Edison Investment Research

Market Commentary - Housing, Infrastructure, Construction and Services 2nd June 2017

Half term, election next week and the sun is shining so little surprise there is limited new news. On house prices the City has gone quiet on the risks facing the sector. Regular readers will be aware that we have been a fan of SIG and this morning LXi Reit plc has announced that it has paid £9.3m to buy a 250,000 sq ft/15 acre facility near Carlisle used to cladding and components and sub-assemblies by the Distributor.

Polar Capital Global Healthcare investors back new strategy

£200m minimum target looks secure after tender offer

Investors in the c £250m Polar Capital Global Healthcare Growth & Income Trust (PCGH) have strongly backed a proposed continuation and strategy change at a general meeting held on 1 June. At the same time, holders of c 22% of the shares (worth c £54-55m based on the latest NAV and closing price) have chosen to exit via a tender offer for up to 100% of shares at close to NAV.

Volatility: Low, but downside protection in demand

We struggle to understand why market volatility has fallen so far in 2017

One of the notable aspects of equity market performance during 2017 has been the rapid fall in market volatility. Trailing 90-day realised volatility for the S&P 500 has reached 7% in recent weeks. Over the last 20 years, these are levels are matched only during a brief period over 2005-2006. We do not see an especially strong parallel with 2005 as at that point US equities were still moderately valued and the US economy was expanding after a mild recession. We believe investors are once again becoming complacent; but also note the skew towards higher priced put options suggesting within the options market at least that downside protection is at a premium.

Market Commentary - Housing, Infrastructure, Construction and Services 1st June 2017

Student accommodation developer and contractor Watkin Jones (WJ) reported its first half numbers to end March 2017 this morning. Capita is creeping slowly upwards and crept faster than anyone else yesterday, 2.8% to 583p. At the other end of the table Interserve crept down a further 2% to 224p and was the largest faller.

Market Commentary - Housing, Infrastructure, Construction and Services 31st May 2017

Telford Homes and Styles and Wood, the former a London property developer and the latter a specialist contractor have provided new information this morning. Galliford Try’s analysts’ dinner last night was helpful. The moves yesterday were in a very narrow band with Compass, the leader, up 1.1% to 1661p, a new record level and the largest faller Kier down just 1.2% at 1255p on a large number of trades at 558,596 shares transacted.

China to attempt entry into the widebody market

China & Russia collaborate on rival to the A330 & Boeing 787

On May 22, United Aircraft Corp (UAC) of Russia and Comac from China launched a full scale development project for a commercial widebody aircraft, with the aim of entry into service in 2027. This represents China’s first foray into the widebody market. It is particularly notable because this time China has chosen to collaborate with the Russians, unlike on the C919 narrowbody which it is developing autonomously (albeit with Western technologies). The Russians have more commercial aerospace experience, which when combined by the financial backing of the Chinese government makes a potentially powerful cocktail.

Witan Investment Trust announces changes to its global equity managers

Number of global managers reduced from five to three

Witan Investment Trust (WTAN) has announced a consolidation of its global managers from five to three. Existing managers Lansdowne Partners, Pzena Investment Management and Veritas Asset Management will each manage c 14% of WTAN’s assets (as at mid-May 2017 versus between 10% and 13% at end-April 2017). MFS Investment Management and Tweedy, Browne Company managed 5% and 3% respectively; their accounts will be closed. MFS was appointed in September 2004, when WTAN adopted its multi-manager approach and Tweedy, Browne in December 2013. WTAN’s CEO Andrew Bell says the change is intended to increase the trust’s performance potential. As a result, WTAN’s active share (a measure of how its portfolio differs from the benchmark) will increase from 70% at end-FY16 to 74%.

Market Commentary - Housing, Infrastructure, Construction and Services 30th May 2017

The only formal item of news this morning is the appointment of John Tonkiss as COO at McCarthy and Stone. Moves on Friday last saw Morgan Sindall soar to greater heights rising 6.2% to 1274p on 159,908 shares traded. The sector performed broadly in line with the market’s 7% rise last week. It therefore remains up around 11% overall versus the market up by 6.5%.

Tory manifesto - what does it mean for oil and gas?

Given the current polls (with the Conservatives leading Labour by 47% to 33%), we assume that the Conservatives form the next government and therefore take a look at what (if anything) we May glean from Theresa’s manifesto.

Market Commentary - Housing, Infrastructure, Construction and Services 26th May 2017

There is no formal RNS news this morning in the HICS sector. In the absence of news we thought it worth highlighting the recent trend to new money going into housing in new ways. The moves yesterday were in a relatively tight band with Capita falling by 31p to 546p, 5.4% but of that fall 20.6p can be ascribed to the stock going XD with its final dividend payment for 2016. Kier got some support yesterday and was our best performer rising 1.1% to 1246p having been a tad friendless in recent months.