Market Commentary - Housing, Infrastructure, Construction and Services
There is no relevant news from HICS sector companies this morning. The HICS sector was positive yesterday with nearly all stocks rising in our closely watched universe of 22. Polypipe restored some of it strength with the biggest rise, up 3.3% to 277p. Homeserve was the weakest performer yesterday, down 0.1% to 572p on low trading volume, with just 76,044 shares traded
There is no relevant news from HICS sector companies this morning. There is an end of term sense at present ahead of the August Bank Holiday and the restart of business in earnest in September when the real implications of Brexit will start to emerge and become more fully evident and be discussed at company board meetings.
Industry sources are speculating on the winners in the P22 Department of Health procurement framework worth up to £5bn over the next four years; of the six companies expected to be appointed three are quoted entities, Kier, Interserve and Galliford Try. Balfour Beatty is on the current P21 framework along with KIE, IRV and GFRD but will not be on the new one, we expect.
The HICS sector was positive yesterday with nearly all stocks rising in our closely watched universe of 22. Polypipe restored some of it strength with the biggest rise, up 3.3% to 277p. It remains well below the level reached just before its solid results were announced earlier this week and the close at 360p in September last year, despite market conditions remaining broadly stable, so far. We would argue that with 23.5p of EPS likely this year and 27p next year that it is undervalued. Grafton was up 2.5% and Travis Perkins by 2.1% as the trading news from Kingsfisher, especially the lack of any Brexit impact in the short term, improved sentiment towards the Builders Merchants. Grafton reports it half year on 31 August and we are expecting a positive report, especially from Ireland which accounts for 20%+ of GFTU’s sales. The attention in GFTU’s statement will be on trading since 24 June as we already know the revenue developments to end June (the last trading update was 12 July) and can expect that the cost structure will be unchanged.
Homeserve was the weakest performer yesterday, down 0.1% to 572p on low trading volume, with just 76,044 shares traded. There are few conclusions to draw from that shift save that recent enthusiasm for the stocks has faded and with the consensus forecasts at around 24p of EPS this year and 27.5p next year (to end March 2018), the valuation remains high by historical and by peer group standards.
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