The FTSE 100 was firmly higher on Wednesday as UK-centric stocks helped London’s leading index outperform amid a sell off in technology shares.

Interest rates were again in focus ahead of next month interest rate decision after lower inflation data almost cemented a 25bps interest rate cut by the Bank of England on 7 November.

UK inflation has fallen to 1.7%, well below the Bank of England’s 2% target, leaving them little choice but to ease borrowing costs. It was likely the bank would cut rates before today’s inflation data with the economy struggling to produce any growth.

As one would expect, most stocks with exposure to the UK economy were having a good day on Wednesday and were among the top gainers.

“On a day when investors are dealing with the headache of a big sell-off in many tech stocks, the UK has come into its own and been a shining light on global markets,” said Russ Mould, investment director at AJ Bell.

“The FTSE 100 climbed 0.7% to 8,309 thanks to commodity producers taking centre stage, together with a healthy dose of gains from AstraZeneca, Rolls-Royce and HSBC.

“Providing back-up support was a group of stocks that stand to benefit from interest rate cuts in the UK.

“Housebuilders Taylor Wimpey and Persimmon, kitchens group Howden Joinery and DIY retailer Kingfisher were all in vogue after UK inflation hit a three-and-a-half year low, strengthening the argument for the Bank of England to cut the cost of borrowing next month.

“Investors are taking the view that financial pressures are easing on households and the public will soon be in a stronger position to spend money. This would be good for the economy and good for the army of stocks on the UK market that rely on consumers to make money.”

Whitbread was the FTSE 100’s top riser after announcing a bumper round of share buybacks and set out plans to return £2bn to shareholders over the next five years. Shareholders love share buybacks and the stock rose over 4% on Wednesday.

Miners also found support on Wednesday after days of steady selling. Antofagasta rose 2.8% and Endeavour Mining added 2.7%.

Insurance companies Admiral and Beazley were residing at the bottom of the leaderboard with losses around 2%-3%.

Tekcapital shares are primed for a rerating, according to a research note released on Wednesday by SP Angel analysts who see 60% appreciation in Tekcapital as interest rates fall and investment company discounts return to normal.

“The estimated value of Tekcapital’s equity investments, either at current market prices (77% of portfolio) or conservative estimate of unlisted investments (23% of portfolio), currently stands at $36.7m. This equates to an asset value per share of 15.6p meaning the shares are trading at a discount of 52%,” SP Angel analysts wrote in a note.

SP Angel explained higher interest rates had led to large investment company discounts to NAV through higher weighted average cost of capital (WACC) and that as interest rates start to fall, WACCs should fall and provide support for the valuations of investment companies such as Tekcapital.

In addition to the external macro influences on the Tekcapital share price, SP Angel highlighted welcomed the boost to NAV by the GenIP IPO and the creation of value in the business where there had previously been no value attributed to Tekcapital.

Investors may be interested to see SP Angel account for broad discounts in the investment company space by adjusting their NAV assessment of 18.5p per share by 35% when deriving their fair value target.

Even with a 35% discount to NAV factored into their fair value, SP Angel’ research concluded Tekcapital’s fair value target should be 12p, offering 60% upside from the current price.

“If we target fair value for Tekcapital in line with an average discount to fair value currently seen in the market for investment companies of c35%, we arrive at a target price of 12p. This lies 60% above the current share price. Buy,” SP Angel explained.

Is it now a good time to have a gamble with The Rank Group (LON:RNK) – I think it is a fair bet.

Tomorrow morning the company, which is a leading international gaming, leisure, and entertainment group offering exciting and entertaining customer experiences, in venues or online.

The group’s mission appears to be ‘excite and to entertain’.

Ahead of tomorrow’s AGM Trading Update could buyers of the shares get excited and will they be entertained by seeing the group’s shares react positively.

The Business

To briefly describe the company, it has some 112 casino and bingo venues regularly entertaining its 3.1m active customers, who also use its 80 plus digital brands covering casino, bingo, slots and sports betting.

Grosvenor Casinos is Rank’s casino-led brand that focuses on table and machine gaming, with 51 venues, it is the UK’s largest casino operator.

Mecca is the group’s very well-known bingo brand, its community-based gaming operates in 52 venues, making it the UK’s second largest bingo operation.

Over in Spain, the group has a strong presence with another community-based bingo brand, Enracha, that is currently operating through nine venues.

The group has a strong three-year programme of growth initiatives in place for each of its businesses focused on: cash maximisation in land-based bingo; recovery and growth in the Grosvenor venues business; scaling the digital business both in the UK and internationally and maximising the opportunities of the anticipated land-based legislative reforms for the UK’s casino and bingo sectors.

Management Comment On The Recent Results

CEO John O’Reilly stated that:

“This has been a year of strong financial, operational and strategic progress for Rank. We are continuing to rebuild profitability following the impact of lockdowns and the material inflationary pressures experienced in recent years. Trading continues to improve due to ongoing investment in our people, our products and the facilities within our venues businesses, and the continued development of the proprietary technology which is driving the growth of our digital business.

With some important developments within our proprietary technology now in place, we are increasingly delivering a seamless and tailored cross-channel experience for our customers, leveraging our key area of competitive advantage.

We are well-positioned to take advantage of the much needed land-based reforms which will help to further modernise our casino and bingo propositions to better meet the expectations of today’s customers and we look forward to the Government confirming the timetable for the required secondary legislation.  

We have started the new financial year as we finished the previous one, with good momentum across all businesses. With inflation receding, disposable incomes improving, investment continuing to be made in the customer proposition and a strong pipeline of growth initiatives underway, we are confident in the future prospects of the Group.”

In My View

Analysts who follow the group rate the shares as a Buy, with the highest Price Objective for its shares set at 120p compared to the current 86p, at which level the whole group is valued at £400m.

I have seen one analysis suggesting that the fair value for this group’s shares is 136p.

I am impressed that recent ‘insider’ purchases have been sizeable at prices up to nearly 83p a share.

Without any inside knowledge, I take the view that the AGM Trading Update tomorrow morning will be bullish, possibly enough to help to push the group’s shares back over the 100p level.

So, I repeat the question, is this the time to take a gamble with The Rank Group?

Whitbread shares were nicely higher on Wednesday after the hotel and leisure group posted interim results revealing robust demand in Germany but a slightly less positive performance in the UK.

The driving factor for shares on Wednesday was a fresh £100m share buy back and 7% increase in the interim dividend. The group also set out a plan to return £2bn shareholders over the next five years.

Group revenue for the period was flat, largely as a result of soft market conditions in the UK. However, outperformance of the wider market seems to have provided some encouragement for investors as shares rose 3%.

“Premier Inn operator Whitbread continues to outperform the market but that’s not quite enough to shrug off a weaker demand picture. In the UK, both occupancy and room rates were down on last year, with London feeling the pinch a little more than the regions,” said Derren Nathan, head of equity research, Hargreaves Lansdown.

“Overall, revenue per available room (RevPAR) fell 4% to £72. This was offset by continued expansion in the estate. Food and Beverage sales fell 7% reflecting both a 3% decrease in like-for-like sales and planned consolidation of the estate towards a more hotel-based dining offering.”

Analysts highlight how less competition after the pandemic has provided a boost to Whitbread as they cement their market leading position.

“There is no doubt just how much the pandemic hurt Whitbread. As COVID-19 tore through the hospitality sector, hotels and hospitality outlets were forced to adapt in a bid to survive. However, as is often the case in times of crisis, there comes opportunity,” said Mark Crouch, market analyst at investment platform eToro.

“Following the pandemic, Whitbread’s competition has significantly thinned out, allowing the Premier Inn owner to consolidate its position as the UK’s leading hotel chain and further bolster its standing in Germany, where total accommodation sales grew by 22% in the first half of the year.”

Versarien has hit long term investors with another placing raising £450,000 through issuing nearly 1.4 billion new ordinary shares at 0.0325p each.

The heavily discounted placing sent Versarien shares sharply lower, touching all time lows in early trade.

Versarien said the fresh capital will bolster capabilities in several key areas. Firstly, it will enhance the firm’s in-house concrete and mortar testing facilities. Additionally, the funds will support external UKAS accredited testing services for 3D construction printed products. Some of the proceeds are also earmarked for general corporate purposes and working capital.

No matter the allocation of capital, the placing will be a bitter blow for investors after a series of positive updates from the company in recent months.

In August, the company inked its first major 3DCP contract with Building For Humanity CIC for a project in Accrington. Moreover, October saw Versarien embark on a year-long, commercially funded venture with construction giant Balfour Beatty to develop graphene-enhanced 3DCP materials.

These developments underscore the growing traction Versarien is gaining in the construction industry. The company’s potential is further evidenced by its robust pipeline of opportunities, valued at £4.7 million as of early October. This pipeline comprises £1.6 million in commercial prospects and £3.1 million in potential grants.

CAP-XX, a leading manufacturer of thin supercapacitors and energy management systems, has secured a contract with a new customer in South Africa’s smart meter sector.

This 12-month agreement follows a successful design-in project and is expected to generate significant revenue in the fiscal year ending June 2025.

The customer will integrate CAP-XX’s supercapacitors into their smart meters for measuring gas and electricity usage. CAP-XX anticipates this initial contract will lead to future orders as the customer’s needs grow.

This development highlights the expanding role of supercapacitors in the booming global smart meter market. CAP-XX said supercapacitors are increasingly preferred in smart meters due to their high power density, rapid charge-discharge capabilities, and long operational life because they provide crucial backup power during outages, ensuring continuous data transmission and uninterrupted functionality.

CAP-XX shares were around 7% higher at the time of writing.

Armadale Capital (LON: ACP) has rebounded following yesterday’s drop on the announcement of the proposed cancellation of the AIM quotation. The board believes that being a public company does not benefit the company because of the costs and lack of ability to raise money. Armadale Capital needs to reduce the cash burn and sell non-core assets. The resources company can be more flexible as a private company. The share price doubled to 0.08p.  

Strategic Minerals (LON: SML) generated revenues of $1.27m from the Cobre tailings project in September. This is treble the level last September. Full year revenues should be more than $4.5m. The remaining loan facilities have been repaid. The share price improved 13.6% to 0.25p.

Audioboom (LON: BOOM) grew third quarter revenues by one-third to $18.8mand full year EBITDA of more than $1m is now expected. September generated record revenues. The share price rose 7.14% to 225p.

Tatton Asset Management (LON: TAM) had stronger than expected net inflows averaging £305m/month in the past six months. Assets under management or influence are £19.9bn. The share price increased 7.08% to 711p.

Semiconductor designer EnSilica (LON: ENSI) has won a design and supply contract for a controller ASIC for automotive and industrial markets. The value should be more than $31m over seven years. The share price is 6.38% higher at 50p.

FALLERS

Technology investment company Tern (LON: TERN) is raising £625,000 at 1.25p/share. This cash will be investe4d in investee companies and cover working capital outflows. The share price slumped 42.3% to 1.275p.

Deltic Energy (LON: DELT) chief executive Graham Swindells has left the board and chief operating officer Andrew Nunn will replace him. The share price fell 23.8% to 4p.

PHSC (LON: PHSC) chair and chief executive Stephen King is stepping down in January. He has a 19.1% stake. A new chief executive is being sought. The share price dropped 6.45% to 29p.

Floorcoverings supplier Victoria (LON: VCP) says the market continues to be soft and EBITDA is likely to decline to £50m in the first half. Second half trading should be stronger. The share price declined 4.86% to 121.6p.

The FTSE 100 was weaker on Tuesday as commodity companies dragged the index lower despite a rally in UK-centric stocks on interest rate hopes.

London’s leading index was down 0.4% at the time of writing on Tuesday with oil majors shaving off a considerable number of points from the index. BP was the top faller, plunging over 4%, and Shell sank over 2%.

The catalyst was falling oil prices – Brent and WTI were both down more than 5% in midmorning trade in London.

“With the crude price failing to bounce through Asia, consolidation was the play, where we saw a tight range for much of trade, however, we’re now seeing sellers regain composure with price breaking through the US lows, with a mix of stops being taken out, and momentum-focused traders working in line with the flows,” said Chris Weston, Head of Research at Pepperstone.

“The demand side of the equation also seems to be in play with OPEC projecting weaker demand forecasts.”

Although the index was firmly in the red on Tuesday due to oil and mining shares, there was considerable positivity emanating from companies focused on the UK economy.

Hopes of lower interest rates provided support for house builders with Persimmon, Barratt Redrow and Taylor Wimpey all up more than 2%.

“Domestic-focused UK stocks were in the spotlight as the latest economic data strengthens the argument for a drop in the cost of borrowing,” says Russ Mould, investment director at AJ Bell.

“The Bank of England is carefully engineering a soft landing as the UK economy loses momentum. A decline in the unemployment rate suggests the labour market isn’t in trouble, yet lacklustre GDP figures for July and August, combined with a slowdown in the rate of pay growth, means a small interest rate cut might be warranted to help grease the wheels and get the country moving a little bit more.

“Markets are now pricing in an 83.5% chance of a quarter percentage point rate cut when the Bank of England’s monetary policy committee meets next month. Shares in housebuilders, banks and supermarkets responded favourably to the latest economic data and how it could lead to a rate cut, but not every consumer-facing stock got a bounce. Retailers Next and Currys were in the red which suggests some caution on behalf of investors, namely that another rate cut isn’t a guaranteed ticket to consumers splashing more cash.”

Easyjet was the top riser after Goldman Sachs after bumped their price target up to 600p.