Tesla (NASDAQ:TSLA) – whose demand continues to surge fueled by CEO Elon Musk. Renault will hope that this year can be one of recovery, and the firm should be keen to show that they can weather the storm to produce results in a tough operating market. Shares in Renault trade at €30 (-0.048%). 19/2/20 12:28BST.
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