The UK Investor Magazine was thrilled to welcome Jonathan Hick, Fund Manager at Triple Point Energy Transition (TENT), to the podcast for a deep dive into the UK energy markets and opportunity in the energy transition.
Regular listeners will remember the Q&A session from the Triple Point presentation at the UK Investor Magazine Virtual Investment Trust Conference in November and the insight Jonathan provided into the UK’s energy ecosystem.
In this Podcast we delve deeper into the regulatory environment and what recent changes mean for power generation assets and TENT’s portfolio.
Jonathan provides an overview of the TENT portfolio and his favourite assets. Jonathan also highlights technologies such as battery storage and green hydrogen as major opportunities for investors in the coming years.
Jerome Powell sparked a rally in US equities overnight after the Fed chair hinted the pace of US rate hikes could soon slow. Powell’s comments increased hopes of a ‘pivot’ in policy which would see financial conditions ease.
“Comments from the Fed chair might have suggested a slight breather from the pace of hikes we’ve seen more recently, but there were clear warnings that the Fed was committed to returning inflation to levels akin to longer term targets,” said Matt Britzman, Equity Analyst at Hargreaves Lansdown.
FTSE 100 gains
The optimism in US equities spilled over into the European session and the FTSE 100 rallied with European equities.
China economic reopening
Adding to trader’s optimism on Thursday was the prospect of the Chinese economy reopening. Reuters reported their sources told them the government were preparing changes to their Zero-COVID policy after a week of unrest. Chinese equities gained, as did the FTSE 100’s cyclical stocks.
UK house prices slide
UK house prices slid 1.4% month-on-month in October, the biggest drop since June 2020.
“The carnage wrought by the mini-budget may have tipped the property market over the edge. The delay in sales being completed means this is just a first glimpse of the horrors that may lie ahead, and it’s looking like the next few months could be something of a nightmare. Prices fell 1.4% in November, their biggest monthly drop in two and a half years,” said Sarah Coles, senior personal finance analyst, Hargreaves Lansdown.
The dollar falls
The dollar was weaker following the Federal Reserve Chair’s comments with GBP/USD approaching the highest level since early August and EUR/USD traders eyeing July highs.
The FTSE 100 has outperformed many major indices in November and will have likely helped the valuation of many UK investor’s portfolios.
While the capital appreciation will be more than welcome given the uncertain backdrop, there are still a number of FTSE 100 dividend payers that could be considered for an income as we move into 2023.
Legal & General
Legal & General pays a very attractive 7.4% dividend, even after rallying over 25% since lows in October. Legal & General was a major casualty of Kwarteng’s doomed mini-budget and felt the pressure of disruption in the bond market. At 200p, Legal & General was trading at the lowest levels since 2020 – and didn’t stay there for long.
Legal & General provided a reassuring trading update in October highlighting the impact on their business wasn’t anywhere nearly as bad as their share price suggested.
With Legal & General shares now at 255p, the stock is well below recent 310p highs and is fairly valued at 7.8x earnings.
GSK
It’s very difficult to get excited about GSK, formerly known as GlaxoSmithKline. But dividend payers shouldn’t really be that exciting. Glaxo shares have been stuck in a range for years. The stock bottoms around 1,200p-1,300p then rallies to the 1,800p region, before falling back. At 1,412p today, GSK shares are towards the bottom of this range and the 61.25p per share dividend promised for 2022 FY would mean a yield of 4.3%.
GSK is a quarterly dividend payer and tends to pay its largest dividend in the 4th quarter – which historically has had an ex-dividend date in February.
Persimmon
Persimmon is a high risk dividend play. It is likely to cut its dividend in the coming year, should the housing market slow as predicted by many experts. Last year’s dividend payouts would mean Persimmon yields 18%, but this should be ignored as Persimmon are very unlikely to pay this again in the coming year.
Nonetheless, Persimmon have been a fantastic dividend payer since the financial crisis and any weakness in the share price caused by an impending recession may be an opportunity to buy in anticipation of an economic recovery. Not for the faint of heart.
Are Tesla shares a buy after their sharp fall? The Tesla share price has cratered in 2022 and investors may be eyeing Elon Musk’s EV company as a potential bargain.
Tesla has been a favourite among investors positioning themselves in a stock that will benefit from the electric vehicle revolution, and push towards cleaner forms of fuel.
For years Tesla was the only real pure-play EV company and built a loyal base of investors. Tesla shares soared as a result. However, these lofty valuations were tested by traditional manufacturers entering the EV market in a big way, and Tesla shares very quickly looked expensive around $400. A global monetary policy tightening cycle meant their frothy valuation was no longer sustainable.
With Tesla shares more than halving since, the focus should now be on whether the current valuation is justified by Tesla’s earnings.
Tesla sales
Tesla is no longer a company that should be priced on what it may do years into the future. The company operates in a developed EV market which accounts for 17.8% of new car registrations in Europe, 22% of cars sold in China in October were electric.
Tesla have been around long enough to establish a foothold in the market and should be judged by current sales activities. Year-on-year revenue growth of 56% in the third quarter is impressive, but significantly below the 80% growth recorded a couple of quarters ago.
Indeed, the extensive ranges of EVs manufactured by traditional car companies means it is also appropriate to make valuation comparisons to peers such as BMW, Volkswagen and Toyota.
Tesla shares valuation
Volkswagen trades at 3.7x earnings, BMW at 3.1x and General Motors 5.9x. A very basic comparison to peers makes Tesla shares trading at $180 and 50x earnings seem expensive.
There is an argument Tesla’s premium is justified by their push into gigafactories, but it’s hard to justify the extent of the disconnect in valuations.
Tesla is a fantastic company, but Tesla shares will need to fall further, or see their sales increase dramatically, to become attractive.
Falkland Islands oil and gas explorer Borders & Southern (LON: BOR) is raising £2.5m at 1.75p a share to finance studies of its 100%-owned Darwin gas condensate discovery. The previous market price was 3.15p and the share price has fallen 35.9% to 2.0175p.
Covid lockdowns in China have hit production of the customers of kettle controls supplier Strix (LON: KETL). Zeus has reduced its 2022 pre-tax profit forecast by 17% to £23.2m and cut the 2023 figure by 11% to £29.7m. There could be some upside from the recently acquired water appliance manufacturer Billi, where there could be opportunities to improve its performance as part of Strix. The share price, which had been recovering, dived 34.8% to 81.3p.
TomCo Energy (LON: TOM) is raising £925,000 at 0.35p a share, while the market price is down 26.4% to 0.355p. The cash will help to finance progress with oil sands prospect Unita Basin in Utah, where subsidiary Greenfield has a 10% stake. It has an option to acquire the other 90% for $16.25m, which is likely to be funded by debt. The $1m loan from Valkor Oil & Gas has been extended to the completion date of a funding transaction for Greenfield.
Market research services provider System1 (LON: SYS1) swung from profit to loss in its latest interims as revenues fell faster than costs. Second half revenues should be better, but the profit outlook remains poor. Net cash is £6.6m. The share price is 13.9% lower at 140p.
Luxury brand Mulberry Group (LON: MUL) reported flat interim revenues with higher international sales offsetting a decline in the UK. Mulberry moved from profit to loss as marketing and other spending was increased. There was an £11.2m cash outflow from operations. The share price fell 7% to 265p.
Europa Metals (LON: EUZ) has unveiled an increased resource at the Toral zinc lead silver deposit in northern Spain. The new resource is 20Mt grading 4.4% zinc, 2.3% lead and 23g/t silver. The orebody remains open at depth so the resource will be larger. The share price moved up 10.3% to 3.75p.
SLB has decided not to take up its option to acquire 108 million shares in Block Energy (LON: BLOE). This removes potential dilution. A further 12 million options have been assigned to Jindal Petroleum and expire on 30 November 2023. The share price increased by 9.8% to 1.4p.
Aquaculture company Benchmark (LON: BMK) made good progress in 2021-22 with each of its divisions growing revenues and the group generating £10.8m in cash from operations. Net debt excluding leases was reduced from £56.9m to £47.5m. All salmon egg production from the new Iceland facility was sold in the fourth quarter. A share issue in Norway will raise £13.2m at the equivalent of around 37.5p a share and that will provide liquidity for the proposed Euronext Growth Oslo flotation as well as further reducing net debt. The share price moved 6.67% higher at 40p.
C4X Discovery (LON: C4XD) is rising again on the back of an exclusive worldwide licence deal with AstraZeneca announced on Monday that could be worth up to £402m. This relates to the use of the NRF2 activator programme to develop an oral therapy for the treatment of chronic obstructive pulmonary disease. There is an upfront payment of $2m. There had been some profit taking after the initial rise, but the share price has improved by 4.77% to 23.05p today.
The FTSE 100 continued its March higher on Wednesday with the index trading at the highest point since August in early trade. Hopes China would soon return to a normal functioning economy were behind the gains.
Asian stocks gain
Asian stocks shrugged off disappointing Chinese economic data overnight. China’s economy has slowed sharply due to lockdowns, with both the manufacturing and services sectors facing pressure. However, investors are looking past this to a potential reopening.
Thai central bank raises rates
The Thai central bank has increased rates to 1.25%. Thailand only has an inflation rate of 6.3% and have avoided the dramatic interest rate hikes experienced in western economies.
Dollar slips
The dollar has dipped after steady gains earlier this week. Jerome Powell is set to speak later today and traders are closing out positions and awaiting any hints on the Fed’s next move.
Home REIT shares gain
Shares in the vulnerable persons accommodation real estate investment trust (REIT) gained after the company responded to ‘baseless’ claims made in a report by a short seller. Home REIT shares had been heavily hit in the past few days.
Floorcoverings and tiles manufacturer Victoria (LON: VCP) reported a 7.7% increase in like-for-like interim revenues even though the UK and Europe floorcoverings division, which accounts for more than 50% of group revenues, was flat.
The other divisions all grew in double digits and Victoria is increasing its market share. This organic growth was supplemented by acquisitions. In the six months to September 2022, total revenues were 59% ahead at £776m, while operating profit moved from £58.6m to £61.1m. This excludes exceptional items, including a credit because the Balta acquisition was made for below asset value.
The profit was achieved even though the price of the main raw material peaked during the period. The price has eased since then and shipping costs have also reduced. Balta, the most recent floorcoverings acquisition, is being restructured and there will be cost savings. This provides an improved backdrop to the second half. Longer-term, there are efficiency savings from capital investment.
Debt
Acquisitions are not as high a priority as in the past, at least in the short-term. The focus will be generating cash and reducing net debt, which reached £651.5m mainly due to acquisitions and capital spending to improve efficiency. There are also higher inventories so that supply is not disrupted. If no acquisitions are made, then the net debt could reduce by around £100m a year.
Peel Hunt has trimmed its full year pre-tax profit forecast from £78.3m to £73.3m because of higher interest rates. The share price slipped 7.8% to 414p, which means that the prospective multiple is nine.
The share price has fallen by nearly two-thirds, so far this year. Concerns about consumer spending and the high debt level appear to be major reasons behind the decline. Victoria has shown itself to be capable of riding out difficult market conditions and it has strong positions in its main markets.
Replacement windows supplier Safestyle (LON: SFE) says demand has weakened and costs increased during the autumn. There are signs of improvement, but 2022 revenues will be lower than anticipated. Zeus no longer expects Safestyle to make a profit this year and it has more than halved its 2023 forecast pre-tax profit to £3.6m. This also means that the dividend expectations have been cut from 0.8p a share to 0.5p a share in 2022 and halved to 1p a share in 2023. Net cash should be £9m at the end of 2022. The share price dived by 15.5% to 26.15p.
A large foreign exchange loss on a contract pushed cyber security services and software provider Shearwater Group (LON: SWG) into loss and the share price slumped by 21.2% to 89.5p. The loss will partly unwind in the second half, so Shearwater should make a full year pre-tax profit of £600,000 according to Cenkos. The longer-term outlook is positive with two new distributors signed up in North America and a new software launch.
PipeHawk (LON: PIP) fell into loss on lower full year revenues. It has been hit by higher energy costs and delayed orders. Management says that the outlook is more positive. Net debt increased to £8.28m. The share price fell 13.3% to 13p.
Karelian Diamond Resources (LON: KDR) is raising £250,000 at 2p a share, while the share price dipped 12% to 2.2p. The cash will be spent on diamond concessions in Finland and Ireland. A meeting is upcoming relating to the Lahtojoki diamond deposit in Finland.
Infrastructure India (LON: IIP) says it expects to receive proceeds from the sale of Indian Energy in December. The buyer has asked for additional time to complete the transaction and there is a possibility that the deal might not go through and an alternative buyer comes forward. Assuming the cash is received it will be used to pay creditors. Other disposals are planned. The share price recovered by 28.6% to 0.45p.
Home buying technology developer Smoove (LON: SMV) has announced details of its £5m tender offer. It is acquiring up to 12.5 million shares at 40p each. That is 19.3% of the share capital. The share price rose 9% to 36.3p. The tender closes on 9 January. There was £17m in the bank at the end of September 2022 and the cash outflow should reduce.
Orcadian Energy (LON: ORCA) has entered into a memorandum of understanding with SLB to deliver services for the wells on the Pilot heavy oil project in the North Sea. There are plans for 34 wells. The share price improved by 8.33% to 26p.
Ariana Resources (LON: AAU) announced a 22% increase in the resource estimate for the Tavsan mine. The latest estimate is 307,000 ounces of gold and 1.1 million ounces of silver, with 83% of the resource in measured and indicated categories. Ariana Resources has a 23.5% stake in Tavsan. Further exploration should increase the resource. The shares rose 7.46% to 3.6p.
Following its 2021 milestone as the most successful year to date for signings, Radisson Hotel Group is showing no signs of slowing down. It has achieved continued growth in 2022 and expects the same for 2023. The group aims to double its portfolio to over 2,000 hotels in EMEA and APAC by 2025, and the development of its brands across the UK & Ireland is paramount.
A significant development is the announcement that the prizeotel brand will be introduced to the UK & Ireland, marking Radisson Hotel Group’s eighth brand in the market. prizeotel offers owners and investors new build opportunities or easy conversion solutions and guarantees a high-design focused brand for lifestyle travellers in vibrant urban locations. The midscale lifestyle brand is expected to open its doors in top cities and strategic destinations in the UK & Ireland. With 19 hotels open and in the pipeline in countries including Germany, Austria, Belgium and Switzerland, and plans to expand the portfolio with 45 new signings in the next five years, the brand remains a key growth driver for Radisson Hotel Group in the wider EMEA market.
prizeotel represents an exciting alternative to conventional hotel brands in the midscale segment for investors. As part of its new expansion strategy, Radisson Hotel Group offers flexible contractual solutions with lease, management and franchise agreements. The optimised design concept is suitable both for conversions of existing hotels and for new developments. A high degree of space efficiency (16m² guest room) and smart FF&E solutions enable construction costs to be achieved at economy level, with the cost for a new project at approximately £75,000 per room, including FF&E and OS&E. The operating concept is lean, so that GOP margins of over 50% can be achieved, depending on the market. As a result, prizeotel combines the revenue level of a midscale lifestyle hotel with the efficiency of the economy segment – a unique value proposition for hotel investors.
prizeotel
Adela Cristea, Vice President, Business Development UK & Ireland, Radisson Hotel Group, said: “Our UK & Ireland portfolio is going from strength to strength. The launch of prizeotel will mark the introduction of our eighth brand to the market. Travelers coming to the UK & Ireland are looking for tech-savvy and high-design properties and prizeotel will be the perfect fit for them.”
Amongst Radisson Hotel Group’s existing UK based brands is the upper upscale, and undoubtably fun, Radisson RED, which also has exciting additions in store for some of UK’s most popular cities. In the coming weeks, Radisson RED Liverpool is set to make a splash in the hotel space, taking over the historic North Western Hall connected to Liverpool Lime Street train station, seeing the Grade II listed building restored and revamped to fit the creative Radisson RED brand. The hotel will include historic features, such as a rediscovered secret doorway and a grand, sandstone staircase.
Radisson RED Liverpool
Not only situated in buzzing cities, Radisson RED also has presence at the UK’s busiest airport with Radisson RED London Heathrow, which is part of the UK’s first dual-branded property, with 258 Radisson RED guest rooms and 637 Radisson guest rooms. The hotel offers guests a restaurant, bar and leisure club as well as large events spaces with two multi-purpose conference centres and 41 meeting rooms. Each Radisson RED property incorporates local art, music and fashion within its design. The eye-catching entrance at London Heathrow includes a Mini Cooper car and iconic red phone boxes that serve as self-check in terminals as a nod to England’s capital, creating a memorable arrival.
Radisson Hotel Group’s core brand, Radisson Blu, has been named the largest upper-upscale brand for the past 11 years*. It has presence in leading European cities such as Frankfurt, Stockholm, Copenhagen, Barcelona and Nice, and in the UK in Edinburgh, Glasgow, Birmingham and Leeds to name a few. Recent additions to the UK portfolio include Radisson Blu Hotel, Perth, in Scotland, and Radisson Blu Hotel, Sheffield, set to open at the end of 2023. Housed within the striking Victorian architecture of Pinstone Street, the property is a key part of Sheffield’s city centre transformation.
To stay up to date with Radisson Hotel Group’s latest news, openings and exciting destinations, visit www.radissonhotels.com
The FTSE 100’s China-exposed stocks were big winners on Tuesday on reports the Chinese government would focus on ensuring the country’s older population would receive the COVID vaccine.
Chinese vaccine rates of the over 65s are way behind other major economies – a significant factor behind the ongoing COVID-zero policy. China is also using a different vaccine to western countries which has a lower efficacy.
However, widespread unrest in China’s largest cities over the weekend sparked a response from Chinese authorities and market participants are hopeful of a continued effort to reopen China’s economy.
“The FTSE 100 bounced back on Tuesday as the same oil and mining stocks which had driven the index lower yesterday recovered on hopes for an easing of China’s strict zero-Covid policy,” said AJ Bell investment director Russ Mould.
The FTSE 100 was 0.5% higher at 7,513 at the time writing. The index had briefly broken above 7,540 earlier in the session.
China-exposed stocks
Rio Tinto was 3.5% higher while Anglo American, Glencore and Antofagasta also gained on hopes of increased demand for natural resources.
Prudential was the FTSE 100’s top riser, gaining some 5%, as investors bought into the wealth manager which earns around a third of its profit from Hong Kong and Mainland China.
Burberry also gained on the prospect of China’s luxury consumers returning to their stores in greater numbers.
easyjet
easyJet was among the FTSE 100’s worse performers after the disruption of cancelled summer flights overshadowed a record 4th quarter. easyJet shares fell as analysts pointed to struggles with costs and expansion plans.
“EasyJet is struggling to compete on costs and fares with Wizz Airline and Ryanair. Our experts say that it’s proving difficult for EasyJet to expand in markets where there is already an abundance of capacity, such as Milian,” said Olly Anibaba, airlines analyst at Third Bridge.
“EasyJet is in a better position to compete with legacy carriers in capacity-constrained airports, thanks to its relative cost base. Easyjet’s strength remains in its aggressive cost-saving measures, including greater utilisation of aircrafts and more reliable on-time performance.”
