44 Thursday February 3 2022 | the times
BusinessMarkets
news in brief
McKay sells off office
The Reading office that houses
Three, the mobile network, has
been sold by McKay Securities
for £19 million to King’s Oaks, a
residential developer that is
expected to turn it into flats.
Great Brighams Mead in the
Berkshire town’s centre went for
21 per cent more than it was
valued at last September. McKay,
which has a £455 million portfolio
of offices and warehouses along
the M4 corridor, described the
site close to the Thames and the
railway station as “prime”. Three
has been its tenant since 1998; the
lease expires in March.American jobs setback
Private payrolls in the United
States fell for the first time in a
year in January as soaring Covid-
19 infections disrupted business
operations, raising the risk of a
sharp decline in American
employment. The surprise drop
in payrolls in the ADP National
Employment Report was across all
industries and business sizes.
Private payrolls decreased by
301,000 jobs last month, the first
drop since December 2020, after
increasing by 776,000 in
December.Friendless PayPal sinks
The disclosure of a big hit to
revenue from the impending loss
of eBay, its marquee client,
prompted immediate questions
on Wall Street yesterday about
the growth prospects of PayPal
Holdings. Shares in the payments
provider sank by almost a
quarter, or $43.23, to $132.57.
PayPal’s operating agreement
with eBay, its former parent, has
ended and the online
marketplace’s transition to its
own payments platform is
affecting transaction volumes.Hilton’s grand plans
Hilton, the hotels chain, aims to
recruit 1,000 new employees this
year under expansion plans. Jobs
on offer include apprentice chefs
and beauty therapists, as well as
managerial roles. The company
also announced plans to open
new hotels this year, including in
Bath, Silverstone and London.
About 4,000 staff were taken on
last year, despite the impact of
the pandemic. Julie Baker, UK &
Ireland vice-president operations
at Hilton, said: “We are thrilled to
see the green shoots of recovery.”Commodities
ICIS pricing (London 7.30pm)Crude Oils ($/barrel FOB)
Brent Physical 93.11 +0.31
BFOE(Mar) 89.60 +0.31
BFOE(Apr) 88.25 +0.35
WTI(Mar) 86.69 +0.23
WTI(Apr) 88.25 +0.30Products ($/MT)Spot CIF NW Europe (prompt delivery)
Premium Unld 808.00 810.00 -9.00
Gasoil EEC 785.50 787.50 -7.50
3.5 Fuel Oil 485.00 489.00 +0.00
Naphtha 787.00 789.00 -9.00ICE Futures
Gas Oil
Feb 809.75-809.50 May 760.00-759.25
Mar 794.50-794.25 Jun 748.75-748.25
Apr 774.50-774.25 Volume: 640319Brent (9.00pm)
Mar 91.28-91.18 Jun 87.00-86.97
Apr 89.59-89.58 July 86.50-85.73
May 88.23-88.21 Volume: 1873923LIFFE
Cocoa
Mar 1749-1747 May 1760-1762
May 1789-1788 Jul 1762-1700
Jul 1804-1800 Sep 1798-1792
Sep 1798-1792
Dec 1788-1772
Mar 1771-1764 Volume: 66708RobustaCoffee
Jan 2314-2315 Nov 2197-2152
May 2199-2196 Jan 2180-2095
Jul 2187-2164
Sep 2182-2160 Volume: 11834White Sugar (FOB)
Reuters Oct 479.40-465.40
Dec 485.00-455.50
Mar 488.90-488.50 Mar 475.10-465.00
May 479.20-478.90 May 475.90-465.20
Aug 479.80-470.10 Volume: 58862PRICES
Major indices
New York
Dow Jones 35629.33 (+224.09)
Nasdaq Composite 14417.55 (+71.54)
S&P 500 4589.38 (+42.84)
Tokyo
Nikkei 225 27533.60 (+455.12)
Hong Kong
Hang Seng 23802.26 (+252.18)
Amsterdam
AEX Index 765.56 (+0.34)
Sydney
AO 7399.60 (+86.80)
Frankfurt
DAX 15613.77 (-5.62)
Singapore
Straits 3249.59 n/a
Brussels
BEL20 4123.02 (+12.55)
Paris
CAC-40 7115.27 (+15.78)
Zurich
SMI Index 12360.37 (+0.57)
DJ Euro Stoxx 50 4222.05 (-2.40)
London
FTSE 100 7583.00 (+47.22)
FTSE 250 22249.40 (+81.46)
FTSE 350 4283.88 (+24.85)
FTSE Eurotop 100 3555.04 (+9.13)
FTSE All-Shares 4257.23 (+24.75)
FTSE Non Financials 5103.63 (+28.24)
techMARK 100 6507.85 (+12.26)
Bargains n/a
US$ 1.3574 (+0.0052)
Euro 1.1999 (+0.0004)
£:SDR 0.98 (+0.00)
Exchange Index 82.91 (+0.34)
Bank of England official close (4pm)
CPI 115.05 Dec (2015 = 100)
RPI 317.70 Dec (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 Mar 22 122.08 122.56 121.93 122.42 260697 822493
Jun 22 124.28 124.28 124.28 124.50 456 972
3-Mth Sterling Mar 22 99.320 99.320 99.285 99.301 3457 269264
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
3-Mth Euribor Mar 22 100.53 100.53 100.52 100.53 74345 354639
Jun 22 100.45 100.45 100.43 100.44 172243 507764
Sep 22 100.33 100.34 100.31 100.32 222108 533044
Dec 22 100.18 100.19 100.15 100.17 187281 516269
Mar 23 99.985 99.995 99.945 99.960 156411 449376
3-Mth Euroswiss Mar 22 100.73 100.73 100.73 100.73 677 31949
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
FTSE100 Mar 22 7507.5 7547.0 7500.0 7531.5 87836 599633
Jun 22 7368.0 7368.0 7327.0 7404.5 3 230
FTSEurofirst 80 Mar 22 5848.5
Jun 22 5831.0© 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.group’s debt is at a fixed rate, with
7 per cent at a floating rate and
about a third linked with inflation.
Unsurprisingly, net finance costs
increased by almost a third during
the first half of its financial year and
interest charges are expected to rise
further during the second six months
as the rate of inflation moves higher.
One strength Severn Trent has
over Pennon and United Utilities, its
rivals, is the prospect of more cash
for outperforming service targets. In
November, the FTSE 100
constituent raised guidance for
outcome delivery incentives, the net
reward or penalty that the company
earns based on 41 performance
indicators, to at least £75 million fordividend linked to inflation, which is
forecast to total 102.13p a share for
this year and leaves the stock
offering a decent dividend yield of
about 3.5 per cent, based upon the
present share price.
The dividend policy, set until the
current regulatory cycle ends in
2025, is for dividends to rise in line
with CPIH, a measure of consumer
prices inflation that includes housing
costs.
Yet rising inflation has its
drawbacks. High leverage is run of
the mill for utility companies and
Severn Trent is no different, with net
debt of about £6.2 billion at the end
of June, or 544 per cent of
shareholder equity. The bulk of theW
ater companies are natural
victims of a rise in interest
rates, as the reliable
dividends they are known for lose
their shine when yields on offer
elsewhere start to improve. However,
Severn Trent’s bond proxy status
hasn’t dimmed its valuation too
much because the shares remain at a
premium to the group’s forecast
regulatory capital value at the end of
the next financial year.
There is still a lot to like about the
water group — chiefly, a reliableEmma Powell Tempus
Buy, sell or hold: today’s best share tipsOn a cloud and ready to rise further
G
oogle’s parent entered the
pandemic as a powerful
advertising group and has
emerged a titan. A
lockdown-induced surge
in consumer spending online has
intensified the scramble among
businesses to place their wares in
front of shoppers’ eyeballs.
For Alphabet, the result was
another consensus-beating rise in
performance in the fourth quarter,
when revenue rose 32 per cent and
topped a bumper year for the group.
Advertising revenue is the engine of
its rapid growth, providing just over
80 per cent of the group total, as it
dominates online advertising.
The technology powerhouse’s
influence is vast. It owns the world’s
leading search engine, the Android
smartphone operating system and
YouTube, the video platform. Like
many of its Big Tech peers, it has
faced multiple antitrust lawsuits. The
latest, filed last month by more than
a dozen states, including Texas,
accuses Google of misleading
advertisers and publishers over
pricing. Alphabet has countered that
the lawsuit is “full of inaccuracies
and lacks legal merit”, adding that its
“advertising technologies help
websites and apps fund their content
and enable small businesses to reach
customers around the world”.
Like its peers, Alphabet is used tofighting little fires, but a bill that the
US Senate voted to advance last
month might be harder to put out.
The legislation, which has bipartisan
support, would stop companies
giving preferential treatment to their
own products and services,
preventing Google from ranking itsown apps more highly in its search
engine.
Regulators on both sides of the
Atlantic have long been stalking the
technology giants, but investors have
shut out the noise and the threat of
any enforced sales of Google’s parts.
Alphabet’s shares, which rose after
the fourth-quarter results, have more
than doubled in value since the start
of 2020, even after the sell-off in
technology stocks over the prospect
of rising interest rates this year.
A rare stock split, which will give
shareholders 19 additional shares for
each they own, is designed to make
Alphabet’s shares more accessible to
investors by lowering the price, but it
won’t change the marketGiant steps
Share priceSource: Refinitiv
Q1 Q2 Q3 Q4 Q1$3,0002,8002,6002,4002,2002,0001,8002021 22Fourth-quarter revenue by segment
Google search
and other
$43.3bnOther bets
$0.18bnGoogle
network
$9.3bn
YouTube ads
$8.6bnGoogle
cloud
$5.5bnHedging
gains
$0.2bnGoogle
other
$8.2bnTotal
$75.28bn*Yellow represents advertising revenuecapitalisation. An enterprise value of
just under 14 times forecast earnings
before tax and other charges makes
Alphabet one of the most low-valued
of the Big Tech stocks — and not
justifiably so. Its net cash stood at
$140 billion at the end of last year,
boosted by $18.6 billion in free
cashflow in the fourth quarter. The
benefit of rapidly building scale has
expanded margins to 31 per cent last
year from 21 per cent two years ago.
That puts its margin last year
ahead of the likes of Apple, Amazon
and Netflix. The Google owner also
holds its own when it comes to
expected earnings growth, which
analysts forecast will outpace groups
such as Apple and Meta Platforms,
the Facebook parent, in the years to
come.
Yes, the pace of revenue growth is
expected to slow, with analysts
pegging it at 16 per cent this year, but
that’s still impressive for a group of
Alphabet’s heft. Investment in staff,
property and its servers is expected
to step up this year, which could
depress margins. Analysts at Morgan
Stanley, the investment bank, expect
a margin of 29.3 per cent this year
and 28.6 per cent next year.
Targets for spending include the
cloud computing business, now the
third largest player behind Amazon
and Microsoft. The business is still
lossmaking despite revenue rising
apace, up 43 per cent in the fourth
quarter, but the shift among
businesses to cloud computing is still
in its “early innings”, Ruth Porat, the
chief financial officer, said.ADVICE Buy
WHY The group’s lower
valuation against its peers
doesn’t seem justified against
better margins and solid
forecast revenue growththis year. Reducing debt or funding
capital expenditure are both
potential uses of that windfall, but it
can be carried over to the next
regulatory cycle, making dividend
cuts less likely.
A premium of about 30 per cent
against the regulatory capital value
forecast by RBC Capital next year
doesn’t make for an attractive entry
point to the shares, but the company
has enough merit to keep holding.ADVICE Hold
WHY Shares offer a reliable,
inflation-linked dividendalphabet
Market cap
$1.83 trillionRevenue
$258 billionsevern trent
Dividend yield
3.5%One-year share
gain 56%