The Times - UK (2022-05-17)

42 Tuesday May 17 2022 | the times

BusinessMarkets

news in brief

Hedge fund expands

A quantitative hedge fund that

was spun out of Credit Suisse five

years ago is to triple its office

space in London after agreeing to

take four floors at Land

Securities’ n2 building near

Victoria station. Qube Research

& Technologies will move into

the 17-storey office block when

building work finishes next

summer. Its new office will be

more than three times the size of

its present London base in Nova

South, another Landsec building

near by. Landsec said that the

deal “sets a new benchmark for

Victoria office rents”.

New boss at Dignity

Dignity, Britain’s only listed

funerals provider, is to appoint

Kate Davidson as chief executive

as it looks to emerge from a

tumultuous period. Davidson, 37,

chief operating officer since last

June, is set to take up the role

from June 10. She will replace

Gary Channon, co-founder of

Phoenix Asset Management,

Dignity’s largest shareholder, who

seized control in April last year.

He will step down from the

board. Its shares fell 8p, or 1.7 per

cent, to 475p.

Activists on the prowl

The market turmoil since Russia

invaded Ukraine is set to lead to

an increase in activist

shareholders stalking European

companies. Alvarez & Marsal, the

professional services firm,

predicted that 155 companies

would be at risk of attacks in the

next 18 months. That is an

increase of seven compared with

its analysis in November. The UK

is the most attractive market for

activists, with 59 companies

tipped to face an attack by an

activist within six to 18 months.

The name is now GSK

GlaxoSmithKline has changed

its name to GSK ahead of the

break-up of the FTSE 100

pharmaceuticals company this

summer. The decision was taken

last month but investors are

unaffected, it said. GSK is

spinning off its consumer

healthcare division, which it has

called Haleon, on the London

Stock Exchange in July and will

focus on its remaining core

vaccines and pharmaceuticals

business. Shares in GSK rose 43p,

or 2.5 per cent, to £17.98½.

Commodities

ICIS pricing (London 7.30pm)

Crude Oils ($/barrel FOB)

Brent Physical 114.73 +2.53

BFOE(Apr) 114.39 +2.69

BFOE(May) 112.28 +2.36

WTI(Apr) 111.82 +3.19

WTI(May) 108.91 +2.64

Products ($/MT)

Spot CIF NW Europe (prompt delivery)

Premium Unld 1244.00 1244.00 +13.00

Gasoil EEC 1099.75 1101.75 -13.00

3.5 Fuel Oil 605.00 605.00 +0.00

Naphtha 945.00 947.00 +14.00

ICE Futures

Gas Oil

Jun 1096.50-1095.75 Sep 1032.00-1022.00

Jul 1069.00-1068.25 Oct 1010.25-1009.75

Aug 1044.00-1043.75 Volume: 522644

Brent (9.00pm)

July 112.80-112.79 Oct 106.50-106.46

Aug 110.83-110.81 Nov 105.00-104.53

Sep 108.64-108.59 Volume: 1616656

LIFFE

Cocoa

May 1825-1621 Jul 1820-1803

Jul 1800-1796 Sep 1832-1799

Sep 1816-1812 Dec 1810-1798

Dec 1839-1833

Mar 1835-1805

May 1833-1814 Volume: 63343

RobustaCoffee

May 2300-2090 Jan 2082-2010

Jul 2090-2086 Mar 2074-1995

Sep 2089-2084

Nov 2085-2045 Volume: 10349

White Sugar (FOB)

Reuters Mar 525.50-525.30

May 518.20-494.70

Aug 549.20-548.50 Aug 509.20-507.50

Oct 534.90-534.40 Oct 534.90-534.40

Dec 529.80-520.00 Volume: 58800

London Grain Futures

LIFFE Wheat (close £/t)

May 350.00 Jul unq Nov 352.00

Jan unq Mar unq Volume: 824

PRICES

Major indices

New York
Dow Jones 32223.42 (+26.76)
Nasdaq Composite 11662.79 (-142.21)
S&P 500 4008.01 (-15.88)

Tokyo
Nikkei 225 26547.05 (+119.40)

Hong Kong
Hang Seng 19950.21 (+51.44)

Amsterdam
AEX Index 694.62 (+0.49)

Sydney
AO 7326.20 (+18.50)

Frankfurt
DAX 13964.38 (-63.55)

Singapore
Straits 3191.16 n/a

Brussels
BEL20 3967.83 (+23.27)

Paris
CAC-40 6347.77 (-14.91)

Zurich

SMI Index 11672.23 (+21.81)

DJ Euro Stoxx 50 3685.34 (-18.08)

London

FTSE 100 7464.80 (+46.65)

FTSE 250 19924.11 (+2.22)

FTSE 350 4154.12 (+22.05)

FTSE Eurotop 100 3295.98 (+2.17)

FTSE All-Shares 4120.34 (+21.28)

FTSE Non Financials 5077.11 (+34.27)

techMARK 100 5975.57 (-10.65)

Bargains n/a

US$ 1.2299 (+0.0042)

Euro 1.1796 (+0.0012)

£:SDR 0.98 (+0.00)

Exchange Index 79.43 (+0.04)

Bank of England official close (4pm)

CPI 117.09 Mar (2015 = 100)

RPI 323.50 Mar (Jan 1987 = 100)

RPIX 290.10 Jun (Jan 1987 = 100)

Morningstar Long Commodity 677.16 (+5.72)

Morningstar Long/Short Commod4703.45 (+27.75)

London Financial Futures

Period Open High Low Sett Vol Open Int

Long Gilt Jun 22 120.49 120.53 119.66 120.27 165346 659988

Sep 22 119.55 119.55 119.55 119.58 43 14

3-Mth Sterling Jun 22 99.025 99.045 99.015 99.026 10377 232459

Sep 22 98.885 98.890 98.860 98.866 3885 301735

Dec 22 98.820 98.825 98.790 98.806 7310 347378

Mar 23 98.785 98.795 98.755 98.771 8310 229855

Jun 23

3-Mth Euribor Jun 22 100.26 100.27 100.24 100.25 99540 423872

Sep 22 99.805 99.805 99.750 99.760 98032 528417

Dec 22 99.445 99.445 99.370 99.385 125474 598709

Mar 23 99.105 99.105 99.030 99.055 65499 484658

Jun 23 98.820 98.825 98.755 98.785 62091 420563

3-Mth Euroswiss Jun 22 100.71 100.72 100.70 100.71 925 29152

Sep 22 100.68 100.68 100.67 100.68 710 31355

Dec 22 100.61 100.62 100.59 100.62 488 22748

Mar 23

FTSE100 Jun 22 7435.0 7462.5 7335.5 7427.0 94873 618361

Sep 22 7365.0 7407.0 7285.0 7373.5 11 8098

FTSEurofirst 80 Jun 22 5072.5

Sep 22 5061.0

© 2021 Tradeweb Markets LLC. All rights reserved.

The Tradeweb FTSE Gilt Closing Prices information contained

herein is proprietary to Tradeweb; may not be copied or

re-distributed; is not warranted to be accurate, complete or timely; and does not constitute

investment advice. Tradeweb is not responsible for any loss or damage that might result

from the use of this information.

double-digit organic growth, ahead

of a 5 per cent norm, and an adjusted

operating margin of 18 per cent to

19 per cent this year remains intact.

Over the six months to the end of

March, underlying revenue was up

16 per cent, helped by organic

growth of 28 per cent from the

controls business.

That division is a case study for

Thomson’s strategy of broadening

the business to France, Germany and

the United States and pivoting

towards structural growth markets,

such as providing the digital antenna

for 5G and products for data centres.

Comparisons get harder from the

next quarter when the group laps a

strong comparator, when industrial

moderate over the next six months

to a year, according to Johnny

Thomson, its chief executive, and

inflation will rise further — but

Diploma has several defences against

both. The industrial seals, gaskets,

specialist wiring and cabling that the

group sources and supplies are

critical to its customers’ operations,

which meansthat they are accounted

for in operational rather than capital

expenditure budgets, which are less

likely to be cut in a downturn.

Providing services such as technical

support and training means the

group has a pricing power that has

imbued it with superior margins to

other middlemen.

Upgraded guidance for low-

A

reversion to more typical

growth rates is one thing, but

investors in Diploma are more

edgy about a potential downturn in

demand among the FTSE 250

distribution company’s industrial

customers.

A share price of 24 times forward

earnings is a heady fall from 37 at the

start of the year and leaves Diploma

valued at a similar level to late 2019,

when pre-Brexit jitters stoked an

uncertain outlook.

Industrial demand could well

Emma Powell Tempus

Buy, sell or hold: today’s best share tips

Metric system is measuring up nicely

I

n a rapid inflationary

environment such as the one we

are seeing today, stocks with

high earnings expectations

baked-in increasingly will

require proof of value. LondonMetric

Property has strengthened its case

with a £34 million package of

disposals, a combined price that is

35 per cent above book value at the

end of September.

The assets sold by the commercial

landlord were let on long leases, a

class of property in high demand by

investors seeking reliable, inflation-

linked income and one that accounts

for just over a fifth of LondonMetric’s

portfolio. Those sit alongside the core

pool of warehouse assets, a sector

that has become the unlikely hero of

the commercial property market.

The beefy premiums attached to

industrial property stocks have been

prohibitive for some investors, but, as

is the case with its peers, the broader

market sell-off has narrowed the gap

between LondonMetric’s share price

and the real estate investment trust’s

net asset value, from 24 per cent at

the start of this year to 8 per cent

versus the NAV that analysts expect

for the end of March, and 1 per cent

against that forecast for the same

time next year. The hefty gains made

by investors that sought to capitalise

on the last big bout of market

volatility in 2020 indicate that there

could be opportunity in the recent

sell-off.

According to Andrew Jones, its

chief executive, the logistics landlord

has built a portfolio with the aim of

generating “stress-adjusted returns”,

designed to weather economic

storms. Indeed, the make-up of

LondonMetric’s portfolio showed its

worth during the pandemic, with rent

collection above 90 per cent even in

the depths of lockdown, which also

meant the dividend escaped the chop

and the value of its assets continued

to rise.

Ahead of a potential recession, a

steep imbalance in supply and

demand in industrial property and a

tilt towards structural growth

industries such as ecommerce and

dark kitchens used in food delivery

mean that LondonMetric looks in

shape to outperform. The space

shortage is most acute in urban areas,

which after the 2019 acquisition of

A&J Mucklow, a rival, accounts for

42 per cent of the group’s portfolio, as

Capital showing

Total return Earnings per share

Dividend per share

Source: Refinitiv

30%

20

10

0

-10

-20

Jul Oct Jan

2021 2022

Apr

FTSE 250

LondonMetric

2019

2020

2021

2022e

2023e

8.7p

8.2p

9.2p

8.3p

9.47p

8.65p

9.82p

9.01p

10.57p

9.47p

the creation of new warehouse assets

is restricted by the need for

residential development and other

commercial uses. Demands on land

are even greater in London and the

southeast, the geographical bias for

LondonMetric’s distribution assets.

The result? A net tangible asset

value that has risen almost a quarter

over the past two years, while net

rental income was up 13 per cent in

the same period. Acquisitions aren’t

doing all the heavy lifting, either; rent

reviews were agreed 13 per cent ahead

of previous passing rates during the

six months to September. Forty per

cent of the portfolio is subject to

open market reviews, hardly an issue

when urban warehouses are being let

on average 25 per cent higher at rent

review than previously. The rest have

fixed contractual uplifts built into the

lease or reviews linked to inflation,

though the latter does typically have

a cap of 4 per cent.

There is no total return target in

place, but the company has a record

of beating the IPD All Property

index. Over the first half of the year,

LondonMetric generated a return of

10.4 per cent, versus the 7.6 per cent

delivered by the latter. A decent-sized

dividend accounts for part of that

return, which this year is forecast to

total 9.01p a share, representing a

potential 3.6 per cent yield at the

present share price. That’s alongside

compound growth of 11 per cent in

NAV over the next three years. With

the share price weakness, that should

reassure those that feared they might

have missed their chance.

ADVICE Buy

WHY The recent fall in the

share price offers an

opportunity to gain exposure

to a fast NAV growth and a

sizeable dividend

sales were boosted by strong pent-up

demand post-lockdown and

businesses seeking to buy more

products ahead of time to navigate

supply chain disruption.

Peel Hunt, the broker, expects

annual revenue growth of 9 per cent

next year, down from 20 per cent in

this financial year, generated evenly

by acquisitions and organic means. A

dose of faith has served investors well

in the past and could do right now.

ADVICE Buy

WHY Well placed to navigate

inflationary challenges

londonmetric

Market value

£2.42bn

Dividend yield

3.7%

diploma

Market cap

£3.25bn Half-year

revenue growth

23%