The FTSE-100 finished Friday's session 0.46% higher at 6,730.48, whilst the FTSE AIM All-Share index closed 0.26% better-off at 740.22. In continental Europe, markets ended mixed after the release of weak economic data in the region. Investors remained concerned over the Eurozone's economic growth after Brexit. France's CAC 40 edged 0.1% higher, whereas Germany's DAX dropped 0.1%.
Wall Street ended in the green amid better-than-expected manufacturing data released in the US. Investors digested a mixed set of corporate earnings released. The S&P 500 rose 0.5%, driven by gains in the utilities and telecom sectors. For the week, the markets closed 0.6% higher.
Equities are trading lower, as investors await central bank meetings in the US and Japan this week. The Nikkei 225 closed broadly flat, despite positive export data released in Japan. The Hang Seng was trading 0.2% down at 7:00 am
On Friday, WTI prices slid 1.3% to US$44.19 per barrel, while Brent oil prices fell 1.1% to US$45.69 per barrel.
UK's private sector contracts sharply in July
As per Markit, the UK's private sector activity declined at the fastest pace since early 2009. The flash composite output index slumped to 47.7 in July from 52.4 in June, the lowest reading in 87 months. The manufacturing PMI dropped to 49.9 from 52.1 in June, the lowest in 41 months. In addition, the services PMI slipped to 47.4 in July from 52.3 in June, an 88-month low.
Big Yellow Group (LON:BYG, 718.50p) - Hold
Big Yellow Group (Big Yellow) released a trading update for the first quarter ended 30th June 2016 (Q1 2017). During the period, revenue increased 10% y-o-y to £26.4m, with like-for-like (LFL) revenue growth of 8.0%. Big Yellow reported a 3% increase in store maximum lettable area (MLA) to 4.55 million sq ft. Big Yellow had 3.55 million sq ft occupied at the end of Q1 2017, up 7% from Q1 2016, with an occupancy rate of 78.0% compared with 75.5% in the same period last year. LFL closing occupancy improved 3.0% to 78.5%. Average LFL net achieved rent per sq. ft. increased to £25.99 from £25.31 in Q1 2016. Revenue from Armadillo portfolio in Q1 2017 rose 11% y-o-y to £2.5m. LFL revenue, excluding West Molesey and Canterbury (acquired from Lock and Leave on 28th April 2016), increased 6% compared with the same quarter last year. In July 2016, Big Yellow entered into an interest rate derivative over £30m of its debt at 0.4% plus underlying margin on the loan until October 2021. After the expiry of an outstanding hedge on £30m of its debt in September 2016, the group's pro forma average cost of debt would be 3.2% compared with 3.5% as at 30th June 2016.
Our view: Big Yellow delivered satisfactory performance in Q1 2017. The group's revenue increased, driven by a rise in average rent charged, higher occupancy rate and greater storage space available for rent. Big Yellow continued its investments to increase capacity, acquire new sites and open new stores. The group has the largest market share in visits to self-storage company websites in the UK, ranging 34% to 40%. However, Big Yellow's performance in the near term may be impacted by the Brexit, which has dampened consumer confidence and appears set to trim economic growth in the region. The group is still remains in expansion phase, but this appears to be largely in the price. Therefore, we maintain a Hold rating on the stock.
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CRH (LON:CRH, 2,252.0p) - Hold
CRH, an international building materials company, released an earnings update for H1 2016. As per CRH's update on 27th April 2016, the company's EBITDA was expected to be close to €1bn for H1 2016. Given its performance in the latter part of Q2 2016, CRH expects H1 2016 EBITDA at about €1.1bn. CRH would publish its full interim report for H1 2016 on 25th August 2016.
Our view: CRH has performed well in Q2 2016; therefore, it expects a 10% rise in EBITDA in H1 2016 vis-à-vis the previous guidance. Usually, the first half of the year is less significant as activity typically remains seasonally lower. However, favourable weather conditions improved construction activity, which was supported by continued positive economic trends, and in turn improved sales. As per a trading update for Q1 2016, CRH delivered good performance driven by strong sales in the Americas. In the US, the demand for aggregates and ready-mixed concrete was high with positive pricing trends and asphalt volumes were strongly ahead; however, prices reduced due to a continuing low input cost environment. In Europe, markets stabilised while pricing remained competitive. In Asia, strong demand for cement, particularly in the Philippines, was supported by increased foreign direct investment in the business process outsourcing sector, overseas workers' remittances and increasing government infrastructure spend. In H2 2016, the management expects to continue to make progress on a group EBITDA basis in the absence of any major financial or energy market dislocations. We maintain a Hold rating on the stock.
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Vodafone (LON:VOD, 235.55p) - Buy
Vodafone, one of the world's largest telecommunication company, on Monday, provided trading update for the quarter ended 30 June 2016 (Q1 FY2017). During the period, revenue fell by -4.5% to €13.4bn due to -5.3% adverse foreign exchange rate effect. The Group service revenue fell -3.3% on reported and advanced +2.2% at organic basis to €12.3bn, consists of Europe (-1.7% reported and +0.3% organic basis) and AMAP (-5.5% reported and +7.7% organic basis). On the operational front, the growth in Europe remains stable despite the regulatory pressure on lower roaming fees with only UK recorded negative organic service revenue of -3.2%. AMAP on the other hand has maintained its growth momentum, seeing growth in all major markets, with particularly strong service revenue growth from Turkey (+11.5%), Egypt (+9.4%) and Ghana (+20.3%). The Group said 4G customers has doubled year-on-year to 52.5m and data volumes jumped by +63%, while broadband has added 348,000 new customers in Q1, bringing total to 13.7 million. Enterprise (services to business customers) grew +2.6% in Q1 as Vodafone Global Enterprise, which provides services to biggest international customers, achieved revenue growth of +6.3%, driven by increasing trend among multinational corporations to use a single provider of services across its operating countries.
Our view: Vodafone continue to perform well in Q1 FY2017, registering good organic service growth driven by strength in AMAP. As a multinational company with extensive foreign currency exposure, the recent fluctuation in exchange rates has caused an overall negative -5.3% translational effect on Group revenues. The majority of this adverse currency movement was due to weaker AMAP regions (-12.6%), particularly the South African Rand, Turkish Lira, Egyptian Pound and Indian Rupee. The Group said, however, its Q1 trading was in line with management's expectations and reaffirmed its FY2017 outlook. As expected, the Group is witnessing mobile usage shifting from traditional voice calls & text towards fast data, as also seen through Vodafone's excellent growth in 4G customers and the data volumes. This is of course, steered by 'new norm' of owning smartphones, falling data prices (now even pressuring for lower Euro roaming cost) and improving quality of mobile networks. People increasingly wish to stream TVs and videos from their smartphones at any time, while the recent worldwide craze in Nintendo game, Pokemon Go, could attract more data requirement, assuming that its popularity continues uninterrupted. There are so far 11 out of 27 countries where Vodafone operates, has Pokemon Go available to play, including UK. Vodafone's 'more-for-more' commercial offerings of larger data bundles and extra services is set to attract more customers across multiple markets. The Group said it sees "substantial opportunity for future growth" for 4G service in Eurozone. With the Group also strengthening its customer base in broadband and grew revenue from Enterprise, we are left sharing the management's optimism. Beaufort reiterate its Buy rating on the shares.