Strong fundamentals supporting the Barratt share price

Liam Roche
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0
Strong fundamentals supporting the Barratt share price

Barratt Share Price

The Barratt share price is up by 1.05% on Monday after the homebuilder found some momentum during the second half of July. Despite a fall in June, the Barratt share price has performed well over the past 12 months, thanks to its strong fundamentals and a booming housing market. As the stamp duty holiday comes to an end, and with many expecting the housing boom to cool off, now is an ideal time to analyse the stock.

Rising House Prices

Government policies aimed at boosting demand for homes have helped push the sector to recover following the pandemic. UK house prices rose by 13% in June compared to the same month in 2020.

As seen by the above graph, the Barratt share price has reaped the benefits, with the average selling price of properties soaring.

For the year to June Barratt completed 17,243 homes, which was just shy of its figure for the same period in 2019, before the pandemic.

However, in July, the market cooled off somewhat, although house prices were still 10.5% higher than the same point a year ago. This might give some investors a moment of pause when considering betting on the Barratt share price over the longer-term.

Outlook

Barratt possesses some fundamentally good qualities as a stock. Firstly, it has a strong pipeline for the year to June 2022 of more than 14,000 homes sold at a value of £3.5bn. In addition, the FTSE 100 homebuilder is atop £1.3bn in net cash. This offers investors a level of stability and predictability that buyers of airline shares could only dream of.

Martin Beck, senior economic adviser at EY Item Club, told the Financial Times that “The odds of a significant correction in house prices anytime soon looks small”.

However, Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, countered Beck’s point: “house price growth has probably now peaked. The larger than expected slowdown probably marks the start of a sustained deceleration in house price growth between now and the end of the year.”

While the level of demand for homes and the ongoing price level remains up for debate, there will still be plenty to do for Barratt. This, in addition to the company’s strong fundamentals, bodes well for the Barratt share price.

China manufacturing slows in July to 15-month low amid weak exports

Liam Roche
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0
China manufacturing slows in July to 15-month low amid weak exports

The monthly purchasing managers’ index decreased to 50.3, down from 51.3 in June

China’s manufacturing growth eased in July to a 15-month low while demand for exports slowed down as factories struggled to cope with supply issues, according to the China General Manufacturing PMI.

The monthly purchasing managers’ index decreased to 50.3, down from 51.3 in June, with anything above 50 showing activity increasing.

Compared to other countries, China recovered speedily from the pandemic, however, manufacturers have struggled as they wait for supply chains to get back to the levels seen before the pandemic.

In addition, foreign export markets are struggling as new variants of Covid continue to keep their respective recoveries in check.

New export orders rose only slightly as the pandemic continued to hinder sales overseas.

”The Chinese economy has largely recovered from disruptions caused by the coronavirus pandemic, but it has faced new challenges in recent months such as higher raw material costs, which dragged on profit growth at industrial firms in June,” the report said.

Supply chain delays persisted in July, with average delivery times for inputs increasing solidly. Anecdotal evidence indicated that material shortages and transport delays due to the pandemic had driven the latest increase in lead times.

Capacity pressures eased at the start of the third quarter, with backlogs of work rising at the softest pace for five months. Employment levels meanwhile were little-changed in July, after a slight uptick in payroll numbers in June.

Commenting on the China General Manufacturing PMITM data, Dr. Wang Zhe, Senior Economist at Caixin Insight Group said:

“The Caixin China General Manufacturing PMI came in at 50.3 in July, down from 51.3 the previous month. The July reading was the lowest in 15 months, though it marked the 15th consecutive month of expansion. That meant while the manufacturing industry continued to grow, the rate of expansion slowed further.”

Zhe added that inflationary pressure eased slightly.

“Both the gauges for input prices and output prices fell in July, with the latter dropping at a steeper pace. Still, the gauge for input prices was well above 50, as surveyed enterprises said raw material prices remained high, especially for industrial metals. Notably, the gauge for input prices remained above 55 for the eighth consecutive month in July.”

Sandstone launches new REIT fund fuelled by property market growth

Liam Roche
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0
Sandstone launches new REIT fund fuelled by property market growth

Sandstone has achieved returns of 28% per annum, over the past 25 years

Sandstone, a UK-based private property investment company has launched the Sandstone Residential REIT, focused on traditional residential property across ten cities in the UK.

The trust will allow a host of entities, including family offices, fund managers and private clients with SIPPS to invest in the UK residential market in a ‘tax efficient way’.

Projected returns are expected to be in the region of 17%, as there is a maximum gearing of 50%.

The UK’s property market continues to offer highly attractive investment opportunities, growing at its fastest rate since 2007 in March.

Sandstone was founded in 1997 with the purpose of helping clients to build portfolios of residential properties, which are then rented to university students.

“The Sandstone REIT is a logical next step, for clients – existing and new,” the company said.

Performance

Sandstone produced a White Paper on its history and market segment, which demonstrates high and steady returns, driven by rising demand and constrained city centre or prime location supply.

The company has achieved returns of 28% per annum, over the past 25 years, based on 75% loan-to-value gearing.

The resilience of the student accommodation market and Sandstone’s experience during the pandemic bears this out: occupancy in the portfolio has been above 95%, and rental income rose by 12% in 2020.

In addition to its core services of property sourcing, renovation, furnishing and ongoing rental and management, clients also benefit from annual reviews, green upgrades, and bespoke reporting.   

The Sandstone Residential REIT will allow clients, old and new, to invest into a listed fund, “benefiting from the advantages of a booming rental market, capital gains, corporation tax efficiency as well as diversification of investment and liquidity”, the company said. Existing clients will also be able to move their properties into the REIT.

Peter Grant, founder and CEO of Sandstone Group said:

“Sandstone’s new REIT allows a whole new group of clients including Family Offices, Institutions and Charities to capitalise on high performing investments in the UK residential property market, in a hands-off way. It gives them the opportunity to move assets into a listed fund and benefit from the associated gains.”

“We are already seeing interest from client groups in the UK and Europe, as well as Singapore, Hong Kong and across Asia.”

“Private clients often have strong connections with the UK, whether it’s because of them, their children or grandchildren being educated here. The UK residential market has an incredible track record, combining low risk and high returns.”

“There are very few residential REITS in the UK, and our new Sandstone Residential REIT has been created with large institutional investors in mind.”

Meggitt agrees £6.3bn takeover by US tech company Parker-Hannifin

Liam Roche
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Meggitt agrees £6.3bn takeover by US tech company Parker-Hannifin

Meggitt shareholders will stand to earn 800p per share, a 71% premium on last week’s close

Meggitt, the British aerospace company, has agreed a takeover deal from Parker Hannifin, its American rival.

It is the latest in a string of approaches for UK-listed companies from buyers based overseas.

If the deal goes ahead, Meggitt shareholders will stand to earn 800p per share, amounting to a premium of 71% on last week’s close.

The board of the FTSE 250 engineering company has unanimously recommended that shareholders accept the 800p-per-share deal.

“Meggitt is one of the world’s foremost aerospace, defence and energy businesses, leading the market with a strong portfolio of technology and manufacturing capabilities, and holding a significant amount of intellectual property,” said the Meggitt chairman, Sir Nigel Rudd.

“While Meggitt is currently pursuing a strong, standalone strategy which will deliver value to shareholders over the long term, Parker’s offer provides the opportunity to significantly accelerate and de-risk those plans, while continuing to deliver for shareholders.”

The bid comes amid a flurry of bids for UK companies by US buyers, specifically in the defence sector.

Recently, the UK government has been keeping a close eye on Cobham’s private-equity backed takeover of Ultra Electronics.

In addition, Senior, the FTSE 250 aerospace and defence group, rejected an approach by Lone Star, the US investment firm.

Parker would nearly double its aerospace operation with the acquisition of Meggitt, the company that supplies the UK government.

Parker has made a series of legally binding pledges to the government to guard Meggitt’s operations.

Following the downturn caused by the pandemic, Meggitt was forced to cut 1,800 jobs as Covid-19 ravaged the travel sector.

The company has also confirmed that it swung to a profit for H1 2021 as it continued on its path to recovery.

The Meggitt share price is up by 56.85% on Monday to 735.80p, blowing past the previous record high of just under 700p.

Flurry of takeover activity causes lifts UK markets

Liam Roche
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0
Flurry of takeover activity causes lifts UK markets

The FTSE 100 is up by 0.98% to 7,100.99 during the morning session on Monday amid a new wave of takeover activity.

The FTSE 250 hit a new record high of 23,305 as its cohort of mid-cap stocks is seen to be better hunting ground for takeover targets than the large cap FTSE 100 index.

“Aerospace and defence components group Meggitt has become the latest target for an overseas buyer, and one pitched at a very generous 70.5% premium to last Friday’s closing market price,” says Russ Mould, investment director at AJ Bell.

The bid for Meggitt, together with well-received numbers from HSBC and rumours about a potential counterbid for Morrisons, helped to push up the FTSE 100.

“With a 6% gain, the top FTSE 100 riser was Melrose Industries on positive read-across from Meggitt given it also has interests in the aerospace and defence sector, having bought GKN in 2018. It would be interesting to see if this predator becomes prey, as Melrose has historically been the one doing the bidding,” Mould added.

Existing FTSE 250 bid target Sanne received an offer from private equity group Apex at 920p per share, having previously been subject to 830p, 850p and 875p per share offers from Cinven.

“We’ve seen quite a few private equity suitors having to raise their offers this year as companies and shareholders push back on initial approaches, saying they are too low. Private equity firms have a reputation for trying to get a bargain, but their tactics have been fully exposed this year and it now seems rare for the first offer to be the winning one.”

FTSE 100 Top Movers

Melrose Industries (6%), IAG (4.22%) and JD Sports (3.87%) are ahead of the rest a couple of hours into trading in August.

Trailing the UK’s top 100 companies at the back is Fresnillo (-1.91%), Pearson (-1.23%) and Smith and Nephew (-0.89%).

88 Energy announces Philip Byrne as new chairman

Liam Roche
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0
88 Energy announces Philip Byrne as new chairman

Byrne is a petroleum geologist with over 40 years’ experience in the industry

88 Energy (AIM:88E) announced on Monday that Philip Byrne has been appointed as Non-Executive Chairman and to the board of the oil exploration company.

Byrne will replace Michael Evans, who retired after seven years in the role.

The new 88 Energy Non-Executive Chairman, Phil Byrne, commented: “I am delighted to be joining the 88 Energy team at this exciting time. The Company’s suite of world-class acreage on the North Slope of Alaska offers huge potential for shareholder value in my eyes. I look forward to assisting the management team in the drive to unlock this value through our appraisal and exploration activities over coming seasons.”

Byrne is a petroleum geologist with over 40 years’ experience in the international oil and gas industry.

The AIM-listed company made two additional appointments in order to boost the management team. Robert Benkovic has been hired as 88 Energy’s new new chief operating officer, while Joanne Kendrick is a new-non-executive director.

Benkovic is a petroleum engineer and subsurface manager with almost 25 years’ experience across the oil and gas industry. Previous industry roles he has held include Group Manager, Reservoir Engineering at Inpex Corp, Kharaib Section Head at Maersk Oil, Reservoir Engineering Expert and Senior Reservoir Engineer at Apache Corp, Senior Petroleum Engineer at Schlumberger and Petroleum Engineer at Origin Energy.

While Kendrick is currently a Non-Executive Director of Buru Energy Limited and Sacgasco Limited and has previously held Board and senior management positions with various international oil and gas companies including more recently as Managing Director and CEO of Blue Star Helium.

The 88 Energy share price is up by 7.19% during the morning session on Monday.

HSBC profit soars on recovery from pandemic

Liam Roche
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0
HSBC profit soars on recovery from pandemic

HSBC’s pre-tax profit reaches $10.8bn (£7.8bn)

HSBC confirmed on Monday its decision to pay an interim dividend after its pre-tax profit surged to $5.1bn during Q2.

The FTSE 100 bank continued to cancel provisions made in order to cover credit losses during the pandemic as it saw an improvement in the economic outlook.

HSBC’s profit before tax for H1 rose to $10.8bn (£7.8bn), up from $4.3bn year-on-year.

The bank confirmed it had been profitable across all regions during the period.

Noel Quinn, Group Chief Executive, said: “These are good results that reflect the return of growth in our main markets and marked progress in the execution of our strategy. We were profitable in every region in the first half of the year, supported by the release of expected credit loss provisions.”

“Our lending pipeline began to translate into business growth in the second quarter and we further strengthened that pipeline during the half. This performance enables us to pay an interim dividend for the first six months of 2021.”

“I’m pleased with the momentum generated around our growth and transformation plans, with good delivery against all four pillars of our strategy. In particular, we have taken firm steps to define the future of our US and continental Europe businesses, and further enhanced our global Wealth capabilities.”

HSBC reinstated its dividend payout following the economic recovery in two of its key markets, Britain and Hong Kong.

The bank will pay an interim dividend of $0.07 per share after the Bank of England gave a green light to do so last month.

HSBC cancelled an additional $300m of provisions made for bad debts during the pandemic in Q2. Over the course of the year, HSBC cancelled $700m of reserves. This means the total of its increase reserves now stands at $2.4bn.

The HSBC share price (LON:HSBA) is up by 1.57% during the morning session on Monday.

New AIM admission: Big Technologies goes to huge premium

Andrew Hore
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0
New AIM admission: Big Technologies goes to huge premium

Big Technologies has developed remote monitoring technology which is mainly used in the criminal justice sector and is sold on a subscription basis. This means that it has recurring revenues and contract wins are enabling it to grow rapidly. Big Technologies has never permanently lost a customer.
One of the attractions is the high gross margins of the business, although they have declined in the short-term as the company gears up for further growth. Even so, pre-tax profit is still growing faster than revenues. Like-for-like revenues grew by 60% in the first quarter.
In three days of trading t...

New standard listing: Spinnaker Acqusitions targets sustainable acquisition

Andrew Hore
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0
New standard listing: Spinnaker Acqusitions targets sustainable acquisition

Spinnaker Acquisitions is a shell that has been brought to the market by the same team that floated Spinnaker Opportunities, which eventually acquired cannabis products supplier Kanabo (LON: KNB).
Spinnaker Acquisitions is seeking to use shares to acquire a business in the sustainability and energy transition services markets. The existing board would not run the business being acquired but it would offer advice and direction. The first acquisition would provide a base for further purchases. The valuation of the initial acquired business is likely to be between £5m and £30m.
The share price ha...

Deliveroo announces plans to pull out of Spain

Liam Roche
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0
Deliveroo announces plans to pull out of Spain

Spain accounted for fewer than 2% of Deliveroo’s overall sales in H1 2021

Deliveroo (LON:ROO) is weighing up the possibility of ceasing its services in Spain because of the high costs involved in operating in the country.

The food delivery company added on Friday that it may seek to focus its resources on other markets by expanding into new locations.

“The company has determined that achieving and sustaining a top-tier market position in Spain would require a disproportionate level of investment with highly uncertain long-term potential returns,” Deliveroo said in a statement.

A spokesperson for Deliveroo specifically said that Spain’s employment rights law was not the reason, although it was confirmed that it did contribute to the earlier than initially expected withdrawal.

Back in March the Spanish government revealed its intention to give employment rights to workers food delivery companies and similar platforms in what was a landmark ruling.

According to Deliveroo, Spain accounted for fewer than 2% of its overall sales in H1 2021.

The Deliveroo share price is up by 2.77% on Friday following the announcement.

The London-listed food delivery company operates in 12 markets across Europe, as well as Hong Kong, with around 50% of its revenue coming from the UK and Ireland.

The Deliveroo share price surged towards the end of June as a UK court ruled that the people who deliver the food on bikes are self-employed. The ruling was passed by three judges who came to a unanimous agreement.

“Concern about the company’s reliance on the gig economy model was one of the factors which contributed to its disastrous IPO in March,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

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