Alan Green joins the UK Investor Magazine Podcast for a discussion of the key factors driving markets and a selection of UK equities.
Global equities have surged as Ukraine-Russia negotiations provided a glimmer of hope there could be a ceasefire. Suggestions of stimulus in China also provided optimism in markets and we discuss whether this is short-lived spike or the start of a sustained period of lower volatility.
Barclays is set to benefit from higher interest rates promised by centrals banks this year. We make valuation comparisons with their banking peers and access their outlook.
Sovereign Metals has made an announcement relating to their Titanium Rutile project in Malawi and we look forward to a significant upgrade to their resources in 2022.
Smart Metering Systems yields 4.6% and the renewables-focused power solutions company has just posted a respectable set of results including a near 20% increase in underlying profit-before-tax.
The FTSE 100 climbed on Wednesday following a rally in Asian markets and hopes there would be a ceasefire in Ukraine.
Asian market strength included an impressive 9.1% jump in the Hang Seng index which translated to a strong start for European equites.
“After a big sell-off in Chinese stocks on Monday and Tuesday, Beijing has stepped in with pledges of support to try and stabilise markets,” said says Russ Mould, investment director at AJ Bell.
Ongoing negotiations between Ukraine and Russia also helped lift sentiment as investors positioned for a potential ceasefire.
“There are signs of optimism coming through on financial markets today with the FTSE 100 opening up 1.2% in early trade amid fresh signs a negotiated deal to end the conflict in Ukraine may be a step closer,” said Sophie Lund-Yates, Lead Equity Analyst at Hargreaves Lansdown.
Lund-Yates also highlighted optimism around inflation. The falling oil price may mean we have seen a top in a inflation.
“This comes hot on the heels of a rally in Asia and the US, where there are genuine hopes inflation may have peaked.”
Interest Rate Decisions
The markets are awaiting the U.S. Federal Reserve’s policy decision in which it is expected to raise rates on Wednesday.
Investors are flocking to financial stocks with the additional expectations the Bank of England will raise interest rates as a result of increasing inflation and the recent decrease in UK employment rate. Standard Chartered shares are up 2.3% to 493p while Lloyds and Barclays gained between 2.1% and 2.4%.
Scottish Mortgage Investment Trust saw its stock rise 7.6% to 944.9p as its holdings in Asian companies Tencent and Alibaba saw rebounds of 23% and 26% respectively.
Prudential rose 5.9% to 1,059.5p as its refocus on the Asian market in 2021 pulled its share price higher along with the rising Hang Seng index.
“In the UK, the FTSE 100 jumped 1.4%, led by companies exposed to Asia including Scottish Mortgage Investment Trust, Burberry and Prudential,” said Russ Mould.
Fallers
The top fallers were led by Avast with a decline of 11.5% to 570.1p after an $8.6 billion merger with NortonLifeLock was halted by an investigation by the Competition and Markets Authority (CMA).
“As the companies are close competitors, with few other significant rivals, the Competition and Markets Authority is concerned that, if completed, the proposed deal could lead to a reduction in competition in the UK market,” the CMA said in a statement.
The total mineral resource estimate (MRE) was 809.3 koz at 1.15 grams per tonne of gold.
With the drill programme, the gold miners are trying to enhance the MRE.
All deposits remain open at depth and along strike, allowing for significant expansion.
The results from the drilling will be released once the programme is completed. The expected date for completion for the drilling is Q2 2022.
Following the completion of all definitive feasibility study (DFS) field work in January 2022, work on the DFS is picking up pace, with the study scheduled to be finished in H1 2022.
Bert Monro, Chief Executive Officer, Cora Gold, commented, “We have multiple workstreams underway as we set our sights on delivering a definitive feasibility study in the coming months, alongside a resource expansion programme, which we believe will further enhance both the quantum and confidence levels of our MRE.”
“We have consistently demonstrated Sanankoro’s potential to become an open-pittable, free-digging oxide mine and work will accelerate throughout 2022 as we look to make this into reality.”
“We look forward to sharing updates from this drill programme over the coming weeks.”
Hammerson and joint-venture partner Canada Pension Plan Investment Board have completed the disposal of the shopping centre, Silverburn, near Glasgow.
Silverburn is a 100,000 m2 shopping centre near Glasgow which entered into escrow with a deposit of £40m in December 2021.
Hammerson is a property development and investment company, whose portfolio includes real estate from across the UK and some European cities such as Paris and Nice.
The sale of Silverburn to private equity real-estate managers Henderson and Eurofund, the operating partners in this acquisition, has been completed for £140m.
Hammerson shares were trading up 3.6% to 32.4p on Wednesday morning with the announcement of the successful disposal of Silverburn.
Centamin saw its share price dive 6.7% to 91.6p in early morning trading on Wednesday, after the mining firm reported a 12% decrease in revenue and a halved pre-tax profit in 2021.
The gold miner reported a revenue of $733 million in 2021, compared to $828 million in 2020.
The company announced a shocking pre-tax profit decrease to $153 million against $315 million in 2020, representing a 51% decline.
The gold mining company announced a final dividend of 5c per share, representing a $58 million payout for shareholders and a total shareholder distribution of $105 million over 2021.
The group produced 415,370 ounces of gold in 2021, an 8% decrease compared to 452,320 ounces in 2020.
The company noted a higher price per gold ounce at $866 against $719 in 2020.
“Delivery towards our strategic objectives was the standout achievement in 2021, placing Centamin in a much stronger position going forward and laying the foundations for long-term success,” said Centamin CEO Martin Horgan.
“We safely delivered annual production and cost guidance and made excellent progress on our key capital projects.”
“Balancing our growth plans with shareholder returns, today we announced a 5 US cent final dividend for 2021 and expressed our intention to pay a minimum 5 US cent 2022.”
The marketing company reported a 41% climb in revenue to £787.3 million compared to £560 million in 2020.
The firm noted a 672% increase in operating profit to £30.6 million against £3.9 million in 2020, alongside a 687% rise in pre-tax profit to £30.2 million compared to £3.8 million in 2020.
The 4imprint Group announced a total dividend per share of 33.8p for 2021, after declining to pay a dividend over 2020.
The firm attributed its strong financial report to trading recovery in 2021 after the dent in revenue from the Covid-19 pandemic in 2020.
The company highlighted its advantageous financial position of a $41.5 million cash balance with no debt.
The company further acquired 263,000 new customers over the year, compared to 173,000 in 2020.
“The recovery in the Group’s financial performance in 2021 has been very encouraging,” said 4imprint Group chairman Paul Moody.
“Most importantly, it was driven by decisions and actions fully aligned with the Group’s strategy, culture and focus on the sustainability of the longer-term health of the business.”
“Challenges continue with regard to the ongoing pandemic, supply chain disruption and inflationary pressures.”
“However, the Group has a clear strategy and is financially strong.”
“Trading results in the first few weeks of 2022 have been encouraging.”
New Energy One Acquisition Corporation is a cash shell seeking to acquire a business involved in the energy transition sector.
Conditional dealings commenced on 11 March, while unconditional dealings begin on 16 March. The £175m figure for the fundraising includes escrow account overfunding. The share price fell back to 992.5p in conditional dealings. That is still slightly above the post-flotation NAV when expenses are taken into account.
The company has 15 months to secure a business combination and if it does not then the ordinary shares will be redeemed. Wait for news of progress.
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Cash shell CYBA has acquired its first cyber security business Narf Industries, which is classed as a reverse takeover. The enlarged group will be able to roll out the company’s products.
The cyber security market is worth $173bn and estimated to be growing at 10% a year. the addressable part of the market is worth $26.4bn.
The money left after the cash part of the acquisition payment will be used for sales and marketing, IP and set aside for to help to fund potential acquisitions. CYBA floated last March, and the admission price was 1.5p a share. The placing price of 2p was above the m...
With geopolitical concerns and recovery from the pandemic, 2022 is already been an eventful year for FTSE 100 firms. The markets have reflected the impact of a series of event and as a consequence, the following are ranked as the top performers of the FTSE 100 from December 31, 2021.
Pearson +34%
Pearson, the education publisher, has seen rise of 34% since the beginning of 2022. The shares saw a sharp increase on March 11 to 766.6p with Pearson rejecting the bid offer from Apollo. Pearson shares have since continued the rally and are the FTSE 100’s top riser in 2022.
The group reported a £0.03bn increase in revenues in their latest financial reports while recording a loss of nearly £150mn pounds in pretax profits. However, the group announced a share-buyback program of £350m in 2022.
The forward P/E ratio is 19 which is lower than the trailing P/E of 22 pointing to a strong earnings outlook.
The dividend cover is 1.7 which shows that the company enough to pay the dividend yield of 2.7%, and even increase payouts.
BAE Systems +31.3%
BAE Systems has recently been making headlines with their acquisition of Bohemia Interactive to develop their military training simulation.
Investors are expecting the arms dealers will have a good year as a consequence of rising geopolitical tensions. In late February, the weapon makers reported revenue increase of £448m to £21.3bn with volume of orders exceeding expectations. The company also increased their dividends by 6%.
BAE Systems shares are up 31.3% since the beginning of this year. BAE Systems shares shot up on two major occasions which were the release of their annual reports and the acquisition of Bohemia.
The forward P/E ratio is 14.4, marginally below the FTSE 100 average 14.8. The dividend yield is 3.5%, covered 1.9x.
BAE Systems has a ROCE of 11.6.
Glencore +23%
Glencore, one of the world’s biggest commodity traders, has seen a 23% rise in share price since the start of 2022. The shares were trading at 461p on Tuesday afternoon.
With rising tensions between Russia and Ukraine, sanctions including the export of metals and energy, have driven commodity prices higher. As commodity prices rise, investors have flocked to mining shares making them some of the best performers of 2022.
The forward P/E ratio is 6.3 which is half that of the trailing P/E of 12. This means that the company’s market capital is not increasing as fast as the forecasted profits, resulting in a disconnect which may be attractive to investors.
The dividend yield is 4.1% and has a dividend coverage of 2 demonstrating the capability to finance their payouts to shareholders.
However Glencore’s ROCE is 16.8, the lowest of the FTSE 100 miners, suggesting their peers are more efficiently producing earnings.
Anglo American +20%
Anglo American shares have increased 20% over 2022 so far. The shares were trading at 3,655p on Tuesday afternoon.
Anglo American is another miner which is raking in the profits from rising commodity prices. Increase in prices of copper and platinum is also one of the many commodities facing volatility from the war in Ukraine and is likely to play into Anglo’s next earnings update.
The mining group also saw surge in their share price with the announcement of a dividend hike. EBITDA saw an 111% jump to $20.6bn in 2021 which was more than double that of 2020. The company announced a bumper dividend payout of $1.18 per share for final dividends amounting to $2.1bn.
The forward P/E ratio is to 8.1 compared to a trailing P/E ratio of 7.
The company’s dividend yield is 6% with 2.4 coverage with supporting a progressive dividend policy.
Anglo’s ROCE is 32, towards the upper end of mining sector’s average.
Shell +16.9%
Shell shares have shot up 16.9% since December 31, 2021 as the oil ban enforced on Russia resulted in upside pressure on oil prices, benefitting oil companies such as Shell.
The company’s ROCE is 8.6, below peer BP who has a ROCE of 10.3.
The forward P/E ratio is 6.3 and Shell yields 3.6% with a 2.3 cover.
The recent market volatility has seen several prominent FTSE 100 companies take a blow, with the Russian assault on Ukraine impacting Russian-based firms including Polymetal and Evraz in particular.
Coca-Cola, Scottish Mortgage Investments and JD Sports have been hit by supply chain disruption linked to war in Ukraine and the Covid-19 pandemic, alongside concerns that the rising cost of energy will take a sizeable chunk out of consumer spending budgets across 2022.
JD Sports -34%
JD Sports suffered a share price decrease of 34% since the beginning of 2022.
The increasing price of energy has seen concerns that consumers will spend less on non-essential retail purchases, as higher energy and fuel expenses eat into customer budgets.
The company was also fined £4.3 million for a violation of Competition and Markets Authority (CMA) rules, sharing confidential information in meetings concerning a merger with Footasylum in 2019 which the CMA was investigating in 2022.
The sporting goods company currently has a dividend yield of 0.2%. The retail group has a PE ratio of 22.6 and a forward PE ratio of 12.4.
Scottish Mortgage Investment Trust -34.3%
Scottish Mortgage Investment Trust shares have a decline of 34.3% in the early stages of 2022.
The trust has its holdings split between a selection of tech stocks, including Tesla, Tencent, Nvidia and Alibaba accounting of 23.3% of its portfolio.
China’s Covid-19 lockdown of tech production hub Shenzhen, combined with concerns China will provide assistance to Russia, has dragged tech companies, and Scottish Mortgages shares with them.
With persistently his inflation, the US Fed is scheduled to increase its interest rates on a number of occasion this year which has rocked the US tech sector so far in 2022.
The Scottish Mortgage Investment Trust currently yields 0.4%.
Coca-Cola HBC -37.2%
Coca-Cola HBC has seen its share price take a hit of 37.2% thus far in 2022.
The drinks producer’s stock fell after it withdrew from its Russian operations and shut down its Ukraine plant, which collectively accounted for 20% of the company’s 2021 production.
The shock to the company’s earnings outlook has caused the group’s shares to take a steep dive as investors prepare for the fallout in their next trading update.
Coca-Cola HBC yields of 3.3% which was 2.6x, as their last set of results. This will likely change if earnings are particularly heavily hit.
The FMCG giant has a current PE ratio of 12.3 and a forward PE ratio of 14.
Evraz -86.3%
Evraz has been severely impacted by the Russian war on Ukraine, with its shares tanking 86.3% since the start of 2022.
The company is scheduled for removal from the FTSE 100 on 21 March, due to the extreme destruction of its stock.
The company was paying a dividend but investors shouldn’t hold their breath waiting for another pay out.
Polymetal -90.1%
Polymetal is the worst performer on the FTSE 100 so far in 2022 as the Ukrainian conflict rocked the Russia-focused Gold miner.
The precious metals mining group has experienced an extreme share price dive of 90.1% since the start of 2022.
