IAG share price: good value if air travel returns to normal

Liam Roche
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IAG share price: good value if air travel returns to normal

The coronavirus pandemic devastated not only International Consolidated Airlines (IAG) (LON:IAG), but the airline sector more generally. Heathrow confirmed a £2bn loss during 2020 as passenger numbers dropped to the airport’s lowest level since the 1970s. However, while the way back for the aviation is not imminent, there is now a roadmap which could tempt investors to look closely at IAG. The Prime Minister has ruled out non-essential travel until May 17, although there will be a review on April 12 on how to safely restart travel ahead of summer.

Good value?

British Airways owner IAG stomached a €7.4bn loss in 2020, a €10bn swing from the year before. “Our results reflect the serious impact that Covid-19 has had on our business,” said Luis Gallego, the chief executive of IAG. As a result, the airline’s share price is down to 191.95p, from 351.31p 12 months ago.

While other industries have experienced rallies as the vaccine roll-out picks up momentum, the aviation sector is being left alone by investors, while question marks remain over the future. On the assumption that travel returns to its normal levels during the summer, IAG shares could represent excellent value. Analysts at UBS Group have issued a 215p price target to its clients on Friday, as well as assigning the stock a “buy” rating. The price target is 12% above the stock’s current price.

Will flying return to pre-pandemic levels?

Airlines reported an influx of holiday bookings following the Prime Minister announcing a roadmap out of lockdown. The demand is there, according to chief executive of easyJet, John Lundgren: “We have consistently seen that there is pent-up demand for travel and this surge in bookings shows the signal from the government that it plans to reopen travel has been what UK consumers have been waiting for.”

However, the sector will need more than demand from consumers to secure its future. A question mark remains over the long-term effects of Covid-19, even once most people have received a vaccine jab. If the disease lingers then international travel could be restricted beyond May 17

“The challenge is to find a way to live with it without keeping huge restrictions in place,” says Azra Ghani, professor of infectious disease epidemiology at Imperial College London.

GRIT Real Estate Income Group: exposure to Africa’s rapid growth

Liam Roche
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GRIT Real Estate Income Group: exposure to Africa’s rapid growth

GRIT Real Estate Income Group is a leading pan-African property investment company with an actively managed and diversified portfolio of assets worth $849.2m.

There are three key aspects to GRIT’s business model. Firstly, the company’s client base consists of high-quality blue-chip multinationals which means its agreements are backed by guarantees. Secondly, GRIT’s revenues are denominated mostly (93%) in the US dollar or the euro, allowing the company to protect itself from currency risk. Finally, GRIT is diversified across the continent of Africa.

Why Africa?

With many of the world’s youngest populations, Africa is poised for growth both in the coming year and for decades to come. Following the pandemic, regional growth is forecasted at 3.4% in 2021. By 2030, 40% of Africans will be middle-upper class, while 50% of the continent will be urbanised. 

Strong population growth, a growing middle-class and increasing economic growth are trends that suggest Africa will be able to deliver strong and sustainable income, in addition to potential for income and capital growth for investors.

Diversification

GRIT’s holdings are well diversified across Africa and by sector. The countries where GRIT has its largest investments are Mozambique (39.3%), Mauritius (23.4%), Zambia (9.9%) and Morocco (8.7%). Office space (27.7%), retail (24.7%), hospitality (22.9%) and corporate accommodation (15.5%) are among the top revenue generating industries for GRIT. Out of a host of multinational tenants, Beachcomber (11.8%), Total (9.9%) and Vale (9.8%) are GRIT’s top three income generating clients.

Retail

At the recent UK Investor Magazine conference, Bronwyn Corbett, CEO of GRIT Real Estate Income Group, outlined the company’s decision to change its retail weighting based on trends that emerged prior to the pandemic.

Highlighting the changing shape of consumption in Africa and how GRIT are harnessing the opportunity, Corbett outlined recent projects adapted to the needs of the African consumer.

“The retail in Africa that we believe in is convenience shopping. We’ve got malls in Zambia that have brought a 12,000 sqm space to 4.5m people in an area where people previously had to walk for 6 hours to shop,” Corbett said.

Performance

GRIT controlled its costs throughout the pandemic in order to offset the impact on revenue. This leaves the company well positioned to rebound once the impact of Covid-19 falls away. 

The company’s profit rose by 19.7% to $12.9m in 2020, while gross rental income fell by 0.1% to $31.6m. GRIT’s assets performed well during 2020 with the total income produced rising by 3.1% to $849.2m. GRIT’s EPRA NAV per share rose by 6.3% to 124.4 cents per share, suggesting an undervaluation by the stock market.  

GRIT’s board suspended its dividend payout for the second half of 2020 to protect the company during the pandemic. However, the property firm has proposed a resumption of its dividend of 1.5 cents per share in 2021 due to its LTV reduction and strong rent collections.

Outlook

GRIT has three developments underway in Mauritius and Kenya, each with yields above 10%. The company also has two redevelopments being processed in Mozambique and Senegal with target closing dates before the end of 2021. 

The group had an LTV of 50.2% in 2020, which is expected to fall to 49.3% in 2021, and remains a focus for GRIT.

Chinese consumer trends: the online ecosystem and growing luxury demand

UK Investor Magazine
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Chinese consumer trends: the online ecosystem and growing luxury demand

Sandrine Zerbib, founder of Chinese online consumer platform Full Jet, joins the UK Investor Magazine Podcast to discuss key Chinese consumer trends and the evolution of the luxury market.

We look at the strength of the Chinese consumer after a recent report by Morgan Stanley that pointed to consumption in China doubling to $12.7 trillion in 2030.

Sandrine provides detailed insight on the Chinese online consumer markets and explains the ecosystem and key platforms used by brands to distribute their products. There are significant differences between the West’s leading online platforms such as Amazon, eBay, Facebook and YouTube, and those driving online consumption in China.

We pay particular attention to the luxury markets and how they have developed in recent years. For example, Burberry has enjoyed years of growth in China. With an innovative engaging model, Burberry are still seeing strong growth figures that has been helped by consumers spending their cash domestically as coronavirus restrictions prevents them spending abroad.

Bitcoin plummets as Bill Gates wades into the debate

Liam Roche
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Bitcoin plummets as Bill Gates wades into the debate

Bitcoin falls by 20% in five days

Bitcoin is down by 9.53% in 24 hours following the cryptocurrency’s recent surge to record highs.

The price of of the cryptocurrency is now valued at just above $46,000, down from $51,600 a day before.

The cryptocurrency reached an all-time high of $58,000 on Sunday as a series of institutional investors put their weight behind the controversial blockchain technology.

Friday’s fall represents a 20% drop in value within the space of a week.

Michael Saylor, co-founder of Microstrategy, the software company, restated his view that the cryptocurrency was here to stay following his company’s announcement that it had taken its holdings to 90,531 bitcoins, valued at $4.5bn.

“The company now holds over 90,000 bitcoins, reaffirming our belief that bitcoin, as the world’s most widely-adopted cryptocurrency, can serve as a dependable store of value,” he said.

“We will continue to pursue our strategy of acquiring bitcoin with excess cash and we may from time to time, subject to market conditions, issue debt or equity securities… with the objective of using the proceeds to purchase additional bitcoin.”

Microsoft founder Bill Gates also waded into the debate recently, warning retail investors against investing in bitcoin. The billionaire cited Tesla CEO Elon Musk as someone who could afford to take risks by holding the cryptocurrency.

“Elon has tons of money and he’s very sophisticated, so I don’t worry that his bitcoin will sort of randomly go up or down,” Gates said.

“I do think people get bought into these manias who may not have as much money to spare. My general thought would be that if you have less money than Elon, you should probably watch out.”

The news means more of the same for bitcoin’s rising yet volatile price. At the beginning of 2020 one bitcoin was valued at under $10,000.

Investment bank JP Morgan recently revealed a long-term price target of $146,000.

FTSE 100 slides as anxiety grows over rising bond yields

Liam Roche
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FTSE 100 slides as anxiety grows over rising bond yields

The FTSE 100 is down by 96 points, or 1.4%, at 6,555.85 on Monday afternoon. Having gained momentum on Wednesday and Thursday, the index is now lower than where it began the week.

The dip is in line with significant falls in Europe and Asia as rising bond yields raised eyebrows over the prospect of higher interest rates.

Craig Erlam, senior market analyst at OANDA Europe, commented on a dramatic end to the week for the FTSE 100.

“The rapid rise in yields this week has come despite a perfectly competent performance from Fed Chair Jerome Powell in front of the Senate Banking and House Financial Services Committees. He gave his best assurances and it’s seemingly fallen on deaf ears,” said Erlam

“I expect we’ll see a lot more of this from central banks in the coming weeks if stock go into freefall. Despite a couple of days of losses, we’re very much not in that territory yet – this is not a taper tantrum – and policy makers may be perfectly comfortable with what’s happening.”

FTSE 100 Top Movers

Out of the few companies that did make gains on Friday, International Consolidated Airlines (3.96%), Reckitt Benckiser (1.48%) and Rentokil Initial (0.83%) led the way at the top of the index.

At the bottom end of the FTSE 100, British Land Co (-5.37%), Rightmove (-5.32%) and Anglo American (-5.09%), were the day’s biggest fallers.

Pets At Home

Pets At Home (LON:PETS) has upgraded its profit guidance again as raised demand for pets during lockdowns is showing no signs of slowing down. 

The FTSE 100 company announced on Friday that it is forecasting its underlying pre-tax profits to reach £85m, up £12m from its previous forecast of £77m. 

Hikma Pharmaceuticals

Hikma Pharmaceuticals (LON:HIK) announced on Friday that it expects its yearly operating profit to rise during 2021 having been tasked with supplying emergency treatments for Covid-19 patients.

The FTSE 100 company confirmed its core operating profit rose by 11% to $566m during 2020, up from $508m the year before. Hikma said its profit was driven by strong growth in sales of Generics and Injectables.

Hikma Pharmaceuticals predicts profit rise as demand for Covid drug treatment ramps up

Liam Roche
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Hikma Pharmaceuticals predicts profit rise as demand for Covid drug treatment ramps up

Hikma Pharmaceuticals has supplied drug treatment across the world

Hikma Pharmaceuticals (LON:HIK) announced on Friday that it expects its yearly operating profit to rise during 2021 having been tasked with supplying emergency treatments for Covid-19 patients.

The FTSE 100 company confirmed its core operating profit rose by 11% to $566m during 2020, up from $508m the year before. Hikma said its profit was driven by strong growth in sales of Generics and Injectables.

The London-based company’s core revenue rose by 6% to $2.3bn.

Despite the upturn in profit and revenue, Hikma Pharmaceuticals’ share price levelled at around 2,341p per share post-lunchtime on Friday following a morning of peaks and troughs.

The drugs company has been called upon to supply its emergency drug treatment to nations across the world as demand soared during the pandemic.

The company confirmed it used its “strong foundation to meet increased demand for essential medicines used in the treatment of Covid-19,” while remaning focused on other apsets of its business. 

Siggi Olafsson, Chief Executive Officer of Hikma, commented on the company’s performance during the pandemic.

“Thanks to our strong foundation, flexible and high-quality manufacturing capabilities, robust supply chain and the unwavering dedication of our people to our purpose, Hikma was able to play a critical role in the pandemic. We responded rapidly to the changing needs of healthcare providers, supplying essential medicines used to treat COVID-19 patients, while continuing to provide the critical medicines our patients need every day,” Olafsson said.

“Our response to the pandemic demonstrates the resilience of our business, which enabled us to deliver a strong financial performance and continued progress against our longer-term strategic objectives. We achieved good revenue growth in all our businesses and an improvement in core profitability.”

Aquis Exchange to make maiden profit

Liam Roche
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Aquis Exchange to make maiden profit

Aquis Exchange share price soars on early morning trading

Aquis Exchange announced on Friday that it expected to make a profit in 2020, the company’s first time doing so, as revenue is forecast to grow above expectations.

The trading exchange expects revenue to be at least £11m, which would be nearly a 60% increase from £6.9m in 2019. 

Revenue growth has been driven in part by continued high levels of trading on Aquis Exchange alongside strong technology sales, with a number of clients having renewed licensing contracts at the end of the year. 

Therefore, Aquis Exchange expects to record its first ever profit, compared to a loss of £1.1m for 2019.

The company’s share price shot up on Friday’s morning trade by 8.65% to a value of 565p per share. It is a continuation of the share’s bright start to the year which began with a valuation of 470p per share. 

Alasdair Haynes, chief executive of Aquis Exchange, outlined the company’s preparedness for Brexit and the coronavirus pandemic.

“We have long been well-prepared for Brexit-related changes and are pleased to report the successful and seamless continuation of our operations in the UK and the transfer of our European trading business to the Paris office.”

“Despite the continued pandemic-related restrictions seen across our markets, we continue to achieve substantial operational progress and have beaten market expectations. Looking forward to 2021, we remain confident in our ability to execute against our growth strategy.”

Aquis Exchange was admitted to the AIM in 2012 and has since become one of the largest trading companies in Europe.

Aquis Exchange PLC is an exchange services group, which operates pan-European cash equities trading businesses, growth and regulated primary markets and develops/licenses exchange software to third parties.

Pets At Home raises profit forecast as demand surges

Liam Roche
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Pets At Home raises profit forecast as demand surges

Pets At Home performance ‘ahead of expectations’

Pets At Home (LON:PETS) has upgraded its profit guidance again as raised demand for pets during lockdowns is showing no signs of slowing down.

The company announced on Friday that it is forecasting its underlying pre-tax profits to reach £85m, up £12m from its previous forecast of £77m. 

Pets At Home changed its guidance upon learning that its trading during Q4 of its financial year was stronger than anticipated. 

The company said: “In our trading update on 8 January 2021, our guidance for full-year profit out-turn reflected a number of ongoing uncertainties over the near-term outlook, including renewed challenges from higher Covid infection rates and restrictions on a national level, as well as potential supply disruption relating to the UK’s exit from the European Union.”

“Notwithstanding this challenging external environment, our performance over the last eight weeks has been ahead of expectations, with continued strong and broad-based growth across all channels and categories.”

Before lunchtime on Friday the Pets At Home share price was up by over 6% as investors reacted to the FTSE 250 company’s announcement. 

“The rapid improvement is evidence of just how strong recent trading has been, and the effect rolling lockdowns are having — both on pet ownership and our willingness to splash out on our furry friends,” said Nicholas Hyett, equity analyst at Hargreaves Lansdown.

Pets At Home has been a beneficiary of lockdowns, revealing an “exceptional level of demand” in November, as the company’s revenue shot up.

In January, Pets At Home revealed that its retail sales climbed up by 17.5% between October and December.

Pets At Home is the UK’s leading pet care business with over 451 stores, many of which also have vet practices and grooming salons.

Tesla share price: analysts remain bullish despite high valuation

Liam Roche
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Tesla share price: analysts remain bullish despite high valuation

Elon Musk saw his net worth tumble by over $15bn as shares in Tesla fell by 8.6% on Monday. While 2020 was an outstanding year for the electric vehicle manufacturer, its performance over the past week has brought its future prospects back into focus. 

Tesla share price

Despite recent losses, the Tesla share price is up 465% over the past 12 months to $742 per share. During 2020, in the midst of the pandemic, the electric car maker saw a 743% rise in the value of its shares. Stretching back further to October 2019, Tesla stock is up by around 1300%.

Analysts have given mixed views for Tesla over the coming year. Colin Rusch, analyst at Oppenheimer, has set his price target at $1,036. While Dan Ives of Wedbush, set a price target of $950, more than $200 above where Tesla is currently trading.

Sales

Tesla delivered nearly 500,000 electric vehicles in 2020, up 36% from the year before. Over a “multi-year horizon”, the company expects to achieve 50% average annual growth in sales. The electric vehicle manufacturer is on track to begin deliveries of its Model Y capacity from its Gigafactory Berlin and Gigafactory Texas in 2021. 

Morgan Stanley believes Tesla “can leverage its cost leadership in EVs to aggressively expand its user base, over time generating a higher percentage of revenue from recurring and high-margin services revenue.”

Risks

Tesla’s price to earnings ratio is in excess of 200. Put simply, the car maker’s profits will have to grow substantially in the coming years to justify this value.

This could become a problem for Tesla as competition from other manufacturers is intensifying. Volkswagen ended 2020 with over 400,000 new electric vehicle sales. While Nio, XPeng and Li Auto, Chinese electric car makers listed on the New York Stock Exchange, are worth a combined $166bn.

FTSE 100 up despite expectations of tax hike

Liam Roche
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FTSE 100 up despite expectations of tax hike

After lunchtime on Thursday the FTSE 100 was up by 0.35% despite news emerging of an oncoming tax rise. The index stands at 6,821.21 points as investors’ faith in the vaccine holds steady.

In an effort to restore the country’s finances, UK Chancellor, Rishi Sunak has hinted at an oncoming tax hike akin to the policies of Joe Biden. “It’s right that once our economy begins to recover, we should look to return the public finances to a more sustainable footing and I’ll always be honest with the British people about how we will do this,” the Chancellor said.

FTSE 100 Top Movers

DS Smith (6.68%), Evraz (5.33%) and Anglo American (4.43%) all made significant gains as the top three risers on the FTSE 100. 

At the bottom end, Standard Chartered (-5.96%), Hikma Pharmaceuticals (-5.25%) and Polymetal International (-2.21%) are the day’s biggest fallers on early afternoon trading.

Standard Chartered

Standard Chartered will reinstate its dividend this year despite seeing a significant fall in its pre-tax profit. The bank also unveiled plans to significantly reduce its office space over 2021.

BAE Systems

BAE Systems, the FTSE 100 aerospace company, posted “strong” results on Thursday morning, announcing a 4% increase in sales over 2020, up to £21bn.

The company’s revenue rose to £19.3bn from £18.3bn, while operating profit climbed to £1.9bn. The underlying earnings per share is now at 46.8p.

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