28th Jun 2023. 8.58am
Regency View:
Update
Regency View:
Update
AstraZeneca receives approval in China for type-2 diabetes treatment
AstraZeneca (AZN) announced that its Xigduo XR combination treatment has received approval in China for type-2 diabetes. The treatment has been approved by China’s National Medical Products Administration as an adjunct to diet and exercise to improve glycaemic control.
The pharma highlighted that Xigduo XR is the only fixed-dose combination of its kind to be approved in China. It offers a first-line treatment option that can improve glycaemic control in type-2 diabetes patients.
In China, there are approximately 129 million people with type 2 diabetes, and many of them struggle with poor glycaemic control. High levels of blood glucose can lead to organ damage and life-threatening complications such as cardiovascular disease and kidney damage.
AstraZeneca pointed out that complex drug regimens often contribute to low glycaemic control due to low medication adherence. Most type-2 diabetes patients in China need to take three to six tablets a day. Therefore, there is a need for effective and innovative therapies that can help improve treatment adherence and lower the occurrence of complications.
This news follows rumours that AstraZeneca is considering separating its China business and listing it in Hong Kong or Shanghai to protect against geopolitical tensions. While plans are still uncertain, the separation would create a separate entity while retaining control.
AZN Daily Candle Chart
Doropo Gold Project shows promising pre-feasibility study results
Centamin (CEY) has released positive results from a pre-feasibility study (PFS) conducted at its Doropo Gold Project in north-eastern Côte d’Ivoire. The study includes the estimation of maiden Mineral Reserves, project parameters, and economics, with potential opportunities for improvement to be evaluated during the definitive feasibility study (DFS).
The PFS revealed a “robust project” that meets Centamin’s requirements to proceed with the DFS. Over a 10-year period, the project is projected to have an average annual gold production of approximately 175,000 ounces at an all-in sustaining cost (AISC) of US$1,000 per ounce.
The estimated internal rate of return (IRR) stands at 26% with a gold price of US$1,600 per ounce. The company plans to complete the DFS by mid-2024 after having already completed a substantial portion of the fieldwork in 2023.
Key highlights of the PFS include a maiden mineral reserve estimate of 1.87m ounces of gold with an average grade of 1.44 grams per tonne. The project assumes conventional open pit mining and the total construction capital expenditure is estimated at US$349m, with a projected payback period of 2.3 years at a gold price of US$1,600 per ounce.
The PFS also identifies potential opportunities for resource and reserve growth, as well as improvements to capital and operating expenditure estimates. The company plans to complete the DFS and environmental and social impact assessment (ESIA) in the first half of 2024, before submitting a mining license application.
CEY Daily Candle Chart
Halma’s strong revenue growth fails to impress market
Halma’s (HLMA) share price dropped last week following the release of its full-year results which narrowly missed forecasts.
The life-saving technology company delivered strong headline revenue growth of 21%, totalling £1.85bn. This growth was driven by strong performance in most sectors and regions, except for a slight decline in the safety sector. The US and mainland Europe showed particularly robust growth, while the UK experienced slower growth.
Despite the positive revenue growth, Halma’s pre-tax profit slipped by 4% to £291.5m. This decline was primarily due to the absence of a gain from the disposal of a Safety Sector business in the previous year. However, the company’s adjusted pre-tax profits were 14% higher, marking a 20th consecutive year of record earnings.
Halma decided to increase its dividend by 7% to 20.20p per share. However, this announcement did not meet market expectations, leading to a 5% drop in the company’s share price on the day of the results. The primary reason for the market’s reaction was the company’s forecasted return on sales for the year, which fell slightly below expectations.
The market’s reaction highlights the challenge of investing in stocks that trade at high forward price-to-earnings multiples. However, despite the short-term market response, we believe that Halma’s recession-proof growth story justifies its premium valuation in the long-term.
HLMA Daily Candle Chart
JD Sports confident in profit forecast amid North American slowdown
JD Sports (JD.) recently released an AGM trading statement, noting a slowdown in its North American trade. However, the sports fashion retailer expects growth in other regions to compensate for this decline.
Despite the challenges in the US and Canadian markets, JD Sports remains confident in its pre-tax profit forecast of around £1.04 billion for the 12-month period ending in January.
In May, the company reported a moderation in organic sales growth, with a rate of approximately 8% at constant exchange rates. This is a decrease from the 15% growth reported in the first three months of the financial year. Nevertheless, JD Sports stated that this performance is in line with its expectations.
It’s worth noting that JD Sports’ competitors in North America, including Foot Locker Inc, also experienced a similar trend. Foot Locker Inc downgraded its outlook due to a significant drop in demand caused by reduced discretionary spending among US consumers.
Despite being aware of the Foot Locker downgrade before re-entering JD Sport last week, it did not alter our long-term view that JD Sports is undervalued. Currently, the shares trade at a forward price-to-earnings multiple of 10.6, a figure we consider to be highly reasonable given JD Sports’ track record and the anticipated growth in earnings.
JD. Daily Candle Chart
Unilever scoops up Yasso
Unilever (ULVR), the world’s largest ice-cream maker, has acquired Yasso, a US-based business that offers frozen desserts made with Greek yogurt. The deal aligns with Unilever’s strategy to enhance its ice cream business and expand its portfolio of premium products.
Yasso, founded in 2009, offers a range of frozen treats such as stick bars, chocolate crunch bars, frozen Greek yogurt sandwiches, and more. Its products can be found in major US retailers like Kroger and Safeway.
The acquisition comes after speculation about Unilever’s future in the ice cream sector, with reports suggesting a possible sale of some brands like Breyers and Klondike. However, Unilever’s acquisition of Yasso indicates its commitment to the ice cream market and its focus on meeting consumer demand for healthier ice cream options.
Research suggests that there is growing consumer interest in healthier ice cream products, and Yasso’s offerings align with this trend. Unilever can tap into this market by leveraging Yasso’s low-calorie yet indulgent products.
ULVR Daily Candle Chart
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