Europe
The FTSE-100 finished yesterday's session at 6,161.63. The FTSE AIM All-Share index closed 0.46% higher yesterday at 712.12. Continental markets ended higher, taking positive cues from upbeat economic data from China and an increase in oil prices. Furthermore, healthcare stocks rallied after Pfizer and Allegran agreed to terminate their merger. France's CAC 40 and Germany's DAX gained 0.8% and 0.6%, respectively. To read our latest research click here.
Wall Street
Wall Street ended in the green amid a sharp rise in oil prices. The Fed's meeting minutes indicated a very low likelihood of a rate hike in April, thereby calming investor sentiment. The S&P 500 advanced 1.1%, driven by gains in the healthcare and energy sectors.
Asia
Equities are trading higher after the minutes of the Fed's latest meeting confirmed that US policymakers are in no hurry to raise interest rates. Investors cheered improvement in oil and commodity prices. The Nikkei 225 rose 0.2%, while the Hang Seng was trading 0.4% higher at 7:00 am.
Oil
Yesterday, WTI and Brent oil prices increased 5.2% each. The spread between the two varieties stood at US$2.1 per barrel.
Headlines
New car sales in UK reach 17-year high in March
As per data from the Society of Motor Manufacturers and Traders, new car sales in the UK rose 5.3% y-o-y to 518,707 in March, the highest volume since 1999. This increase can be ascribed to growth in the UK's car industry, driven by cheaper finance and stronger exports. For the first three months of 2016, sales rose 5.1% to 771,780 units.
Company news
HSS Hire (LON:HSS, 84.0p) - Hold
HSS Hire Group plc yesterday announced results for the year-ended 26 December 2015. Financial highlights included management's declaration that FY15 results were in line with revised expectations, with revenue up 10% to £312.3m (2014: £284.6m) including organic growth of 8%. Adjusted EBITA was £20.3m (2014: £31.2m), reflected incremental depreciation from significant fleet expansion through 2014 and 2015, with adjusted operating profit of £15.4m (2014: £27.3m). Reported operating profit of £6.8m (2014: £23.6m) included exceptional costs, leaving adjusted earnings per share of 3.2p (2014: 8.4p) against a reported loss per share of 9.9p (2014: 8.6p). It also declared a final dividend of 0.57p proposed, bringing full year dividend to 1.14p. Management went on to note that the second half had recorded stronger growth for existing and new Key Account customers. The Group continued to gain market share, with revenue growth of 10% being well ahead of the overall UK equipment rental market growth of 1.5%. Gross cost savings of £2.4m achieved in Q4 15. Targeting annualised cost savings of £10m in 2016.
Our view: Having seen its share price recover quite dramatically since Beaufort first placed HSS on its Speculative Buy list in mid-August last year, it is realistic now to anticipate a pause for breath. Full year results contained little in the way of surprises, although management has successfully put in place the foundations for further growth while continuing to refine its cost base and distribution network in order to optimise operating leverage. Improved activity reported during 2H'2015 has also been sustained into the new year. That said, the absence of last year's General Election hiccup, more predictable weather patterns plus the activity rush created by the hike in stamp duty for Buy-to-Let and second homes, means it would be something of a surprise if Q1'2016 revenues were not quite comfortably ahead of the comparable period. Having passed this date, however, a slowdown might now be anticipated which, compounded by uncertainty ahead of the looming Brexit vote (23rd June), will have been behind management's relatively cautionary reference to it remaining 'watchful of broader economic headwinds.' It also noted that 'Market conditions remain competitive in all customer groups'. The background environment, of course, remains fundamentally positive: Relaxed planning legislation/low interest rates/energy costs continuing to power RMI activity, in tandem with demand-side subsidies that support new housebuilding in a significantly undersupplied market place. But against this, the market will focus on HSS's high net debt of £218m (being leveraged 3.1x 2015 EBITDA) as a factor potentially limiting its ability to fully participate in the continuing recovery. Beaufort's 2016E eps forecast remains toward the upper end of market expectations at 6.7p (followed by 8.5p the following year), but present uncertainties mean that Beaufort has decided to cut its own price target from 100p/share to 90p/share and reduce its recommendation to 'Hold' until improved visibility justifies a further earnings upgrade.
CityFibre Infrastructure Holdings (LON:CITY, 56.0p) - Speculative Buy
Yesterday, CityFibre Infrastructure Holdings (CityFibre) announced the first sale of dark fibre capacity on its 1,100 km national long-distance network (LDN) acquired from KCOM Group. CityFibre has won a 15-year, £2.3m contract with SSE Enterprise Telecoms, covering a 48 km stretch of network between Reading and Slough. The transaction is arranged as an indefeasible right of use (IRU), so most proceeds are received up front, with a small annual recurring charge for the remainder of the contract term.
Our view: This news augurs well for CityFibre as SSE is the first national service provider to buy dark fibre capacity over CityFibre's newly acquired LDN. The contract reflects strong demand for CityFibre's fibre connectivity, as it is the fourth deal related to CityFibre's newly acquired LDN. Recently, the company has been seeking acquisitions and partnerships to widen and strengthen its market presence. Earlier this week, CityFibre signed contracts with two new service providers for its Leeds and Bradford networks. CityFibre has a route length of 190 kilometres of ducted fibre across Leeds and Bradford, which would offer its partners coverage in one of the largest metropolitan areas outside London. In March, CityFibre signed an agreement with Updata Infrastructure to provide the latter with its existing national network infrastructure as a platform for public sector and enterprise customers. With a bunch of impressive contracts, national-level partners and partnership with UK's leading broadband service providers, CityFibre is well placed to cater to a large customer base. Therefore, we maintain a Speculative Buy rating on the stock.
EasyJet (LON:EZJ, 1,476.0p) - Buy
Yesterday, EasyJet released passenger statistics for March 2016. During the month, passenger traffic rose 4.3% y-o-y to 5,728,114 and the load factor fell 1.3 percentage points to 91.3%. On a rolling basis for the past 12 months, passenger traffic rose 7.2% to 70,761,515 and the load factor improved 0.6 percentage points to 91.5%.
Our view: EasyJet fared well in March 2016, with passenger traffic rising during the month. The company's strategy of easy and affordable travel aided in strong growth in passenger numbers. EasyJet also benefitted from low oil prices. Although the load factor fell slightly, EasyJet recovered from the impact of terrorist attacks in Egypt and Paris. Recently, EasyJet reported strong performance for Q1 2016 despite the disruption by terrorists. The board expects pre-tax profit for FY 2016 to remain in line with market expectations, helped by prudent cost management, low fuel prices, disciplined capacity allocation and resilient trading. It has estimated that at January's exchange rates and with fuel trading at US$350–450 per metric tonne, its unit fuel bill for FY 2016 is likely to decrease by £165–180m from FY 2015 levels. Furthermore, the company plans to expand its services by increasing its flight offerings. Recently, several strategic routes were launched, including Vienna and Basel, which are expected to carry 78,000 passengers annually. In view of this argument, we maintain a Buy rating on the stock.