Top tip: if you ever wish to take the 3am flight from Dubai to London Heathrow (which arrives at 7am UK time) is not to have arranged a bunch of conference calls and even a presentation (fortunately online) for the few hours afterwards. So I am struggling a bit, but needs must as it is a few days since I have published. I expect I will go back and consider reporters earlier this week such as easyJet (EZJ) another time, but let us review three names that strike me as worthy of note now. First up...bad boy Royal Mail (RMG)…
I wrote on this in January 'I do not own shares in the company...but I can see myself owning them sooner rather than later'. Well it is lucky I did not as the shares have had a shocker during 2019, not helped by the insistence of Jezza's Labour Party to nationalise them. Now a funny old half-year update, with comments such as 'group revenue was up 5.1 per cent, including our best UK revenue performance in 5 years' and some in-line comments then augmented with 'lower than anticipated GDP and lower GDP forecasts for 2020-21, together with business uncertainty, are expected to have an impact on addressed letter volumes'. Numbers reduced here combined with the continuing high profile industrial disputes have pushed the shares sharply lower again, back to the two quid levels last seen in July. So very out-of-favour...and you cannot trust the current x10 operating profit rating as the expectation is that 2020-1 core UK postal profits (even with the good parcels business) could be around breakeven due to ongoing transformation costs, which could nibble headline operating profits by a third year-on-year. Overall, it is one for the brave here. I will let you know if I have a punt but my gut feel is...there are far easier things to be doing.
You could make a bunch of similar concerns re. nationalisation and uncertainty about Centrica (CNA), but the share price here continues to slowly recover. Again numbers were inline, although Centrica 'expect adjusted earnings to be weighted towards the second half of the year...adjusted operating cash flow to be in the lower half of the targeted £1.8-£2.0bn range'. That does not sound good but earnings and debt number hopes were not changed and the company has picked up some more customers, helping to reverse recent trends ('total customer account holdings increased by 214,000 in the four months to October and have increased by 528,000 in the ten months to October'). Even I was too pessimistic about not aggressively adding to the stock at the lows back in August... but I least I have kept on holding the stock. I continue to do so and suggest you do too.
Finally, I have loved up Johnson Matthey (JMAT) before on the basis of positive thematic exposure to areas such as recycling and refining of precious metals, clean air (legislation apparently going to be positive for the next year), car emissions regulation, batteries and value-adding fine chemicals. I talked about both the thirty quid and thirty-two quid levels here a few months ago. After the latest update the shares are below the lower of these two levels. No fire here, just some strange comparisons. Bottom-drawer value – and I would buy today if you do not own already or fancy upping the large cap quality component of your portfolios at a current mid-teens earnings rating. Otherwise...an early night awaits!
Filed under: Royal Mail, Centrica, Johnson Matthey, FCA, SFO, Live Company, Science in Sport, easyJet
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