Edison Investment Research

Brexit: The big guns go silent

PM May has quietened her opposition for now – but will it be enough?

Overnight, the UK and EU have agreed an additional instrument which provides further assurances that the Northern Ireland backstop will be temporary. In particular, should either the UK or EU act in a manner which seeks to apply the backstop indefinitely, as decided by an arbitration panel of judges, then the other party would be entitled to a suspension of its obligations under the Withdrawal Agreement. It is not a time-limit on the backstop, nor a change to the Withdrawal Agreement. It also does not give the UK a unilateral right to terminate its obligations under the Withdrawal Agreement, but merely appeal to arbitration in the event of suspected foul play. Nevertheless, the mechanism for unilateral suspension is a significant concession in our view which may be sufficient to win over enough MPs in the UK’s Parliament. Key to any success will be the legal opinion expected later today of UK attorney general Geoffrey Cox.

F&C Investment Trust (FCIT); annual report: share price total return of -0.6%

The company’s dividend per share grew 5.8% to 11.0p

For the year ended 31 December 2018, F&C Investment Trust reported NAV total return of -3.3% with debt at market value. Share price total return was -0.6%, above the benchmark of -3.4%.

MOD Resources (MOD.L); receives first set of infill drill results.

High-grade assay results over large intercepts confirm deposit continuity

MOD Resources has received the assay results from the first 11 infill drill holes at its 100% owned T3 Copper Project, located in the Kalahari Copper Belt of Botswana. The assay results for 14 additional holes that have already been completed are pending, while an additional 35 holes are still to be drilled. This drill programme is expected to be completed mid-year.

Mercia Technologies (MERC); Concepta announces partnership with Walgreens Boots Alliance

Mercia Technologies announced that its AIM-listed portfolio company Concepta has secured a commercial partnership with Walgreens Boots Alliance for the supply of its revolutionary women’s fertility and hormone testing product, myLotus. Mercia has an 18.2% direct equity stake in Concepta.

Witan Investment Trust (WTAN); annual report: NAV total returns below the benchmark

For the year ended 31 December 2018, Witan Investment Trust reported NAV returns of -8.4%, which is below the benchmark return of -6.5%. The company’s five-year NAV total return was 52.1%, compared with benchmark returns of 44.6%. Revenue earnings per ordinary share for the year were 25.92p.

Primary Health Properties (PHP); primary care centre in Dublin acquired for €10.9m

Meath’s c. 2,770m2 property is fully let with an unexpired lease term of around 16 years

Meath PCC, which provides a range of local integrated care services, has been acquired by an Irish investment vehicle wholly owned by PHP.

Provident Financial ( PFG); rejects takeover bid from Non-Standard Financial

Provident Financial has issued another rejection of the £1.3bn hostile takeover bid from Non-Standard Financial. Following last week’s publication of the formal offer document, Provident states that it believes the bid is “strategically and financially flawed and presents significant risk in terms of both execution and shareholder value”.

Hutchison China MediTech (HCM); announces FY results: revenue of $214.1m, net loss of $74.8m

Group figures are in line with Chi-Med’s most recent guidance

Hutchison China MediTech (Chi-Med) reported consolidated revenue of $41.2m vs. $36.0m in 2017, mainly from service fee payments from AstraZeneca, Lilly and Nutrition Science Partners. The company also received $13.5m in milestone payments from Lilly following approval of its fruquintinib drug. Fruquintinib was launched under the brand name Elunate and generated $3.3m in revenue and $0.3m in royalty income during the last five weeks of 2018.

Globalworth Real Estate Investments (GWI); combined portfolio value up 35.6% to €2.5bn

Globalworths occupancy was 95.1% vs. 93.3% last year

Globalworth Real Estate Investments (GLA) reported that net operating income increased 161% year-on-year to €60.9m, from €16.8m. EPRA NAV per share rose 2.3% to €9.04 and the LTV ratio stood at 43.9% vs. 34% last year.

ECB: Buy the rumour, sell the news

Markets had run ahead of ECB’s policymaking; valuations suggest near-term rally complete

Despite the ECB’s policy action yesterday, which pushed out the date of the first interest rate increase and confirmed a substantial package of targeted bank financing intended to ease credit conditions for the corporate sector, the market reaction was largely negative. Yet a key part of our bullish call in January was that equity valuations had retreated to levels which were close to long-term averages, a relatively unusual occurrence in this economic cycle. Since then, equity valuations have rebounded sharply as markets have risen while 2019 consensus profits estimates have fallen. This was largely in anticipation of easier monetary policy in our view. We now expect markets to trade only sideways in the absence of a near-term catalyst, while awaiting evidence of a turn in the economy during Q2/Q3. In respect of a US/China trade deal, the apparent cancellation of the Xi/Trump summit due in late March is however unhelpful for sentiment.