Edison Investment Research

Market Commentary - Housing, Infrastructure, Construction and Services

News today comes from Speedy Hire and Michelmersh.  On the issue of Brexit Michelmersh concludes it is too early to know the long-term impact but, somewhat curiously then adds that the outcome of the referendum will have no material affect on the near-term financial results or future growth prospects. What we do know is that there is a short-term hiatus as the PMI figures last week indicated, that recruitment is reducing and that prices are likely to rise in response to sterling’s decline, as is seen at the petrol pumps already. News this week comes from Keller’s AGM tomorrow, Taylor Wimpey reports interims on Wednesday, on Thursday Rentokil has its interims and Compass provides an update and on Friday Berendsen reports its half-year results.

Inside the White House

A guide to the US budgetary process

Last week I wrote about what Donald Trump as President of the United States might mean for the US Defence Budget and I noted that in an election year, the President’s ability to alter the budget is quite limited. Today I look at why that is the case by unpicking the rather confusing and protracted US budget process.

UK earnings trends - stable and few surprises

There has been much speculation in regard to the economic and market impact of the UK’s vote to exit the EU. However, even four weeks after the date of the referendum, there is no hard data to rely on. In the circumstances, survey data may also be misleading, with the risk that it reflects a projection of the personal views of respondents rather than a cold analysis of future prospects.  However, early indications are that 2016 UK consensus earnings forecasts have remained stable, a continuation of the trend seen since February.

In dancing with Softbank, ARM may start stepping on more toes

In dancing with Softbank, ARM may start stepping on more toes.

One of the key factors behind ARM’s rise is that it has carefully avoided stepping on its customers toes. To the frustration of certain shareholders, it kept royalty rates affordably low – a low single digit percent of the chip price – despite its dominant position. And while the company has progressively expanded its portfolio of designs, it has done so in a measured fashion, carefully selecting domains which do not compete with those of its key customers. Its acquisitions have for the most part been small and focused – Falanx for graphics processing and more recently the likes of Sansa Security and Offspark for IOT security.

Porcupine Basin Phase 2

The Porcupine Basin is an exploration hotspot, driven both by the interest in Jurassic plays similar to those found in the analogous Flemish Pass basin offshore Canada and in Cretaceous stratigraphic prospects similar to those encountered offshore West Africa. As such, the 2015 Atlantic Margin licencing round has been the most successful to date, with a record number of 43 applications from 17 companies. With Phase 2 of these awards announced in June 2016, we are providing an update to our Exploration Watch on the Porcupine basin published in April 2016. For a more detailed introduction to the basin, please refer to our original note.

The end of the road for the A380?

A look at why the business case for the A380 has gone wrong

Airbus launched the A3XX aircraft (which would become the A380) in 1997 based on winning 650 orders over the next twenty years. It claimed to be in consultation with 20 leading airlines about their requirements for a new double-decker aircraft. Nineteen years on, the A380 has won just 319 orders from 18 airlines. So where has it all gone so wrong for what is Airbus’ flagship aircraft? In addition, with the announcement last week at the Farnborough Air Show that the production rate has been cut to twelve per year, what does the future hold for the programme?

Conoco sells Senegalese discovery blocks - fair price?

Conoco’s sale of its interests in Senegal can be used as a barometer of industry sentiment and as a yardstick on valuation of the assets.

We believe the deal reached was a fair reflection of the value of the assets given the current environment, where the collapse in the oil price has lead to a re-evaluation within the industry. Conoco may have signalled its intent to sell the assets, but as a result this was an open process where all comers could have bid.

The rain fell mainly on the planes

Farnborough Airshow 2016 rant, sorry round up

When considering my view on the Farnborough International Airshow 2016 it is tempting to focus on the chaos of the first couple of days at the show. Monday’s washout was spectacular, and when we were eventually cleared from the site at around 5.30pm there was hardly anybody left. Even the ice cream van had gone home!

Full speed ahead for Successor

UK's nuclear deterrent looks assured with May as PM

On Wednesday evening, Theresa May was asked to write her orders for how the military should react in the event of nuclear war. Not exactly the easiest first few hours in a new job and probably cause for a sleepless night. However, the executives at the top of the UK defence industry will probably have slept a little more soundly as the future of Trident finally looks secure under her leadership.

Market commentary - housing, infrastructure, construction and services

This morning Homeserve did not miss the opportunity to issue another trading statement.Given the wide variations in price of recent weeks the HICS sector was benign yesterday, despite the news on interest rates. In the absence of new news it’s worth a quick look at where we are ytd based on closing prices last night. The key question is whether the stocks that have been shunned in recent weeks have better recovery potential than current valuations imply; conversely, the other issue is whether the “safe havens” can maintain current outperformance.