Next shares hit record highs on Thursday after posting another set of strong full-year results, as the group navigated softer economic conditions to produce higher sales and profit. 

There’s no stopping Next. Neither the momentum in sales nor its shares.

As competitors went into administration and closed their doors over the past decade, Next continued to grow through a carefully executed plan to increase online sales and better customers’ in-store experience.

The cost of living crisis and tensions in the Middle East have been blamed for soggy sales elsewhere in the sector. Not so at Next.

“We’ve heard of many retailers having to contend with disruption to shipping due to geopolitical tension but Next has said this will not be a significant factor,” said Adam Vettese, analyst at investment platform eToro.

“This is good news for shareholders but more importantly Next will continue to funnel cash back to them in the form of dividends and share buybacks as they have done consistently in recent years.”

Total group sales increased 5.9% in the year to January 2023 and profit before tax rose 5%. It isn’t explosive growth, but it’s steady and increasingly reliable.

Next has grown the business over the years by acquiring complementary companies, and the acquisition of Reiss has delivered a non-cash gain of £109m. 

“Next appears quietly confident for the year ahead. Shrewd acquisitions and investments have improved its growth prospects, while moderating inflation has significantly reduced pressure on costs. And while the UK economy isn’t out of the woods, the economic tea leaves don’t read as grimly as at this stage last year,” said Charlie Huggins, Fund Manager at Wealth Club.

Investors cheered full-year results, and shares jumped 2.9% in early trade.  Next shares have gained 26% over the past year. 

Though a night at the casino could feel like a blast from the past, the casino business is evolving quickly, and new trends offer investors a special chance.

Many states in the United States are starting to legalize online gaming, and established casino establishments as well as emerging online gambling businesses are following suit. At the end of the previous year, online casinos in PA set a record in revenue. No one would have thought that casinos in this state would show these kinds of results. Thanks to this, they will only increase their presence on the market, offer more unique promotions at PA online casinos, and provide gamers with exciting moments and opportunities. Other states where online casinos are legalized also show positive dynamics.

In the meantime, the Asian industry, which is concentrated in the Chinese province of Macau, has established itself as the world’s biggest gambling market, offering many profit opportunities to potential investors.

1. MGM Resorts

Among the casino industry’s most remarkable property portfolios is MGM’s. It has properties in Atlantic City, Detroit, Mississippi, and several of the most well-known casino resorts on the Las Vegas strip, such as the Bellagio, MGM Grand, Luxor, and New York-New York. Additionally, it has a 56% share in MGM Macau and MGM Cotai, two Macau casinos.

Compared to many of its contemporaries, it is more vulnerable to Las Vegas tourism since almost two-thirds of its 45,000 hotel rooms are located on the strip.

When the pandemic initially started in March 2020, MGM’s stock fell sharply. However, with the support of an investment from IAC/Interactive (IAC -0.15%) and a shift to online gambling via BetMGM, the company has since recovered to post-financial crisis highs. In 2021, it created sportsbooks at a number of its locations and began accepting bets online in other states. For its regional and Las Vegas Strip properties, it reported record EBITDAR in 2022. However, for a large portion of the year, COVID-19-related casino closures in China negatively impacted its business.

2. Las Vegas Sands

Las Vegas Sands is the best option for an investor who wants to bet on Macau. With five casinos in Macau and the Marina Bay Sands in Singapore, the corporation is solely focused on the Asian market. In March 2021, it sold the Venetian as well as its Las Vegas operations to a private equity company for $6.25 billion.

Regrettably, during the COVID-19 epidemic, the plan of concentrating on Asia failed when tourism effectively died as a result of stringent lockdowns in China and other Asian countries. The business battled the limitations in 2022 and reported an operational deficit for the third consecutive year.

However, as the area develops and regulations start to loosen, commerce should pick up again. Macau should continue to lead the world’s gaming industry due to its close proximity to sizable populations and the shared cultural fondness for gambling in China and other Asian countries. The business is likewise making strong progress at its Marina Bay Sands resort in Singapore.

3. Wynn Resorts

Another operator of varied casinos, Wynn owns 72% of the Wynn Palace and Wynn Macau. Furthermore, it is the sole owner of the Encore Boston Harbor, which debuted in 2019, as well as the Wynn and Encore in Las Vegas.

In October 2020, the business also launched Wynn Interactive, of which it controls 97%. It collaborated with BetBull, which it eventually purchased, to develop an online sportsbook and online casino. Almost selling Wynn Interactive to a SPAC in 2021, Wynn withdrew from the agreement in November of that same year.

In January 2022, rumors in the media suggested the corporation was looking for a buyer once again. The economics of online sports betting, according to former CEO Matt Maddox, are unfavorable as rivals are spending excessive amounts on client acquisition. Following a $267.4 million loss in 2021, the business lost $98.5 million in adjusted property   on Wynn Interactive in 2022.

The FTSE 100 held steady on Wednesday after UK inflation cooled more than expected, and traders prepared to receive the Federal Reserve’s interest rate decision later this evening.

The FTSE 100 was up just 3 points at the time of writing as London’s leading index reversed early losses.

When we refer to early losses, the declines were a minor undulation to the downside that was steadily erased as the session progressed.

Early trade was dominated by UK CPI inflation, which declined faster than expected in February, and what the firm disinflation trend meant for UK assets. Judging by the market reaction, UK CPI inflation at 3.4% means very little for financial markets or the Bank of England’s rate decision tomorrow.

“The FTSE 100 dipped at the open despite UK inflation numbers falling more than expected for February,” said AJ Bell investment director Russ Mould.

“The market is now pricing in a higher chance of a June rate cut, even if today’s reading is extremely unlikely to have any influence on the Bank of England’s decision making later this week.”

Today’s main event is the Federal Reserve’s interest rate decision, which is due after the European close this evening. Like the Bank of England, the Federal Reserve isn’t expected to change interest rates, but the commentary and financial projections could be explosive.

“Although policymakers are largely expected to keep rates on hold, investors will be hanging on the words of Fed Chair Jerome Powell about the path ahead for monetary policy. Hotter than expected inflation readings, have pushed down market expectations for an earlier rate cut,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.

“While enthusiasm for the forecast benefits of artificial intelligence powered products and services is energising big tech, a more hawkish stance from the Fed later would be unsettling. At the moment the markets are pricing in a 55% chance that a rate cut may come in June, so any changes to the dot plot of pencilled in cuts by policymakers will be closely scrutinised.”

With the S&P 500 again flirting with record highs, any hints that the first rate cut could be pushed back to later in the year have the potential to hit stocks.

Prudential

Prudential was the FTSE 100’s top faller on Wednesday despite posting a strong set of results for 2023. The company’s presence in China is a concern for investors, given Prudential’s exposure to the property market.

“Despite analyst price forecasts being significantly higher than the current price, it would appear that The Pru still has some work to do in convincing investors that the prolonged downtrend is reversing,” said Mark Crouch, analyst at investment platform eToro.

“Prudential still has significant exposure to China and their share price dropped by a quarter in 2023, currently sitting at a key area of support that also marked the COVID lows.”

Prudential shares were down 6% at the time of writing.

Burberry was another heavy faller after European peer Kering posted a profit warning on weaker Chinese sales.

Melrose was the top gainer as UBS hiked its price target to 770p. Melrose was 4.1% higher at 646p.

Prudential shares sank on Wednesday despite the group posting strong 2023 results boosted by reopening the border between Hong Kong and the Chinese mainland.

New business soared 45% to $3.1bn, and annual premium sales jumped 37%. There’s a lot to like in the group’s full-year results.

However, Prudential’s strong results did little to lift the mood among investors who are still clearly concerned about the risks to China’s economy and what they mean for the immediate outlook.

“The whole idea behind Prudential’s pivot east was to benefit from the growth opportunities in less mature insurance and savings markets in Asia and Africa,” said AJ Bell investment director Russ Mould.

“However, the recent sticky patch for the Chinese economy has undermined the business and, to an even greater degree, sentiment towards it.”

Prudential shares were down 6% at the time of writing and were trading at the lowest levels since the beginning of the pandemic. While 2023 results were robust, what happens next is less clear.

The company said they remain confident in meeting their 2027 targets of 15% – 20% new business compound annual growth from 2022 levels and double-digit compound annual growth in operating free surplus from insurance and asset management businesses.

However, the group’s outlook section of the results was brief and provided little insight into what happens next year. This may have put investors off, given the uncertainty around China.

“Despite analyst price forecasts being significantly higher than the current price, it would appear that The Pru still has some work to do in convincing investors that the prolonged downtrend is reversing,” said Mark Crouch, analyst at investment platform eToro.

“Prudential still has significant exposure to China and their share price dropped by a quarter in 2023, currently sitting at a key area of support that also marked the COVID lows.”

Prudential shares are attractive at these levels for those optimistic about China’s outlook, however difficult that may be. The forward earnings multiple is around 10x and offers value.

The company increased the full-year dividend by 9%. Prudential yields around 2%.

Tekcapital’s portfolio company Guident is seeking to accelerate its growth strategy through a US funding round.

In a UK Investor Magazine interview released yesterday, Tekcapital’s CEO, Dr Clifford Gross, outlined plans for Guident to pursue a private equity funding round.

Guident has engaged a US investment bank to facilitate the capital raising which is expected to provide an uplift to Guident’s current valuation.

Tekcapital has historically provided Guident with growth capital from its own capital. Should Guident complete this round as a privately held completely, with Tekcapital as the controlling shareholder, it will alleviate the requirement for Tekcapital to provide Guident with growth capital.

After MicroSalt was listed in February, Guident is the only current portfolio company privately held, with MicroSalt, Innovative Eyewear, and Belluscura, promising multi-million-pound revenue in 2024 to support their respective growth strategies.

Of the £2m recently raised by Tekcapital, £300,000 was allocated to Guident’s new headquarters, which will be launched in April. Should the US private equity round be successful, this may be the last cash injection from Tekcapital.

The funding round is expected to be completed in about three months and would mark a major milestone for the autonomous vehicle safety company.

Guident has developed a software-as-a-service (SaaS) model and secured its first contracts providing recurring revenues from its Remote Monitoring and Control Centre (RMCC) services. SaaS companies tend to attract higher valuations due to the visibility of future revenues.

Last year, Guident spun out its regenerative shock absorber technology into a new entity, ReVive Energy Solutions, with the aim of maximising the value of the technology and creating the opportunity to secure growth capital specifically for the progression of regenerative shock absorber IP.

Tekcapital said the Guident had conducted successful tests with a tier-one tyre company, yielding positive results. Further announcements are expected this year.

The FTSE 100 was range-bound on Tuesday as the index traded within a tight range ahead of major central bank meetings this week.

Investors held off making big bets opting to wait for the next instalments from the Federal Reserve and Bank of England meetings later this week. Neither is expected to cut rates and all eyes and ears will be on economic projections and hints of when the central banks’ will move to cut rates.

Markets are increasingly pricing June as the earliest date for the Federal Reserve to reduce borrowing costs, and it’s less clear when plotting the BoE’s course.

The Bank of England and Federal Reserve are moving in a different direction to the Bank of Japan who hiked rates last night sparking a rally in the Nikkei that helped European stocks to a stronger start.

“Just as the Bank of Japan finally gets around to raising interest rates, investors are still hoping that the US Federal Reserve will cut them, although the first reduction is now seen coming in June and not at the latest meeting in March, as markets had thought at the start of the year,” said AJ Bell investment director Russ Mould.

“Chair Jay Powell and his colleagues on the Federal Open Markets Committee are therefore moving more slowly than markets had expected and the consensus forecast now is the Fed will cut rates just three times to 4.75% by year end, rather than six times, and that is because US inflation is proving more resilient, and inflation stickier, than expected.”

The FTSE 100 was up just 3 points at the time of writing.

Unilever

Unilever was the FTSE 100’s top gainer, with a rise of 3%, following the release of an accelerated action plan that included disposing of its ice cream business and cutting 7,500 jobs. Unilever has been under pressure to boost performance, and slimming down its core business to four units with the ice cream operating as its own entity is the proposed course of action.

“Unilever says bye-bye to Ben & Jerry’s with its plans to ditch the Ice Cream unit. The company has hinted at a demerger, but all separation routes remain on the table at this stage as it looks to maximise shareholder value. At the same time, there’ll be a new cost-cutting programme over the next three years that aims to more than offset the impact of losing Ice Cream. All-in, these changes are expected to help drive mid-single-digit sales growth, an improvement from current targets of 3-5%, with margin expansion too,” said Matt Britzman, equity analyst, Hargreaves Lansdown.

“Action is what shareholders wanted to see from the new team at the top, and that’s what’s been delivered today. Ice Cream always looked like the odd one out when you compare it to other product lines, and performance has struggled of late. It’s not a huge shock to see this move, but it’s something prior management wasn’t able to deliver. Unilever’s not an overly expensive name at the minute so expect markets to react positively to the news, perhaps more due to the decisive action than anything else.”