“The UK stock market bounces back with a near -1% rise on Tuesday, trading at 7,180 in the first hour of the market being open. Miners, utility companies, pharma firms and financial services groups all lead the charge,” says AJ Bell Investment Director Russ Mould.
“For the second time in a little over six months online takeaway platform Just Eat has announced a big investment plan which will constrain earnings. Again, the move has been punished by the market in the short-term; the key question is whether the news will ultimately be shrugged off like it was before.
“The company wants to put money into its overseas expansion strategy – international revenue was up 75% in 2017 and it now accounts for nearly half of group revenue. Cash will also be invested into the provision of deliveries on behalf of branded restaurants which Just Eat reckons represents an £18bn market opportunity.
“However, delivering food will involve extra costs which are not incurred through the company’s web-based activities.”
“The packaging sector doesn’t often hit the headlines but it is having a rare moment in the sun thanks to a surprise takeover approach for Smurfit Kappa. The proposal by US-based International Paper has already been rejected on grounds that it doesn’t reflect Smurfit’s ‘true intrinsic business worth or its prospects’.
“This sector may seem as boring as you can get, however it has had plenty of takeover action in the past. Companies have been acquired to give the buyers more scale and access to more specialty products.
“In January American corrugated packaging group WestRock (the second biggest US player after International Paper) agreed to pay $4.9bn including net debt for KapStone. There have also been recent rumours that Amcor wants to buy US packaging group Bemis.
“Even the UK stock market has seen its fair share of packaging sector takeover action, albeit involving smaller companies. Former AIM-quoted Powerflute was acquired by Nordic Packaging in 2016 and then sold to Mondi last year. And British Polythene Industries was bought by RPC a little less than two years ago.”
“A drop in profit at emergency power provider Aggreko had been widely trailed ahead of its 2017 results so the negative share price reaction this morning probably reflects guidance for zero profit growth in 2018 once the impact of currency movements is stripped out, with a material weighting towards the second half.
“The company has been hit by issues in its Argentinian business where several contracts have been renegotiated. The well-regarded Heath Drewett joined as finance director from engineering firm WS Atkins in January. Investors should be braced for the risk of a further reset to expectations once he has got his feet under the table.”
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