Tekcapital’s portfolio company, Guident, has issued a Q1 activities update summarising a solid quarter of progress in which the company has made strides forward in commercialising its autonomous vehicle safety technology.

During the quarter, Guident expanded a strategic partnership with Auve Tech and forged a new one with Star Robotics.

Guident will power the safety features for Auve Tech’s MiCa autonomous shuttle, which is launching into the US market. Auve Tech is a leader in autonomous shuttles with a global footprint. Auve Tech has exported autonomous shuttles to Japan from its base in Estonia as part of a partnership with Softbank’s Boldly. The shuttles provide an autonomous vehicle solution to urban mobility considerations such as helping elderly people and improving efficiencies in fixed-circuit transportation such as airports or business parks.

Gudient’s relationship with Auve Tech is focused on the US, but if early commercialisation proves successful, further collaboration would be expected.

Star Robotics

Star Robotics has developed surveillance robots with a broad range of industrial applications. Guident will provide remote monitoring and control services to Star Robotics as it rolls out the ‘Watchbot’ technology across North America. Tekcapital said Guident is working on a ‘go-to-market’ strategy with Star Robotics.

In addition to expanding commercial relationships, Guident recorded an important operational milestone with the grand opening of its new Remote Monitoring and Control Center (RMCC) in Boca Raton, Florida. The facility is the first of its kind in the United States and provides a hub for the teleoperation oversight of autonomous vehicles.

“I was thrilled by the strong turnout of our esteemed partners and valued customers at Guident’s new headquarters inauguration. Our event theme, ‘To the Future,’ perfectly encapsulates Guident’s vision and commitment to pioneering advancements,” said Harald Braun, Executive Chairman and CEO of Guident.

“With MiCa’s debut, the world’s most compact level 4 autonomous shuttle, and our seamless integration with Star Robotics’ state-of-the-art surveillance robot, we’ve reached a pivotal moment in our mission for safer autonomous vehicles and robotics.”

Tekcapital shares were trading 4% higher at the time of writing.

From the post-pandemic low around 39p, Rolls Royce shares (LON:RR) have rallied nearly 1,000%. We look at the key factors determining whether the stock should still be considered a ‘buy’ after the portfolio-making ascent.

The threat of grounded planes for extended periods due to the spread of the coronavirus ravaged the engineer’s share price. The company relies on flying hours for revenue; this evaporated in 2020, and investors scrambled to the exit, sending the Rolls Royce share price below 40p.

This proved to be the buying opportunity of a lifetime.

For many investors who bought Rolls Royce in the depths of 2020 and are still holding it, Rolls will be the best investment they will make in their life, certainly in an FTSE 100 stock.

Whether Rolls Royce continues to rally from here boils down to valuation. The recovery from the pandemic is an old story, and we know very well consumers are choosing to allocate their discretionary spending to travel. The dynamics that underpinned Rolls Royce’s meteoric rise are intact.

The stock is no longer a recovery play. Far from investing in a recovery, investors now must consider the company’s growth potential and whether the underlying fundamentals can support earnings growth, as well as the current earnings multiple.

Trading at 29x historical earnings, Rolls Royce is overvalued compared to peers, and the wider benchmark, on an earnings basis. Earnings are a very simplistic method of valuing a company, but investors of all levels will refer to it when trying to justify an investment case. The question for investors is whether Rolls Royce can bring this multiple down by increasing earnings in the future.

Judging by the company’s latest investor presentation, this is very much a possibility, but Rolls Royce has a lot of work to do to justify the current share price.

Rolls Royce has set out ambitious profitability targets supported by a robust strategic framework. The company is setting out to materially expand it civil aerospace business unit and build foundations in the power generation business.

The company targets £2.5bn—£2.8bn operating profit by 2027 and a return on capital of 16-18%. To meet their targets, Rolls Royce will need to nearly double operating profit from the 2023 full year and dramatically increase operating margins.

Rolls Royce have taken the difficult decision to reduce headcount in the pursuit of higher margins and this has been rewarded by the market.

However, the market appears to have already priced in future targets, which leaves the stock vulnerable to performance which doesn’t deliver on Rolls Royce’s goals.

This vulnerability doesn’t make Rolls Royce a sell but investors must question whether the current valuation justifies future earnings and how much more upside the shares have in them.

Brokers generally have price targets above the current price, but not much higher.

Standard Chartered shares soared on Thursday after the company reported Q1 earnings and wrapped up a fairly upbeat series of updates for the FTSE 100 banks. 

UK investors were saved the best banking update until last as Standard Chartered smashed earnings estimates sending shares 6% higher in early trade.

Underlying income was $5.2bn compared to $4.7bn analyst estimates and underlying profit before tax came in at $2.2bn vs $1.6bn expected.

Most of the FTSE 100 banks, Lloyds, Natwest, HSBC and Barclays, have beaten earnings estimates. But none to the extent of Standard Chartered.

“Standard Chartered has made a statement,” said Matt Britzman, equity analyst, Hargreaves Lansdown.

“This was as close to a clean sweep of first-quarter results as you can get. Pretty much every major line item was better than markets had expected, even after stripping out some of the one-off items that inflated results. Performance was driven by non-interest income, which accounts for over half of all revenue.

“This includes areas like wealth management, investment banking, and trading. Traditional banking operations performed more or less as expected.”

Concerns about the health of the Asian economy have dogged Standard Chartered, and today’s update will go a long way to put the doom-mongers back in their place. 

A big plus for investors is the lower-than-expected credit provisions. With the Chinese property crisis far from over, some may have feared STAN’s exposure to the sector could see further impairment. 

“As we’ve seen from peers, credit quality metrics remain resilient. This is especially important for Asian-focused banks like Standard and HSBC, which have both had to write down the value of Chinese assets in past quarters,” Britzman said.

“Commercial real estate exposure in China has also been a cause for concern, so investors will be pleased to see no real uptick in impairments taken here.

On Wednesday, Horizonte Minerals announced that continued negotiations with secured creditors and potential investors regarding restructuring for its Araguaia project in Brazil were yielding little in the way of hope for investors.

Senior lenders have agreed to extend waivers, deferring accrued interest payments until May 15th, as discussions explore options to recover value for creditors. Shareholders, unfortunately, are of little consequence in these discussions.

Scenarios under consideration include raising financing at the subsidiary level, disposing of the Araguaia project while maintaining its viability, liquidating assets, or leveraging Brazilian laws to maximise creditor recovery while minimising liabilities.

The outcome in any of these scenarios will be unfavourable for shareholders, and the company said it believes these options are unlikely to yield any value for equity investors.

If no further extension is granted by senior lenders, deferred interest will become immediately payable on May 16th. Failure to pay could result in the cancellation of undrawn funds, acceleration of outstanding debt, and potential enforcement of lender security over the group’s assets.

The pressure is mounting on Horizonte Minerals, and its fall from grace could be coming to a conclusion. If a deal is not secured soon, Horizonte Minerals may be the next London-listed firm to enter administration.

Horizonte’s Brazilian subsidiary has secured a 60-day injunction until May 15th, preventing debt enforcement to allow restructuring negotiations.

The company has working capital until mid-May, subject to creditor discussions, project expenditures, and potential cost-saving measures. The clock is ticking.

Horizonte Minerals’ demise is not only a real shame for investors but for the wider London markets. It had the potential to be a powerhouse producer and a text book success story for the junior natural resource sector.

Cornish Metals shares were firmly higher on Wednesday after the tin miner announced a solid economic assessment of its South Crofty tin mine in Cornwall.

Cornish Metals has reported a positive independent Preliminary Economic Assessment (PEA) for its South Crofty tin project confirming the project’s economic viability with an impressive after-tax Net Present Value (NPV) of US$201 million and an Internal Rate of Return (IRR) of 29.8%.

The South Crofty project is poised to become a low-cost and long-life tin mining operation with a current 14-year life of mine. It is expected to produce a high-grade, clean tin concentrate, positioning it as a significant tin producer in Europe. This is particularly promising given the growing demand for tin, a critical metal essential for the energy transition. Tin is also widely used in electronics.

Project economics highlights:

• US$201 million after-tax NPV_8% and 29.8% IRR at base case tin price of US$31,000 /tonne
• US$235 million after-tax NPV_8% and 32.8% IRR at the current US$32,625 /tonne LME tin price
• Capital payback period of 3 years after-tax
• Total after-tax cash flow of approximately US$626 million from start of production, peaking at US$82 million in the second year of production
• Average annual earnings before interest, taxes, depreciation and amortisation (“EBITDA”) of US$83 million and 62.1% EBITDA margin in years 2 through 6

 Cornish Metals shares were 15% higher at the time of writing.

“Congratulations to Cornish Metals’ technical team on completion of this Preliminary Economic Assessment of the South Crofty tin project,” said Ken Armstrong, Interim CEO and Director of Cornish Metals.

“This PEA is an important milestone for Cornish Metals and our goal of bringing responsible tin mining back to Cornwall and the United Kingdom. South Crofty is a strategic asset as tin is recognised as a critical metal by the United Kingdom and other national governments, while there is currently no primary tin production in Europe or North America.”

Next is often referred to as a bellwether of the UK high street. Its brand is embedded in the national psyche and associated with high-quality yet affordable clothing and homeware.

This brand appeal has seen it through challenges such as the shift to online shopping – when it was arguably a little slow to adopt online channels – and the recent pandemic. Many of its peers have gone into administration while Next repositioned its business and maintained sales growth.

Today’s Q1 trading update is another example of Next’s prowess. Sales rose 5.7% in the quarter, slightly above guidance, as online sales surged 8%, but retail remained dead flat.

“Next’s first-quarter results came in slightly above group expectations, beating its full-price sales guidance by 0.7 percentage points. These sales were driven by an 8.8% growth in its Online channel, with Retail remaining flat,” said Guy Lawson-Johns, equity analyst, Hargreaves Lansdown.

“Online revenues continue to drive outperformance. Next’s significant work to enhance its online service is paying dividends. Improved stock availability and seamless operational execution are driving performance beyond anticipated levels.”

Stalling retail sales growth may be why shares are down slightly today. Next shares, however, are up 11% year to date.

There may also be a smidgen of disappointment that sales growth wasn’t better. Notwithstanding the economic challenges Next is operating in, investors have become accustomed to strong results, which have become the norm over the past two years. 

“They have been cautious about raising the full-year outlook due to a particularly warm Q2 last year and as a result anticipate a potential dip upcoming in comparison,” said Adam Vettese, analyst at eToro.

The FTSE 100 broke its streak of record closing highs on Tuesday, and flat trade on Wednesday suggests it’s unlikely to set a fresh intraday high in today’s session.

The pause for breath can be attributed to a multitude of factors, including softer UK house price data hitting housebuilders, the Federal Reserve deciding on rates later today, weaker UK manufacturing data and simply good old-fashioned profit-taking. 

“Having broken its run of record closes on Tuesday, the FTSE 100 ticked higher on Wednesday morning despite selling on Wall Street overnight,” said AJ Bell investment director Russ Mould.

Interest rate concerns could well grip markets again later today as the Federal Reserve meets to decide on rates and provide its commentary on the economy. Markets have pushed the pricing of the first rate cuts back until much later in 2024, and the Federal Reserve isn’t expected to make any changes to rates today. 

The focus will almost entirely be on the commentary. Markets have gradually priced fewer and fewer interest cuts this year. Last year, as many as seven rate cuts were forecast for 2024. Now, only one is expected, and two as an absolute maximum.

Should the Fed say anything tonight that suggests interest rate cuts are being pushed out further than already priced for, history tells us to expect a broad market reaction felt in equities.

Housebuilders were among stocks suffering on Wednesday after new data revealed UK house prices had fallen for a second month amid poor weather and the ongoing pressures of higher mortgage rates and overpriced housing. The house price data comes just a couple of days after major lenders said they would increase mortgage rates in the face of interest rate uncertainty. 

Persimmon was 1% weaker while Taylor Wimpey gave up 0.5%.

Next

Next’s trading updates have been drawing a crowd recently, and its Q1 trading statement will have done nothing to send people home early but also did little to inspire demands for an encore.

Group sales grew at a better-than-expected 5.7%, but flat retail sales kept any enthusiasm in check.

“Next seems to be the gift that keeps on giving as they deliver an increase in sales for Q1 that has come in ahead of expectations,” said Adam Vettese, analyst at eToro.

“They have been cautious about raising the full-year outlook due to a particularly warm Q2 last year and as a result anticipate a potential dip upcoming in comparison.”

“Whilst the macro outlook has certainly improved, there may be some risk factors for retailers, as some uncertainty lingers, but it is still fair to say that Next is a pick of the sector. Despite a slight dip in the share price this morning which could well be a bit of profit taking, there is still scope for the price to push on this year.”

Next shares were flat at the time of writing.

Smith+Nephew

Smith+Nephew was the FTSE 100’s top riser after announcing Q1 sales increased 2.9% to $1,386 million with strength in Sports Medicine & ENT and Orthopaedics.

Smith+Nephew maintained full-year guidance helping shares rise 3%.

Next Tuesday this £176m capitalised estate agency group will be holding its AGM covering its 2023 results, which were gently better than those of 2022.

The Foxtons Group (LON:FOXT), which is London’s leading estate agency and largest lettings agency brand, with a portfolio of over 28,000 tenancies, saw revenues of £147.1m (£140.3m) for the year, with adjusted pre-tax profits of £13.8m (£13.1m) but lower earnings of 2.8p (3.0p) and a maintained dividend of 0.9p per share.

Recent Q1 Trading Update

Two weeks ago, the group gave out a Q1 Trading Update for 2024, showing a 9% advance in revenues at £35.7m for the three months to end March.

CEO Guy Gittins stated that:

“This has been a strong start to the year with our revenue growth demonstrating the real momentum we have built across the business. Last year we regained our number 1 position in London and delivered significant growth in our market share of property instructions across both Lettings and Sales. The business is now focussed on converting these listings to transactions as we deliver results for our clients.

Sales revenue was up 17%, reflecting improved market conditions and Foxtons’ continued growth in market share as the operational improvements we made last year took effect. We entered the second quarter with the highest value under-offer Sales pipeline since the 2016 Brexit vote, giving us optimism for the rest of the year.

We have made great strides in the past two years, with the business’ foundations rebuilt and the Foxtons Operating Platform significantly strengthened. We are well placed to continue to unlock value within our business, drive growth, and ultimately deliver against our medium-term adjusted operating profit target.”

The Group’s Strategy Going Foward

The strategy of the group is to accelerate growth and deliver £25m to £30m of adjusted operating profit in the medium-term, by focusing on non-cyclical and recurring revenues from Lettings and Financial Services refinance activities, supplemented by market share growth in Sales.

Broker’s View – Price Objective 88p

Analyst Greg Poulton at Singer Capital Markets rates the group’s shares as a Buy, with a Price Objective of 88p.

He is now estimating current year revenues of £158.3m, £17.0m profits, 4.0p earnings and a 1.10p dividend per share.

Over the next two years to end 2026 he sees revenues rising to £179.6m, £25.2m profits, 5.9p earnings and a 1.50p per share dividend.

My View – Looking For 80p A Share

The market in the group’s shares is interested to know just how its brokers and Rothschilds will be faring in attempting to get FOXT a much better rating than at present – with suggestions that the whole group is up for sale to the right bidder.

Could we be getting any update on their joint progress to date?

Probably not – but it would be good to excite some more interest in the group’s shares, which are currently trading at around 58p.

If a potential predator is being sought and lined up in due course, it would be reasonable to look for a bidder having to offer at least 80p a share, some £240m in value.