FTSE 100 shrugs off poor US and Asian sessions, IAG and Scottish Mortgage gain

UK Investor Magazine
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FTSE 100 shrugs off poor US and Asian sessions, IAG and Scottish Mortgage gain

A strong session for IAG, Vodafone and the Scottish Mortgage Investment Trust helped the FTSE 100 higher on Friday as investors globally paused for breath after a choppy week for equities.

Positive sentiment has helped lift global stocks in recent weeks, and it was a welcome surprise to see the FTSE 100 take part this week. Overseas indices, including the German DAX, Japanese Nikkei, and US S&P 500, have all broken to record highs in 2024 so far. 

The FTSE 100’s weighting towards natural resources and the uncertainty surrounding the Chinese economy has prevented it from joining the party, so this week’s gains will be encouraging for UK equity traders.

The FTSE 100 shrugged off overnight weakness in the US and Asia to carve out minor gains on Friday. The index was 0.2% higher at the time of writing.

Interest rates were again at the forefront of investors’ decision-making processes after a raft of economic data this week raised questions around the time of the first rate cuts by major central banks.

“With the prospect of the Fed potentially waiting until later in the summer to cut rates, investors are getting impatient. The Hang Seng in Hong Kong fell 1.4% but Europe managed to avoid a big sell-off,” said Russ Mould, investment director at AJ Bell.

“Stocks in the energy and basic materials sectors were in demand, albeit the FTSE 100 faced opposing forces from weakness in consumer and industrial stocks.”

IAG

IAG shares took off on Friday as more analysts issued positive broker notes on the company. IAG shares were up 6% on Friday and are sharply higher than the lows recorded at the beginning of March.

“International Consolidated Airlines flew to the upper end of the FTSE 100 leader board after investors digested yet another positive bit of news for the company,” Russ Mould said.

“Analysts are turning positive on the stock and following last week’s upgrade by JPMorgan Cazenove, BNP Paribas Exane followed suit by switching from a negative to a positive view. This follows news earlier this week that Moody’s has put the company’s credit rating on review for an upgrade. A higher credit rating gives investors more comfort over the risks associated with owning the shares.”

Scottish Mortgage was also among the top risers after the Investment Trust announced it would buy back $1 billion in shares. The technology-focused trust is traded at over a 10% discount, and the move is an effort to reduce this discount. Scottish Mortgage was 3.9% higher.

AIM movers: Positive drilling at Cottesloe for Wishbone Gold and Horizonte Minerals subsidiary files for creditor protection

Andrew Hore
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AIM movers: Positive drilling at Cottesloe for Wishbone Gold and Horizonte Minerals subsidiary files for creditor protection

Wishbone Gold (LON: WSBN) says drilling at the 100%-owned Cottesloe project in Western Australia indicates a large sediment hosted base metal mineralised system. These base metals can be used in lithium-ion batteries. There are highly anomalous lead-zinc and silver levels. The drilling has been in the south of the prospect area and drilling will switch to the northern area. The share price improved 16.3% to 1.25p.

Sheffield Resources has paid £1.25m at 3.623p/share for 10% of Capital Metals (LON: CMET), which owns 50% of the Thunderbird mineral sands mine in Western Australia, with an option to invest more at 4.891p/share. The share price rose 10.8% to 3.6p. Sheffield Resources has been granted co-exclusivity with LB Group for 60 days to provide funds for the development of Capital Metals’ Eastern Minerals project in Sri Lanka. Sheffield Resources has conditionally been granted the right to acquire up to 50% of the project.

Ondine Biomedical (LON: OBI) is making faster progress than expected. The Steriwave sterilisation technology is deploying in a further eight healthcare facilities. Ottawa hospital is expanding the use of Steriwave to combat hospital acquired infections in spine surgery patients. A study estimated a net saving of C$2,600 per surgery and infection rate dropped by two-thirds. Discussions continue with potential distributors. The share price increased 5.41% to 9.75p.

European Metals Holdings (LON: EMH), which is developing the Cinovec lithium project, reported a reduced loss of $1.13m in 2023. The exploration licences were extended until the end of 2026. There was cash of $5.67m at year-end. The share price is 3.7% higher at 14p.

FALLERS

Yesterday evening, Horizonte Minerals (LON: HZM) revealed that the subsidiary that holds the Araguaia project has been granted an injunction which provides 60 days to work on restructuring and negotiate indebtedness. This provides additional time to deal with creditors. Horizonte Minerals continues to try to negotiate a financing. The share price declined a further 17.2% to 3p.

Cornish Metals (LON: CUSN) chief executive Richard Williams is stepping down, but he will provide consultancy while it is required. Non-exec Ken Armstrong will become interim chief executive. A search for a new chief executive will commence. Work at the South Crofty tine mine is accelerated. Dewatering is underway and a preliminary economic assessment is due to be published later this year. The share price fell 13% to 9.75p.

Alien Metals (LON: UFO) has secured a short-term funding facility of up to A$2m from 7.2% shareholder Bennelong Resource Capital. This will enable a review of longer-term funding options. Non-core assets could be sold to focus on the Hancock iron ore and Pinderi Hills PGM, silver and base metals projects. Strand Hanson has been appointed as nominated adviser. The share price slipped 16.4% to 9.75p.

Trading in uranium explorer Aura Energy (LON: AURA) shares has been halted on the ASX pending the announcement of a share placing. Trading should recommence on the ASX on 19 March, but it continues on AIM. New high-grade mineralisation has been defined at Hippolyte South in the Tiris project in Mauritania. The share price dipped 6.4% to 11p.

NextEnergy Solar Fund Investor Presentation March 2024

UK Investor Magazine
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NextEnergy Solar Fund Investor Presentation March 2024

Peter Hamid, Vice President at NextEnergy Solar Fund, presents at the UK Investor Magazine Investor Conference at the London Stock Exchange 13th March 2024.

Download Presentation Slides here

NextEnergy Solar Fund is a leading specialist solar energy and energy storage investment company that is listed on the premium segment of the London Stock Exchange and is a constituent of the FTSE 250. NextEnergy Solar Fund invests primarily in utility scale solar assets, alongside complementary ancillary technologies, like energy storage.

NextEnergy Solar Fund is driven by a mission to lead the transition to clean energy.

1Spatial Investor Presentation March 2024

UK Investor Magazine
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1Spatial Investor Presentation March 2024

Claire Milverton, CEO of 1Spatial, presents at the UK Investor Magazine Investor Conference at the London Stock Exchange 13th March 2024.

Download Presentation Slides here

1Spatial plc is a global leader in providing Location Master Data Management (LMDM) software, solutions and business applications, primarily to the Government, Utilities, Transport and Built Environment sectors via the 1Spatial platform. Our solutions ensure data governance, facilitating the efficient, effective and sustainable operation of customers around the world. Our global clients include national mapping and land management agencies, utility companies, transportation organisations, government and defence departments.

Scottish Mortgage Investment Trust to buy back £1 billion shares

UK Investor Magazine
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Scottish Mortgage Investment Trust to buy back £1 billion shares

Scottish Mortgage Investment Trust was one of the FTSE 100 top gainers on Friday after the technology-focused trust announced a major share buyback.

The lack of interest in the Scottish Mortgage Investment Trust has become too much for its managers, who have announced a £1 billion share buyback over two years.

Despite holding some of the world’s leading technology companies, the trust is trading at over a 10% discount and the team is now taking matters into their own hands by buying back shares to help reduce the discount.

Scottish Mortgage became an investor favourite by picking major success stories in the technology space providing investors with substantial returns. It has since fallen out of favour as Russ Mould, investment director at AJ Bell, explains:

“Once a darling of the stock market during the red hot ‘go-go growth’ phase that was propelled by very low interest rates, the trust fell out of favour after central banks started to lift the cost of borrowing and one of its long-standing fund managers departed. The new team have been trying to make a comeback ever since, but it’s been hard going. The latest bright idea is to throw a massive wad of cash at share buybacks.

“The trust says its portfolio is doing well enough to warrant budgeting £1 billion for buybacks over the next two years. That’s 9% of the entire market value of the trust, making it is a significant commitment. It suggests the board thinks the trust is incredibly cheap – it was trading on a 15% discount to the value of its underlying assets last night.”

Mould questioned the management team’s motivation, picking up on the decision to buy back its own shares as opposed to making more investments.

“However, it also raises a key question – wouldn’t that money be better deployed into new investments to generate future returns? Investment trusts are constantly judged on their discounts or premiums to NAV and Scottish Mortgage clearly wants to lift itself out of the bargain bin.”

The decision doesn’t instil confidence in the management’s stock-picking capabilities, given they were heavily underweight AI-focused stocks and are now choosing to avoid making new investments in favour of buying back their own shares.

hVIVO Investor Presentation March 2024

UK Investor Magazine
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hVIVO Investor Presentation March 2024

Yamin ‘Mo’ Khan, CEO of hVIVO, presents at the UK Investor Magazine Investor Conference at the London Stock Exchange 13th March 2024.

Download Presentation Slides here

hVIVO plc (ticker: HVO) (formerly Open Orphan plc) is a rapidly growing specialist contract research organisation (CRO) and the world leader in testing infectious and respiratory disease vaccines and therapeutics using human challenge clinical trials. The Group provides end-to-end early clinical development services to its large, established and growing repeat client base, which includes four of the top 10 largest global biopharma companies.

Vodafone shares jump after Italian disposal completion

UK Investor Magazine
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Vodafone shares jump after Italian disposal completion

Vodafone has completed the long-awaited sale of its Italian unit as part of a strategy to streamline the business and boost profitability.

Southern Europe has been a laggard for Vodafone, and the €8bn disposal will be a relief for investors looking forward to maximising returns from stronger regions, such as the UK and Africa. 

“The sale of Vodafone’s Italian business is intended to mark the final step of its European restructuring and to get the company back on a firm financial footing,” said Russ Mould, investment director at AJ Bell.

Vodafone will return €4bn to shareholders through share buybacks. Investors cheered the news and Vodafone shares jumped 4.6% on Friday.

“The telecoms are unlikely to ever shoot the lights out when it comes to growth, but the reliable nature of their revenue and high barriers to entry make shareholder returns one of the core attractions of these stocks,” said Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown.

“Vodafone’s Italian business has been struggling, so shedding this weight should help the group refocus and the division’s been up for sale for a while. Attention will now turn to how effectively Vodafone uses its resources to fix wider challenges, including high debts, costs and some increasing competition.”

Cornish Metals Investor Presentation March 2024

UK Investor Magazine
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Cornish Metals Investor Presentation March 2024

Cornish Metals presents at the UK Investor Magazine Investor Conference at the London Stock Exchange 13th March 2024.

Download Presentation slides here

Cornish Metals is a dual-listed company (AIM / TSX-V: CUSN) focused on advancing the South Crofty high-grade, underground tin project towards a construction decision. South Crofty is a strategic tin asset in the UK and covers the former producing South Crofty tin mine in Cornwall which closed in 1998 following over 400 years of continuous production. South Crofty is fully permitted: underground permission till 2071, water discharge permission and planning permission to build a process plant in place.

In 2017 Cornish Metals completed a Preliminary Economic Assessment that demonstrated the economic viability of re-opening the mine. In 2023 an updated MRE increased tonnes by 39% and contained tin by 32% in the Indicated category for the Lower Mine. There is further resource growth potential at South Crofty and the Company is also exploring the near-by Wide Formation target that has the potential to further grow the Mineral Resource base and expand throughput. The water treatment plant was commissioned in October 2023 and dewatering of the South Crofty mine is currently well underway. Cornish Metals is targeting commencement of tin mining at South Crofty by end-2026.

Beyond China: Asia’s growth stories

Aberdeen Investment Trusts
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Beyond China: Asia’s growth stories

Pruksa Iamthongthong and James Thom, co-managers of Asia Dragon Trust plc

Asia is rich with growth stories: from Indonesia, where resource wealth is driving a consumer boom, to Vietnam, where foreign direct investment is an engine for change, to India, where sound economic management and innovation are creating new opportunities. But in 2023, investors focused on a single story – China.  

Asian markets looked lacklustre compared to broader global markets in 2023, where the MSC Asia including Japan was roughly flat in GBP terms and China was down 16%. China remained wildly unpopular, mired in domestic weakness and hit by geopolitical tensions.

The Asia Dragon portfolio leans in to the diversity of the region, gravitating to its highest quality companies aiming to side-step its bear traps. In the year ahead, Asia’s other stories may start to get more attention from investors, even if China’s trajectory remains difficult to predict.

Technology

The revival of the semiconductor industry has become an important theme for the trust. The world is ending a period of de-stocking and entering a period of restocking, which is creating broad demand for semiconductors. Deloitte is predicting global sales of US$588 billion in 2024, 13% better than 2023[1], fuelled by a revival in demand for memory chips and PC/smartphone sales. The largest holdings in the trust are TSMC and Samsung, plus a position in semiconductor supplier ASML.

Data centre growth is also providing a major boost for the sector. Artificial intelligence is every bit as important to the Asian market as it has been in the US market, driving growth in data centres (AI demands significant computing power) and a demand for chips. We have also taken a position in a Taiwanese company called Accton, which makes switches for data centres. Their main customers are the US hyperscalers such as Amazon and Google.

Booming economies

Indonesia has moved from a ‘fragile five’ economy to build a thriving export and consumer economy. Its natural resources have been the catalyst, but our focus has been on the growth in the consumer sector. We hold a small cap dairy company, a Ben & Jerry’s style brand that is building market share. There are also a number of Indonesian banks in the portfolio, which look set to benefit from growing financial inclusion and consumption.

The trust has around 20% in India. Economic growth across India is buoyant with domestic demand and private investment driving growth[2]. However, market pricing increasingly reflects that growth. In particular, there has been a significant rally in small and mid cap companies where valuations now look stretched. We are finding more opportunities in large companies and have added to our holdings in the real estate sector, including Godrej Properties.

We also like proxies for real estate and infrastructure development in India. Cement may be unglamorous, but it is in high demand. For infrastructure, we’ve added an EPC (engineering, procurement, and construction) contractor, which is a beneficiary of the considerable growth in government-funded projects. Another addition has been telco company, Bharti Airtel. The Indian telco sector has been through a significant period of consolidation, which has led to much more favourable dynamics.

There are also plenty of idiosyncratic opportunities across the region. Following the combination with the abrdn New Dawn Investment Trust at the end of last year, our investment universe has been widened to incorporate Australasia. The trust has taken advantage of this opportunity for greater geographic diversification by investing in a handful of high quality businesses in this market. One example is Cochlear, an Australia-listed world leading manufacturer of cochlear implants to help with hearing loss. Biotechnology company CSL is a vaccine company, but also has the world’s largest human blood collection network, focused on the US. We also have a small position in Vietnam, which is benefiting from companies moving manufacturing away from China.

China: still plenty of opportunities

This leaves the thorny problem of China. Clearly, there is growth, but it remains unrewarded by the market. Last year’s weakness was almost universal, with only energy and communications services companies doing well. There was some excitement around the state-owned enterprise (SEO) reform agenda announced last year. The government announced a raft of measures designed to make SOEs more profit-oriented and introduce proper incentive plans. We remain very sceptical of this initiative and have very little exposure to SOEs.

The weakness elsewhere has left the genuine growth companies in China looking even cheaper. While there has been some economic weakness, the share price declines have been disproportionate. It is still quite a tough environment, and it is difficult to find a catalyst likely to trigger a rebound in the market.

Our strategy is not to ignore China altogether. There are still plenty of growth opportunities and pockets of innovation. We’ve been focusing on areas with good visibility on earnings and weeding out any companies where there are question marks. However, we recognise its limitations.

The situation in China has distracted investors from the very real opportunities elsewhere in Asia. It is undoubtedly an important growth engine for the region, with its own idiosyncratic growth opportunities, but the region has plenty to offer with or without China. It taps in to many of the world’s growth stories, from AI and the energy transition, to supply chain re-engineering. These fundamentals are increasingly overlooked, but we hope investors will start to look beyond China’s problems to the broader Asian growth story in the year ahead.

Companies selected for illustrative purposes only to demonstrate the investment management style described herein and not as an investment recommendation or indication of future performance.

Important information

Risk factors you should consider prior to investing:

  • The value of investments, and the income from them, can go down as well as up and investors may get back less than the amount invested.
  • Past performance is not a guide to future results.
  • Investment in the Company may not be appropriate for investors who plan to withdraw their money within 5 years.
  • The Company may borrow to finance further investment (gearing). The use of gearing is likely to lead to volatility in the Net Asset Value (NAV) meaning that any movement in the value of the company’s assets will result in a magnified movement in the NAV.
  • The Company may accumulate investment positions which represent more than normal trading volumes which may make it difficult to realise investments and may lead to volatility in the market price of the Company’s shares.
  • Movements in exchange rates will impact on both the level of income received and the capital value of your investment.
  • There is no guarantee that the market price of the Company’s shares will fully reflect their underlying Net Asset Value.
  • As with all stock exchange investments the value of the Company’s shares purchased will immediately fall by the difference between the buying and selling prices, the bid-offer spread. If trading volumes fall, the bid-offer spread can widen.
  • The Company invests in emerging markets which tend to be more volatile than mature markets and the value of your investment could move sharply up or down.
  • Yields are estimated figures and may fluctuate, there are no guarantees that future dividends will match or exceed historic dividends and certain investors may be subject to further tax on dividends.

Other important information:

Issued by abrdn Fund Managers Limited, registered in England and Wales (740118) at 280 Bishopsgate, London EC2M 4AG. abrdn Investments Limited, registered in Scotland (No. 108419), 10 Queen’s Terrace, Aberdeen AB10 1XL. Both companies are authorised and regulated by the Financial Conduct Authority in the UK.

Find out more at www.asiadragontrust.co.uk or by registering for updates. You can also follow us on social media: X and LinkedIn.

Berkeley Group shares steady as guidance maintained, cost inflation slows

UK Investor Magazine
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Berkeley Group shares steady as guidance maintained, cost inflation slows

Berkeley Group have steadied the ship and maintained guidance as cost inflation slows amid falling sales.

The group noted prices have been resilient, but sales rates are still around a third lower than they were in the same period last year. Higher mortgage rates are to blame for lower sales — a familiar story across the FTSE 350 housebuilders.

The focus for all housebuilding trading updates and results is now what the company thinks will happen in the future. Everyone knows they’ve had a terrible time, so poor historical sales are of little consequence. The emphasis is on what companies see happening with sales in the future. In this respect, Berkeley didn’t disappoint.

“Berkeley has delivered another solid performance in a difficult trading environment. Sales reservations are down around a third reflecting higher interest rates and weak economic sentiment,” said Charlie Huggins, Fund Manager at Wealth Club.

“But pricing and margins have remained firm, while build cost inflation has moderated. This means the group has reiterated its medium-term profit guidance.”

Investors will be encouraged the group has secured all sales for the year ended April 2024 and has secured 70% of sales for next year. Berkeley said enquiries levels have been ‘good’.

The company declared a 33p dividend in February and remains committed to returning an additional  £227m to shareholders by September 2024.

“The firm has sales secured to the end of this financial year as well as 70% of next year, which is a strong position to be in as we start to see some aggravating factors subside, particularly when we begin to see rate cuts which will make the market significantly more attractive,” said Adam Vettese, analyst at investment platform eToro.

“Berkeley Group shares are only 5% off their 52-week high, and given their smart management of a tough market, there’s no reason why they can’t push on in 2024.”

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