MTI Wireless pulls out of Russia

Andrew Hore
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MTI Wireless pulls out of Russia

MTI Wireless Edge (LON: MWE) is ending its operations in Russia and that will hold back growth this year. MTI Wireless had been winning electronic components distribution business in Russia and it already has a prepayment for an order. Despite this problem, profit could still improve this year.
Elsewhere, prospects are good thanks to 5G infrastructure investment and the need to conserve water.  
In 2021, revenues increased 6% to $43.2m, while higher transport costs and exchange rate movements meant that pre-tax profit was flat at $4.04m. Russia accounts for 6% of revenues and 5% of profit...

Sainsbury’s shares offer better value than Tesco

Anshula Kumar
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Sainsbury’s shares offer better value than Tesco

Sainsbury shares may be the pick of the FTSE 100’s two supermarkets with a notably better dividend yield and attractive multiples.

Supermarkets experienced a mixed pandemic with sales jumping as consumers chose higher priced goods due to lockdowns, but the retailers also faced a squeeze on margins as a result of higher costs.

In the key Christmas trading period, Sainsbury’s sales saw an increase of 2.4% as the company saw the benefits of their pricing strategy and a surge in online sales.

Simon Roberts, CEO, J Sainsbury said, “”I am really pleased with how we delivered for customers this Christmas. More people ate at home and our significant investment in value, innovation and service led to market share growth. At the same time, we are pleased to increase profit guidance for the full year.”

The strong festive period results saw the Sainsbury share price increase. Despite a strong start to the year, their shares have since tumbled and are now trading 10% year-to-date.

This will be catching the eye of investors that follow supermarkets due to their reliable cash flows and relative stability when compared to other sectors.

However, just a consumers will weigh up the value of Sainsbury’s products against competitors, investors will make comparisons between the supermarkets for relative value of their shares.

Following the takeover of Morrisons by a US group, Sainsbury’s and Tesco are the only two supermarkets listed in the FTSE 100.

When a comparison of these two groups are made, Sainsbury’s provides better value than Tesco on a number of key valuation metrics.

Earnings Multiples

Sainsbury’s currently has forward PE Ratio of 10.8 compared to Tesco’s 12.8.

The trailing PE also reflects better value in Sainsbury’s shares with a PE of 21.8 and Tesco’s 23.1.

These are of course small differences, but there is a notable opportunity for Sainsbury’s valuation to move back inline with it’s peer. If Sainsbury’s was to move in line with Tesco it would suggest roughly 20% upside in shares.

Sainsbury’s Dividend

Income investors will also see the attractiveness in Sainsbury’s dividend which is currently providing a yield of 4.3% compared to Tesco’s 3.6%.

Given Sainsbury’s dividend policy is to pay dividends covered by full year underlying earnings or at 1.9 cover, this doesn’t look under threat and has room for an increase in the coming year.

Having paid a 7.40p full year dividend in 2021, one would expect this to increase incrementally as they recover from the pandemic. There should, however, be a note of caution around the impact of inflation and rising prices, whilst Sainsbury’s fight for increased market share.

IP Group smashes records with Microbiotica fundraiser

Natasha Doris
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IP Group smashes records with Microbiotica fundraiser

The IP Group has completed its £50 million series B fundraiser for Microbiotica, a microbiome-based therapeutics and biomarkers company in the Group’s portfolio.

Microbiotica was founded in 2016 at the Sanger Institute, with a company mission to explore the medical applications of the microbiome for human disease treatment and therapy.

The IP Group contributed £4 million to the funding.

The company currently holds an undiluted beneficial holding of 18.2% in Microbiotica at a value of £16.1 million.

The IP Group further holds a recorded net unrealised fair value gain of £2.2 million.

The financial injection was the largest microbiome-related fundraiser in Europe on record.

The funds have been allocated to the progression of Microbiotica’s two lead oral Live Bacterial Therapeutics (LBTs), MB097 and MB310, to the first phase of clinical studies.

The financing will further allow the company to expand its discovery pipeline of biomarkers and LBTs in unexplored disease categories.

“The company’s pre-clinical data suggest that, so far, our thesis is proving correct, and we are delighted that the company’s esteemed new investors are joining us for the next leg of this exciting journey,” said Managing Partner of Life Sciences at IP Group Dr Sam Williams. 

“As a founding investor in Microbiotica, our thesis was that, by culturing, characterising and stratifying the human microbiome, Microbiotica would be able to identify live biotherapeutics with the greatest chance of clinical success in the microbiome field.”

The Group highlighted the contributions of additional investors to the series B fundraiser, including new investors Flerie Invest, Tencent and British Patient Capital.

The contributors joined existing investors IP Group, Cambridge Innovation Capital and Seventure Partners.

IP Group has a portfolio of investments in startups that have a strong level of intellectual property and close links to universities, including the London-listed Actual Experience, Abington Health, DeepMatter Group and Itaconix.

The IP Group’s share price rose 0.2% to 80.5p in Monday early afternoon trading.

Audioboom expands Showcase with New Zealand strategic partnership

Anshula Kumar
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Audioboom expands Showcase with New Zealand strategic partnership

Audioboom expands into the New Zealand digital media scene with Showcase, their ad-tech platform.

Audioboom is global leading podcast company, which make podcasts available and profitable for podcasters, advertisers and brands.

With the combination of technical assistance, product knowledge and ad sales expertise, Audioboom is able to deliver a user-friendly and cost effective product.

Showcase, launched in 2021, is a global marketplace for tech-enabled advertising created by Audioboom. With the use of Showcase, brands can execute their campaigns effectively with dynamic ad insertions and self-serve portals. Showcase also provides a platform for buyers and sellers to connect and advertise at large levels.

Showcase brought in more over $1m in sales for Audioboom in 2021. The group plans to make over 3bn ad exposures available to Showcase buyers by 2022. Audioboom now plans to expand Showcase into New Zealand with a strategic partnership with New Zealand Media and Entertainment (NZME.)

NZME is New Zealand’s top radio and digital media company. Publishing, radio, digital and events are NZME’s different segments of business.

In their position as Audioboom’s exclusive advertising representative for New Zealand based companies and purchasers, NZME will monetize Audioboom’s 8,000 content channels in Showcase.

According to Triton Digital’s regional podcast ranker, Audioboom is New Zealand’s third largest podcast publisher, with over 900k monthly downloads and 300k individual listeners. This collaboration will enable effective commercialisation of Audioboom’s content in New Zealand, which is the company’s sixth largest market for podcast consumption.

This strategic move demonstrates Audioboom’s continuous global expansion as well as brands’ growing desire for personalised advertising solutions.

Stuart Last, Chief Executive Officer, Audioboom commented, “NZME provide the expertise to further maximise the value of content for our creators, while supporting our goals of efficient global expansion. New Zealand is an important territory for us, and I am excited to create new opportunities for brands to work with our creative talent and high-quality shows.”

Although further expansion of Showcase will be music to the ear’s of Audioboom’s shareholders, Audioboom shares fell nearly 5% to 1,715p on Monday afternoon as geopolitical problems hit markets.

FTSE 100 whipsaws as Russian oil embargo fears rock markets

UK Investor Magazine
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FTSE 100 whipsaws as Russian oil embargo fears rock markets

The FTSE 100 was down as much as 200 points in Monday trade as Russia’s conflict against Ukraine continued to rock the global economy with the prospect of a Russia oil embargo.

However, a recovery later in the session so the index go positive as commodity companies rallied.

The price of commodities surged, with the price of oil jumping as a potential ban on Russian oil exports boost fears of a scarcity.

Brent Crude has jumped past expectations to $128.7 per barrel on Monday, beforte settling to a price of $125. WTI Crude is currently at a price of $123.2 per barrel.

“So far there have been no country-level sanctions on Russian commodity products, merely the decision of various customers not to buy,” said AJ Bell investment director Russ Mould.

“It seems we could be moving to the next stage whereby countries lay down rules to not buy oil and other commodities from Russia which in turn would reduce its funding for the war.”

FTSE 100 oil majors BP and Shell rallied on higher oil prices with BP gaining 3% and Shell surging 7%.

However, Mould highlighted the consequences for wider economy as rising prices added to inflation that was already hurting house holding spending and company squeezing margins.

“This further surge in fuel costs will intensify the inflationary pressures already causing problems for consumers and businesses.”

UK banks

The impact of the Russia-Ukraine conflict was particularly evident in the financial sector as the prospect of higher fuel prices caused concerns around lending activities, resulting in heavy selloffs of UK bank shares. Natwest shares were down 5.4% to 191p and Lloyd’s shares fell 6.5% to 40.5p.

“Banking stocks have also been beaten down amid concerns the lending and investment business could trigger a broader slowdown which will limit consumer spending and corporate borrowing,” said Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown.

“The move by Visa, MasterCard and Amex to stop transactions is likely to be adding to negative sentiment.”

Evraz and Polymetal

The top risers included Evraz rising 47.1% to 88.1p, Polymetal International rising 29.75% to 223.3p and BAE Systems rising 6.45% to 736p at the time of writing.

Evraz and Polymetal have seen intensive market volatility since the start of the Ukraine crisis, with financial sanctions against Putin’s regime crippling the businesses.

“Russian companies trading on the London Stock Exchange continue to lose board members at pace as directors realise the optics of being linked to these businesses are toxic,” said an analyst at AJ Bell.

“However, it will make any future rehabilitation for these stocks, which already looked unlikely, even more difficult.”

Despite a highly uncertain outlook for Evraz, the plummeting prices have seen bargain hunters swoop in to buy the beaten up stock.

BAE Systems

BAE Systems continued to profit from increased demand in its services, as the arms contractor saw a spike in interest as a direct result of Russia’s war in Ukraine spurring on demand in company’s stock.

CCHBC

Coca-Cola HBC shares continue to fall this week, with a 7% drop to 1464p today. CCHBC is facing the brunt of the geopolitical situation with halted productions of their beverages. At the same time, with large portions of revenue contribution coming from emerging markets, the current situation in Russia and Ukraine is denting investor confidence in CCHBC.

Travel shares

The rippling impact of the oil prices are expected to inflate travel costs for consumers in the near future. As result, investors are departing airline shares with IAG trading down 7.8% to 113p on Monday morning.

“British Airways owner, International Consolidated Airlines Group has flown into severe turbulence today with shares down by nearly 10% in early trade, as investors fretted about mounting fuel costs and the loss of confidence among the travelling public,” said Susannah Streeter.

Halifax says UK housing prices hit new record high of £278,123

Anshula Kumar
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Halifax says UK housing prices hit new record high of £278,123

In Halifax’s latest housing price analysis, a record high price of £278,123 in housing prices was established, with a rise of 10.8% over the past year, the fastest annual pace since 2007.

Dating back to January 1983, Halifax House Price Index has been providing data regarding the monthly house price series for the entire UK. A standardised house price is constructed using the statistics, and property price fluctuations on a like-for-like basis including adjustments based on season are examined through that period. The percentage change amount for the year is equated by comparing the same month over the current year to the previous year with the exception of seasonal adjustments.

Month on month growth rose to 0.5%, despite a deceleration at the beginning of the year. As a result, the annual growth rate was 10.8%, the highest level since the annual growth rate of 11.9% in June 2007.

Walid Koudmani, Chief Market Analyst, at financial brokerage XTB comments, “house prices rose at the fastest annual pace since 2007 and reached a new record high according to today’s Halifax HPI report with monthly house price growth rising to +0.5% following a slower start to the year.”

“While the annual rate of growth increased by +10.8% and reached the strongest level since June 2007, the impact on household finances is still expected to weigh on the market this year as rising inflation and increased costs could undermine the post pandemic economic recovery and slow down the housing market significantly as demand becomes severely impacted.”

With the housing prices reaching an average of £278,123 as a result of deficits in supply, and consumers tightening their belts, there are expectations of a slump in the market in the coming year.

Current geopolitical scenarios are impacting oil and gas prices, which will have an impact on inflation in the UK, which is already at a 30 year peak. Along with that, increased bank rates expected in the near future, will also have an impact on the market.

Performance by Region

Amongst the strong performers in the UK, the Welsh region stood out yet again with average property price rising by 13.8% to £207,184. In the southwest of England, growth in housing prices saw a 13.4% increase with the average house price of £293,968. This region also had the strongest quarter growth of 3.5%. Both of these regions have access to more picturesque sites, which gained popularity with buyers during the pandemic in a ‘race for space’.

Norther Ireland saw a 13.1% growth in price to average housing prices of £173,911 in February.

Amongst the weaker regions, Scotland and London both saw a growth of 9.2% and 5.4% respectively. In February, the average property price in Scotland was £193,777.

Russell Galley, Managing Director, Halifax, said, “this was an eighth successive month of house price growth, as the resilience which has typified the market throughout the pandemic shows little sign of easing.”

“Two years on from the start of the pandemic, average property values have now risen by £38,709 (+16%) since February 2020. Over the last 12 months alone house prices have gained on average £27,215. This is the biggest one-year cash rise recorded in over 39 years of index history.”

“Lack of supply continues to underpin rising house prices, with recent industry surveys showing a dearth of new properties being listed, now a long-term trend. This may be a particular issue at the larger end of the property market. Over the past year the average price of detached properties (£43,251, +11%) have risen at a rate more than four times that of flats (£10,462, +7%) in cash terms.”

Housing Activity

Increased sales in UK homes according to HMRC monthly property transactions data, from 101,840 in December 2021 to 106,990 in January 2022 on a seasonally adjusted (SA) basis. Although a 9.9% decrease was seen in the quarterly SA transactions from the August 2021-October 2021 to the November 2021-January 2022 period. Overall decrease of 10.6% in SA transactions from January 2021 to 2022.

Mortgage approvals rose by 4% to 73,992 in January 2022 according to the latest Bank of England numbers. However, on a YoY basis, January 2022 numbers were down 23%.

According to the RICS Residential Market Survey, an consecutive increase in new buyers was observed, with a net balance of 16%. New instructions declined by 8%.

Polymetal and Evraz announce board changes as Russia sanctions cripple operations

Natasha Doris
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1
Polymetal and Evraz announce board changes as Russia sanctions cripple operations

Polymetal and Evraz have announced changes to their boards today as sanctions against Russia continue to cripple company operations in the country.

Polymetal saw its share price rise 38% to 235.2p and Evraz saw its share price rise 52.6% to 91.5p as bargain hunters continued to jump on the sinking ship in the hopes of a rebound in the historically well-performing stocks.

Polymetal announced that chairperson Ian Cockerill, alongside Ollie Oliveira, Tracey Kerr, and Italia Boninelli have stepped down from the board of directors.

Victor Flores and Andrea Abt have also stepped down from Polymetal’s board with immediate effect.

The remaining directors at the company include CEO Vitaly Nesis, Konstanin Yanakov and Giacomo Baizini.

Evraz announced that Sandra Stash was stepping down as a non-executive director at the company with immediate effect on 4 March.

The mining company added that Maria Gordon had become a member of the company’s nominations committee with immediate effect.

Analysts at AJ Bell commented that the mass exodos of directors from Russian companies was inevitable, and the crippling sanctions against Russia has essentially seen the stock in those companies hit the point of no return.

“Russian companies trading on the London Stock Exchange continue to lose board members at pace as directors realise the optics of being linked to these businesses are toxic. Polymetal saw six of its board members resign and another director has quit Evraz,” said an AJ Bell analyst.

“As soon as the Institute of Directors, hardly an organisation known for its radicalism, pushed for Britons involved to take the jump this mass exodus was almost an inevitability.”

“However, it will make any future rehabilitation for these stocks, which already looked unlikely, even more difficult.”

Clarkson swings back to profit on shipping activity recovery

Anshula Kumar
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Clarkson swings back to profit on shipping activity recovery

Clarkson, the shipbroking company, recorded a pre-tax profit of £69.1m in 2021, as opposed to the loss of £16.4m in 2020.

Clarkson shares rose 7.2% to 3,340p on Monday morning as result of the shipping services company bouncing back from their losses as a result of recovery from the pandemic.

Revenues grew by 23% to £443.3m in 2021. Underlying profits before tax also saw a 55% increase with £69.4m in 2021. Growth in all segments contributed to these positive numbers, with strong performances in the group’s broking and financial division.

Laurence Hollingworth, Chair, Clarkson said, “In 2022, we expect the favourable supply/demand dynamics to continue.”

“The supply of new ships continues to be affected by the structural reduction in shipbuilding capacity compared to 2008 whilst the economic recovery from the COVID-19-induced pandemic has strengthened the demand side. We have a very strong forward order book and the outlook for freight rates remains positive.”

The broking division gained from the company’s longer-term plan to expand its global presence in the shipping and offshore segment in the past few years. With reduced ship supply, freight rates had scope to strengthen. The broking segment increased profits from £55.4m in 2020 to £73.6m in 2021, and increased margins to 21.6%.

The financial segment saw a 432% increase in profits, with £2.5m in 2020 to £13.3m in 2021. The margins in 2021 grew to 23.8% as a result of active capital markets.

Andi Case, Chief Executive Officer, Clarkson said, “our record 2021 results are testament to the strategy which we have followed and communicated to stakeholders over recent years.”

“It is with great pride that I reflect on the strength of our people in all sectors, roles and geographies, together comprising the best team in the world of shipping, offshore and renewables.”

“We are positive about the future of the shipping industry. The outlook for Clarksons remains strong and we believe the business will continue to benefit from its market-leading position.”

The dividend for the group has seen growth for 19 consecutive years. The proposed final dividend has increased by 3p to 57p in 2021, totalling 84p for the full year. With a share price 3,362p, Clarkson has a historical yield of 2.4%

HgCapital Trust results boast 44% NAV increase

Natasha Doris
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HgCapital Trust results boast 44% NAV increase

HgCapital Trust saw its share price drop 5% to 360p in early Monday morning trade, despite the trust reporting an increase in NAV per share to a record of $4.40 and nets assets over £2 billion in 2021.

HgCapital Trust also reported a proposed final dividend of 5p per share and a full year dividend of 7p.

The company noted a revenue growth of 27% and EBITA growth of 30% across its top 20 portfolio investments over the last year.

HgCapital added that its “defensive growth characteristics” of its portfolio would help it to maintain profitability despite the challenges of the Covid-19 pandemic in 2022.

The company is set tot invest in trends in the digitialisation of the business process across its sectors and territories.

HgCapital Trust focuses on businesses that provide services such as insurance, payroll technology and HR solutions. The portfolio includes companies such as Access, Visma and IRIS.

The trust will stay focused on the sale of “business-critical and non-discretionary software and services” for their underlying business customers, as a means to hit highly predictable levels of recurring revenue.

“As I noted in my last review, HGT and its portfolio have coped well with the challenges presented by the COVID-19 pandemic,” said CEO Jim Strang.

“The defensive nature of the businesses within the portfolio and the operational skill of Hg have both contributed to the success of HGT in weathering this challenging period.”

“I am happy to report that our full-year results continue to see the portfolio delivering strong growth and excellent returns.”

Brit Limited bounces back with $247.1 million profit

Natasha Doris
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Brit Limited bounces back with $247.1 million profit

Brit Limited, part of the Fairfax group, enjoyed strong financial results in its 2021 on strong underwriting peformance.

The company reported a profit on ordinary activities before tax of $247.1 million against a pre-tax loss of $235.5 million in 2020.

Brit Limited further reported gross written premiums of $3,238.8 million against $2,424,2 million in 2020.

The company noted adjusted net tangible assets of $1,740.6 million against $1,436.8 million in 2020.

The firm also reported a capital surplus increase of 81.2% to $617.9 million against $341 million in 2020.

Fairfax owns 86.20% of Brit Limited.

“I am pleased to report a positive 2021 for Brit, with our underwriting performance and investment return delivering a strong overall result,” said interim group CEO Martin Thompson.

“Our clear strategy saw us deliver a combined ratio for the year of 95.7%. This reflected the combination of an excellent attritional ratio, prior year reserve releases and increased income from our third party capital management and MGA businesses.” 

“That we delivered this performance despite exposure to a number of major loss events and the continued impact of COVID-19 was particularly encouraging, demonstrating the increased resilience of our business and our firm focus on disciplined underwriting.”

“As well as delivering a good underwriting result, we grew our written premium by 31.8% to $3,238.3m.”

“This reflects strong, targeted growth in our core direct and reinsurance books, and a very successful first year of trading for Ki.”

Thompson added optimism for the company’s 2022 growth potential.

“Looking ahead to 2022, while uncertainty remains around COVID-19, rising inflation and the potential of increased frequency and severity of major loss events, we remain optimistic.” 

“Ongoing rate rises, continued improvement in our attritional claims ratio and our clear strategy give us confidence that Brit is well placed to respond to the opportunities and challenges ahead.”

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