LONDON MARKET OPEN: Pershing Square rises 6% on Universal Music debut

(Alliance News) - Stock prices in London opened higher on Tuesday, rebounding from sharp losses ...

Alliance News 21 September, 2021 | 8:58AM
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(Alliance News) - Stock prices in London opened higher on Tuesday, rebounding from sharp losses on Monday, after a global slump on Monday was sparked by fears of the possible collapse of Chinese property firm Evergrande.

In the FTSE 250, UK transport rivals National Express and Stagecoach were higher after confirming merger talks.

The FTSE 100 index was up 48.56 points, or 0.7%, at 6,952.77. The UK flagship index ended down 59.73 points, or 0.9%, at 6,903.91 Monday, its lowest close since July.

The mid-cap FTSE 250 index was up 124.16 points, 0.5%, at 23,525.88. The AIM All-Share index was up 2.08 points, 0.2%, at 1,257.08.

The Cboe UK 100 index was up 0.7% at 691.40. The Cboe 250 was up 0.6%, at 21,298.30. The Cboe Small Companies was 0.4% higher at 15,410.69.

In mainland Europe, the CAC 40 stock index in Paris was up 1.1% and the DAX 40 index in Frankfurt was up 0.6%.

In the FTSE 100, Pershing Square Holdings was the best performer, up 5.9%, following the successful stock market debut of Universal Music in Amsterdam, in which it holds a 10% stake.

UMG's float price was EUR18.50 per share, putting its value at EUR33.5 billion on admission. The stock was quoted at EUR25.57 on Tuesday morning, 38% above the reference price.

The world's biggest label, which boasts a roster featuring Kanye West, The Weeknd and Taylor Swift, is based in the US but owned by French media firm Vivendi, which is offloaded a majority stake of the lucrative unit on Amsterdam's Euronext index on Tuesday.

Vivendi sold off a 20% stake of Universal to Chinese tech firm Tencent and 10% to US financier Bill Ackman who owns Pershing Square.

Royal Dutch Shell 'A' and 'B' shares were up 3.4% and 3.3% respectively. the oil major said on Monday it is selling its assets in the shale-oil rich Permian Basin of the US to rival ConocoPhillips for USD9.5 billion.

Shell plans to use the proceeds from the sale of the assets, which produce an average of 175,000 barrels per day, to fund a USD7 billion payout to its shareholders and strengthen its finances.

The assets sold by Shell's US unit include 225,000 acres of land in Texas with more than 600 miles of oil, gas and water transmission pipes, according to ConocoPhillips.

British Airways-parent International Consolidated Airlines Group was up 4.3% after the US government on Monday relaxed border restrictions for fully vaccinated travellers from the UK and European Union.

Segro was up 2.0% after Goldman Sachs promoted the warehouse property investor to its Conviction Buy List.

At the other end of the large-caps, Kingfisher was the worst performer, down 4.5%, despite the DIY retailer saying it delivered a strong financial performance in the first half of its financial year and declaring a share buyback.

For the six months to July 31, revenue was GBP7.10 billion, up 20% from GBP5.92 billion last year, and pretax profit was GBP677 million, up 71% from GBP398 million. Kingfisher posted like-for-like sales growth of 23% from a year before, with strong performances in the UK & Ireland, France, Iberia and Romania.

The B&Q and Screwfix owner declared an interim dividend of 3.80 pence, up from the 2.75p paid last year. In addition, the board announced the return of GBP300 million of surplus capital via a share buyback programme. The programme will commence soon, it said.

Kingfisher said it has seen a good start to the second half of the year with resilient demand across all markets.

Looking ahead, Kingfisher expects financial 2022 adjusted pretax profit in the range of GBP910 million to GBP950 million. It posted adjusted pretax profit of GBP786 million in financial 2021, so results will be up at least 16%.

Richard Hinter at interactive investor commented: "Kingfisher is in the centre of the current supply chain blockages, impacting product supply and availability, and cost inflation which is affecting many sectors at present. More broadly, the lingering effects of the pandemic in many of its regions add an element of caution to its outlook.

"Nonetheless, there is clearly progress being made and continuing investment in its online offering as well as the expansion of Screwfix stores should drive further gains. The company has increased its outlook on sales in the second half, notwithstanding that these should still be shy of the corresponding period last year."

Compass Group was down 0.5%. The contract caterer said its full-year revenue performance is set to come within reaching distance of pre-pandemic levels after a better-than-expected fourth quarter.

Compass, ahead of the end of its financial year on September 30, said revenue in the fourth quarter is expected to improve to 86% of 2019 levels, which is slightly ahead of previous guidance of 80% to 85%.

For the full-year, underlying operating margin is expected to be 4.4%. This would mark a sharp improvement on the 2.9% posted for the 2020 financial year, but below the 2019 level of 7.4%.

Looking ahead to the start of the new financial year, Compass said most of its sectors are expected to continue performing well. However, it remains cautious about Business & Industry, given continued uncertainty over the pace of office reopening in major markets.

For the full-year, the FTSE 100-listed firm said revenue is expected to be 76% of 2019, being pre-pandemic, levels.

In the FTSE 250, National Express was up 4.2% after the transport company confirmed it is in discussions with peer Stagecoach over a possible all-share combination.

The statement confirmed a report by Bloomberg News that National Express was looking to make a takeover bid for Stagecoach.

Under the deal terms, it is expected that Stagecoach shareholders would receive 0.36 of a new National Express share for each Stagecoach share, resulting in them owning around 25% of the combined group. The formula represents an 18% premium on Stagecoach shares.

Stagecoach shares were up 17% at 79.85 pence.

The Japanese Nikkei 225 index closed down 2.2% on Tuesday, Tokyo reopening after being closed on Monday for a holiday. The Hang Seng index in Hong Kong was flat. Markets in Shanghai remained closed for the Mid-Autumn Festival. The S&P/ASX 200 in Sydney ended up 0.4%.

Evergrande Property Services Group, one of China's biggest developers, is on the brink of collapse as it wallows in debts of more than USD300 billion.

There are fears that Chinese authorities may not be able to contain the fallout of the firm's potentially disorderly collapse, which could affect many other companies and poses contagion risks, experts say.

Evergrande shares were up 3.4% in Hong Kong, having closed down 11% on Monday.

Currency markets were subdued ahead of the US Federal Reserve's interest rate decision at 1900 BST on Wednesday. The pound was quoted at USD1.3675 early Tuesday, down slightly from USD1.3678 at the London equities close Monday.

The euro was priced at USD1.1732, little changed from USD1.1734. Against the Japanese yen, the dollar was trading at JPY109.59, up from JPY109.46.

Brent was quoted at USD74.74 a barrel Tuesday morning, up from USD74.58 late Monday. Gold stood at USD1,761.35 an ounce, marginally lower from USD1,764.07.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

Copyright 2021 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Rating
Kingfisher PLC 341.80 GBX 0.35
Compass Group PLC 1,442.00 GBX -0.89
International Consolidated Airlines Group SA 156.06 GBX -2.56
Segro PLC 1,288.50 GBX 0.74 -
Royal Dutch Shell PLC B 1,767.60 GBX -0.27
National Express Group PLC 224.40 GBX 3.41 -
Stagecoach Group PLC 76.60 GBX 2.47 -
Royal Dutch Shell PLC Class A 1,749.20 GBX -0.40
Pershing Square Holdings Ord GBP 1,897.02 999 -

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