“The FTSE 100 bounced back strongly on Monday amid relief that tensions in the Middle East seem to have been contained for now,” says AJ Bell investment director Russ Mould.
“Travel and retail stocks were among the gainers on the FTSE 100, with precious metals miner Fresnillo the only stock showing notable weakness, with gold and silver prices dipping as demand for safe havens eased.
“In some respects, investors in music rights investor Hipgnosis Songs Fund will be keen to hear the final note in a stock market listing which has been more soap opera than Glyndebourne.
“However, while news of a potential counteroffer from Blackstone to rival the $1.4 billion takeover bid from Concord Chorus announced last week may prolong matters, it could also mean a better financial outcome for all parties.
“The ranks of the UK small and mid-cap market look set to be further thinned as Tyman, a manufacturer of components for windows and doors, agrees to a bid from a US rival. The 35% premium is likely to get the deal across the line.
“While individually this deal may not make much of a ripple, when you consider the sheer volume of firms being snapped up by overseas buyers, the UK market is experiencing death by a thousand cuts.
“Once known as National Express, transport operator Mobico has finally announced results delayed due to a review of the accounts at its German rail operation.
“While the numbers did not reveal any big shockers, they also did little to help steady a share price which has gone right off track over the last year.
“Profits fell, thanks in part to cost inflation, with the new leadership appointments which have been added to the team of late needing to demonstrate they can translate an encouraging trend in passenger volumes into improved financial performance.”
Ocado
“Ocado is the latest name to be banded around as a potential defector from the UK stock market. Weekend reports suggest certain shareholders want it to switch listing venue to the US, a move that others have made to achieve a higher valuation.
“While Ocado is best known to the UK public for its grocery delivery service, the company’s future lies in the provision of technology and robotic systems to power grocery warehouses. It has a partnership in the US with Kroger, one of America’s largest grocery retailers, and that association could help it appeal to investors in the country.
“Ocado would no doubt dearly love to be seen as a tech company, as that would not only help its aspirations to be a much bigger player in the grocery services industry, but also to get investors to ascribe a different and potentially higher earnings multiple to its stock.
“The general trend for the stock has been downwards since 2021 and something needs to change to get the share price moving back up. The covid pandemic should have acted as a catalyst for grocers around the world to up their game with regards to online services, giving Ocado a once-in-a-lifetime opportunity to licence its proposition while the industry was focused on modernising operations. Sadly, the contract wins have been few and far between for Ocado, leaving investors thoroughly disappointed.
“One obvious route in its reinvention is to make amends with joint venture partner Marks & Spencer as the relationship is on thin ice due to the latter refusing to make a milestone payment for their shared grocery operation, claiming performance targets haven’t been met. Ocado could sell its share of the venture to M&S and then concentrate on being a pureplay tech company.
“Rather than threaten to take M&S to court over the missing milestone payment, it could negotiate a settlement as part of a sale of its share in the venture. In doing so, Ocado would no longer be associated with the little vans that deliver loaves of bread to Mrs Miggins. That act in itself would be an important first step in trying to get the market to look at the business in a different way.
“For many, Ocado is still seen as a delivery company that just happens to help some other grocers behind the scenes. Until that association is confined to the history books, or it ups sticks and moves to a different country where there are no preconceptions, it faces an uphill battle with how investors judge the company and therefore the valuation ascribed to its shares.”
These articles are for information purposes only and are not a personal recommendation or advice.
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- Thu, 02/05/2024 - 10:55