Until the FTSE 100 breaks the historic 7,877 and 7,903 levels, investors will be fixated on each tick in the FTSE 100 and any influencing news.

As we start the third trading week of 2023, the news flow is relatively benign – and market movements muted – with US markets closed for Martin Luther King day.

This saw last week’s momentum continue into the Monday session as the FTSE 100 edged towards key historic levels of 7,877 and 7,903.

“The attractiveness of the FTSE 100 is undimmed, with the index set to flirt again with record highs in early trade. The record closing high of 7,877 is in reach, and another surge in buying could see stocks surpass the best level of 7903, seen on May 22, 2018,” said Susannah Streeter, Senior Investment and Markets Analyst, Hargreaves Lansdown

“Hopes that inflation will keep descending from its peak in the US, after encouraging data last week, saw Wall Street end on a Friday high, with positive vibes spilling over to Monday trades in Asia.”

FTSE 100 updates

There were no major updates from FTSE 100 companies on Monday after a raft of festive trading updates last week helped lift the index.

However, later in the week investors expect to receive updates from Burberry, Antofagasta, Experian and numerous other FTSE 350 companies.

China and US data

After lifting almost all COVID restrictions, China will release GDP figures and make an interest rate decision this week, which have the potential to set a tone for markets.

Investors are looking to China to help propel global growth and a strong reading will be taken well by equity market.

The US will provide more insight into their economy with retail sales for December after a robust Non-Farm Payroll number suggested resilience in labor markets.

ITM Power shares were suffering on Monday after the hydrogen energy solution company said results for the financial year ending April 2023 will be ‘materially different from the current guidance’ as revenue falls and EBITDA losses expand.

The ITM Power share price is now down 72% over the past 52-week period after falling 11% in early trade on Monday.

ITM attributes the poor performance to a period of testing as they move towards volume manufacturing. Write-downs, legacy contracts and underestimating certain costs are also putting pressure on earnings.

“This is the challenge I was expecting when I joined ITM,” said Dennis Schulz, ITM Power CEO

“For the Company to develop from an R&D and prototyping entity, to a mature delivery organisation, we require firmer foundations. Our 12-month plan will make ITM a stronger, more focused and highly capable company.”

“The large-scale opportunities in the market are yet to come, and by putting these foundations in place ITM will be ready for the significant market demand ahead of us.”

Another warning on profit

When a company commits to such a large scale undertaking such as revolutionising the way we generate energy and power travel, there will inevitably be growing pains. Technology from their first wave of innovation has been replaced with more efficient solutions a they seek to scale up their operations. This process has created costs that will hit profits.

Lower generation of revenue will be a concern and further insight into customer traction will be scrutinised in ITM’s interims.

ITM Power’s interim results are due 31st January when it says it will provide greater details on the strategic outlook.

NHS England has commissioned Totally (LON:TLY) to provide additional call handling and clinical capacity to help to alleviate some of the pressures on local NHS 111 services, as required.

Totally helps healthcare commissioners and hospitals ensure patients can access the most appropriate care quickly and efficiently by delivering quality urgent care services, such as NHS 111 and urgent treatment centres and elective care services, such as community dermatology clinics and first contact practitioner.

It also delivers additional clinical capacity through insourcing and outsourcing arrangements to trusts and hospitals tackling growing waiting lists. Its corporate customer services also play a role in reducing reliance on healthcare by promoting healthy lifestyles and physical and mental health.

£10m pa contract with option to renew

The contract, awarded to Vocare, part of Totally’s Urgent Care division, will run from 1 March 2023 at a value of around £10m per annum, initially for one year with the option to extend for a further year.

CEO Wendy Lawrence stated that:

“Totally has significant experience providing quality, resilient and responsive regional NHS 111 services. Our services have provided essential access to core healthcare services as demand has risen beyond the level anticipated by commissioners.

This new contract re-affirms Totally as a core partner in the delivery of NHS 111 services and moves to recognise the new normal in which healthcare providers are operating, providing essential additional capacity into the system.”

Analyst Opinion – 70p Target Price

James Wood at Canaccord Genuity Capital Markets rates the group’s shares as a Buy, with a Target Price of 70p.

His current year estimates, to end March, are for £140.8m (£127.4m) sales, while adjusted pre-tax profits could rise to £5.8m (£4.0m), with earnings of 3.3p (2.1p) and an unchanged dividend of 1p per share.

For the coming year Wood goes for £155m revenues, £8.0m profits, 4.4p earnings and a 1p dividend per share.

Conclusion – shares undervalued

It is very apparent that the NHS needs efficient help in providing national contingency support for its NHS 111 service and this award to Totally is an example of its potential over the next few years.

With its shares trading at around 35p they are clearly undervalued trading on 10.6 times current year earnings and on a low 7.9 times prospective.

The FTSE 100 was on the verge of making history on Friday as London’s leading index edged towards its all time highs.

Investors will be closely watching the index to see if the 7,877 closing high is breached today. The highest intraday level for the FTSE 100 is 7,903.

Although the FTSE 100 is poor representation of the UK economy, better than expected UK GDP figures have helped sentiment and sent the index through 7,800 to trade at 7,827 at the time of writing.

UK GDP

Fears of a UK technical recession receded on Friday after the economy expanded 0.1% in November as the services sector performer better than expected. The World Cup also boosted activity as football fans flocked to pubs for England games.

“The UK economy is doing its best to avoid falling into a technical recession with another month of growth in November. We’ll have to wait for the final quarter figures for 2022 – out next month – to confirm whether it has managed to do that,” said Ed Monk, Associate Director, Personal Investing at Fidelity International.

3 key messages from the just released UK GDP numbers
With a 0.1% expansion, growth surprised on the upside (consensus forecast was -0.2%);
Services continued to power growth (manufacturing contracted);
Judging from certain GDP components, the labor market remains relatively tight

— Mohamed A. El-Erian (@elerianm) January 13, 2023

UK Banks

UK Banks were among top risers on Friday as investors reacted to the upbeat economic data and banking results from the US.

Lloyds shares were up 2% and approaching the key psychological level of 50p and Natwest was up 2.2%.

JP Morgan, Bank of America, Wells Fargo and Citigroup are all set to report on Friday. Those received at the time of writing were were broadly inline with estimates but Wells Fargo shares were down 4% pre-market on a $3.3bn Q4 operating loss.

JP Morgan’s EPS was better than expected.

Morses Club shares were trading a whopping 220% higher at 1.5p as their potential delisting was questioned after major shareholder sold their stake in the company.

The doorstep lender had yesterday announced a proposal to delist from AIM. For the proposals to go ahead, 75% of shareholders are required to vote for the delisting. Yesterday, the company said they had the backing of 51% of shareholders.

However, the announcement today that JO Hambro Capital Management had sold their entire stake in the company will change the dynamics dramatically and raises the question whether the 75% threshold will be met.

Morses Club shares have suffered dearly since the beginning of the pandemic and the board say delisting will provide better access to private capital.