Sky bid battle, Persimmon’s dividend delight and Greggs’ pedestrian earnings

“The UK stock market continues to nudge ahead with the FTSE 100 rising 0.3% to 7,310 in early trading on Tuesday. Media stocks, housebuilders and banks dominate the leader board,” says AJ Bell Investment Director Russ Mould.

Sky

“The plot has thickened at Sky as NBC and Universal owner Comcast trumps 21st Century Fox’s longstanding recommended takeover offer with a higher-priced proposal.

“The company looks in high demand given that Disney is also in the mix after agreeing its own deal for Fox’s media assets including Sky. The interest in Sky reflects its leading market positions in the UK, German and Italian TV markets.

“Sky’s shares were already trading above Fox’s £10.75 per share bid level before news of Comcast’s £12.50 cash bid, suggesting the market expected either some movement on Fox’s existing offer or for a rival to emerge.

“The shares quickly traded above Comcast’s proposal as soon as the market opened today. That’s the market suggesting there may be a bid battle with Fox and/or Disney forced to come back with more.

“Shareholders must now decide whether to sell out now, rather than wait for someone to make the next move, or hold on in hope for an even better deal.

“Comcast seems unlikely to face the same level of regulatory headaches as Fox, which is still awaiting approval on the deal more than a year since it was first agreed.”

Persimmon

“Persimmon’s full year results appear to be breathing some life back in the share prices of the UK quoted housebuilders, many of which have struggled on the market this year.

“Persimmon has reported better than expected pre-tax profit growth of 25% in 2017 to £966.1m. The New Year has also started well with reservation rates up 7% year-on-year.

“Shareholders will be excited about the dividend being enhanced from 110p per year in the four years to 2020 to 235p.

“Against this positive backdrop, it is worth remembering that the share price is highly likely to remain leveraged to sentiment towards the property market.

“Short-term, investors may be drawn back to the sector in the hope that other housebuilders will follow Persimmon’s lead and declare generous dividends.

“Longer-term, house price movements may ultimately prevail over share prices across the sector, as they’ve done on countless occasions in the past.”

Greggs

“Greggs’ evolution continues to take shape with the sausage roll seller now dabbling in the world of almond croissants, strawberry and granola yoghurt and fruit salads.

“Healthier options now account for more than 10% of its sales and the business has also been smartening up the appearance of its shops.

“If you strip out one-off items, its earnings aren’t really growing much. Pre-tax profit for 2017 was up a mere 1.9% to £81.8m and like-for-like sales were up by 3.7%.

“On one hand that is quite pedestrian, on the other it isn’t a bad showing given consumers were faced with an environment of rising inflation which means their disposable income doesn’t go as far.

“The current year looks to be a major turning point for Greggs as that will be its peak year for investment in its supply chain.

“Its product proposition is evolving and the business has laid the foundations to support more efficient operations.

“Now it simply needs to get more people through its doors and sell them even more items if it is to really fire up profit growth.”

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