The AGM Statement by Mark Hammond, Executive Chairman of the DX (Group) (LON:DX.) was very encouraging for shareholders of the delivery solutions group, whose shares were suspended for some eight months of this year.

“Trading in the first quarter of the new financial year was in line with management expectations. I am pleased to announce today that trading to date remains in line, and that the pipeline of new business opportunities continues to be very healthy. The Group remains in a strong financial position, with high levels of liquidity and significant net cash.”

The Group’s Business

Established in 1975, DX is a market leader in the delivery of mail, parcels, pallets and freight of irregular dimension and weight.

The group, which provides a wide range of specialist delivery services to both business and residential addresses across the UK and Ireland, operates through two divisions, DX Freight and DX Express.

DX now provides one of the widest ranges of overnight delivery services in the market, as well as logistics services. 

Items that DX transports range from confidential documents and valuable packages to large, awkward-to-handle freight, unsuitable for automated conveyor.

Analyst Opinions – price targets ranging 50p to 57p share

Analyst Guy Hewett at finnCap, the company’s NOMAD and joint broker, has estimates for the current year of £457.0m sales, £25.4m adjusted pre-tax profits, earnings of 3.5p and a 1.5p dividend per share.

He is even more bullish for 2024 looking for £475.6m revenues, £29.9m profits, 4.0p earnings and a 1.7p dividend per share.

Hewett has a 57p Target Price out on the shares. 

Over at the other joint broker, Liberum Capital, their analyst Gerald Khoo considers that the group’s shares have attractive fundamentals, while the company is resilient in its trading.

For this year his figures suggest £453.0m revenues, £26.7m profits, earnings of 3.3p and a similar 1.5p per share dividend. 

Liberum Capital rate the shares as a Buy and have upped their Target Price to 50p (45p).

Conclusion – from 26.5p to 35p 

I reckon that this group’s shares are looking distinctly undervalued at just 26.5p, trading at around 8 times current year earnings and yielding almost 6%.

Before the group provides a further update on trading in February it is reasonable to expect the shares looking to rise clearly over the 30p barrier, with 35p being a good price objective in 2023.

Weaker than expected UK and US CPI inflation data has set the scene for a potentially tumultuous instalment of central bank action from the Bank of England and Federal Reserve over the next 24 hours.

Equity markets rallied sharply yesterday as US CPI fell to 7.1% and investors positioned for a dovish tweak to the Fed’s perspective on interest rates.

“Tonight’s rates decision from the US Federal Reserve remains finely poised but a less aggressive rate hike seems likely – the FTSE 100 dipped a little this morning as investors remain in ‘wait and see’ mode ahead of the decision,” said Russ Mould, AJ Bell investment director.

If either the Fed or BoE give any indication of hawkishness going into 2023, one would expect significant volatility in equities.

FTSE 100 housebuilders

The majority of FTSE 100 constituents were trading negatively on Wednesday ahead of the Fed’s decision at 7pm. There was pronounced weakness in those stocks particularly exposed to interest rates including UK banks and housebuilders.

“Housebuilders acted as a drag on the index, suggesting worries about the housing market and the impact of higher borrowing costs on demand persist,” Mould said.

Ocado was the FTSE 100’s top faller as heightened volatility in the retail technology company persisted. The company’s shares were as much as 10% higher at one point in yesterday’s session.

Rio Tinto and the rest of the FTSE 100’s diversified miners were also among the fallers after posting substantial gains in November. Precious metals miners Fresnillo was up 2.5% as gold prices held above $1,800 after a surge yesterday.

The FTSE 100 is down 1.2% so far in December following a significant rally from lows around 6,800 in October.

Whether the FTSE 100 is able to deliver a seasonal ‘Santa rally’ and produce a positive performance in December will likely be dependent on what happens over the next two days.

TUI shares were weaker on Wednesday after the travel operator released 2022 full year results which demonstrated a material bounce back from the subdued activity during the pandemic.

Revenue more than doubled to €7.6bn and EBIT increased €1.1bn as holidaymakers took the first unrestricted opportunity since the start of the pandemic to get away.

“TUI is back on track, as pent-up travel demand and a return to more normal travel patterns helped jet-fuel profits in the fourth quarter,” said Sophie Lund-Yates, Equity Analyst at Hargreaves Lansdown.

“The number of passengers in the core Markets & Airlines business doubled – with the per-seat margin benefit shining through in the numbers. Demand for winter bookings is also looking bright which means all-in-all, TUI is doing well.”

Despite the solid set of numbers for 2022 and some encouraging signs for 2023, TUI shares were 6% weaker at the time of writing.

The travel company has rallied markedly since their October lows but are still down 40% in 2022. Travel disruption and concerns about the cost of living crisis have rocked investor sentiment around travel companies this year. Analysts highlighted the uncertainty around the ability of holidaymakers to afford higher priced holiday next year as a reason to be cautious on TUI shares.

“In 2022 holidaymakers have been willing to pay what it takes to get away for the first time in what feels like an age. However, if prices move too high then affordability becomes an issue,” said AJ Bell investment director Russ Mould.

“This could be a key test for TUI in 2023 and, given people have shifted to booking their holiday at shorter notice to avoid the risk of being caught off guard by disruption, the company has limited visibility on its future business.”