18th Oct 2023. 9.00am

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Regency View:


Aviva jump on takeover speculation

Aviva’s (AV.) share price rallied last week following speculation of a potential takeover. The rally began after a report from the Financial Times’ ‘Betaville’ blog suggested Aviva might be a takeover target, though the identity of the potential buyer remained unclear.

The takeover rumours continued to circulate, with market sources suggesting at least two interested parties were attracted by Aviva’s excess capital and strong cash flow. Some potential suitors included Allianz, Intact Financial Corporation, Tryg, and an unnamed US insurer, with one of them considering a 600p per share proposal.

In addition to the takeover speculation, analysts at Jefferies upgraded Aviva to a “Buy” rating with a 480p price target. They noted that Aviva was poised to deliver an excellent capital return yield, supported by its excess capital and robust free cash flow, and that its transition toward more capital-light businesses justified a higher valuation compared to other insurers.

Jefferies estimated that Aviva could return up to £5.3 billion to shareholders in dividends and buybacks between 2023 and 2026, considering its strong Solvency II ratio and the sale of assets in India and China.

AV. Daily Candle Chart

AV. Daily Candle Chart

Centamin unveils bold plan to boost Sukari gold mine production

Centamin (CEY) has unveiled an ambitious plan for its Sukari gold mine in Egypt…

The plan is designed to significantly boost gold production, aiming for an average of 506,000 ounces per year, with production costs below $1,000 per ounce. The goal is to sustain this level of production for the next nine years, and it’s expected to lead to a 5% increase in total gold production over the mine’s 11-year life.

To achieve this, Centamin has identified several opportunities to extend the life of the Sukari mine. These opportunities include exploring the Sukari underground, surface satellite deposits, and exploration licenses near the mine, which can increase the available resource and reserves. This is an essential part of their strategy to maximize the potential of the Sukari gold mine.

In the meantime, the company has maintained its 2023 production guidance, which falls within the range of 450,000 to 480,000 ounces of gold. Their primary focus is on achieving the lower end of this range, which is a critical aspect of their operational planning.

In addition to these developments, Centamin has connected the Sukari mine to the Egyptian national grid. This connection is expected to result in substantial annual cost savings, estimated at approximately $41 million, based on current diesel prices. These cost savings contribute to the company’s overall strategy to improve efficiency and profitability.

CEY Daily Candle Chart

CEY Daily Candle Chart

EasyJet misses profit expectations, but resumes dividends

Shares in EasyJet (EZJ) fell last week after guiding for full-year profit below market expectations. The budget airline expects £440 million to £460 million headline pre-tax profit, whereas the analyst consensus forecast before the trading update was £469 million.

However, EasyJet announced several positive developments. They unveiled new growth targets, a plan to buy 157 new planes, and a commitment to resume dividends. CEO Johan Lundgren commented that these targets would pave the way for achieving a pre-tax profit exceeding £1 billion. This would be driven by measures such as reducing winter losses, expanding the fleet, and growing EasyJet holidays. Additionally, the board intends to reinstate dividends starting with the full year 2023 results.

EasyJet also reached a proposed agreement with Airbus for an additional 157 aircraft order and a further one hundred purchase rights. This move is aimed at enabling EasyJet’s fleet modernisation and growth to continue beyond 2028, while also providing substantial benefits in terms of cost efficiencies and sustainability improvements.

In terms of operational performance, for its fourth quarter, EasyJet reported 8% year-on-year passenger growth, and the ticket yield per passenger increased by 9% year-on-year. Their package holidays business is expected to deliver around £120 million in pre-tax profit for the full year 2023.

When it comes to shareholder returns, EasyJet is aiming to pay shareholders 10% of headline profit after tax for the full year ending on September 30, 2023. This payout is expected to rise to 20% of headline post-tax profit for the year ending on September 30, 2024. The company also mentioned the potential to increase the level of future returns over the coming years.

EZJ Daily Candle Chart

EZJ Daily Candle Chart

Moneysupermarket’s Q3 Report: Surge in insurance income boosts revenue

Moneysupermarket’s (MONY) Q3 Results revealed a substantial 14% jump in revenue primarily driven by a 38% surge in insurance income.

The price comparison site also saw a 31% increase in revenue from travel-related services. This growth can be attributed to the heightened interest in affordable package holiday deals, as consumers increasingly sought the best offers available.

While the revenue from home services did experience a slight decline, down 1%, it was primarily due to softness in broadband switching. However, this dip was partially offset by robust growth in mobile switching services.

Conversely, the company’s money division reported a 10% decrease in revenue. This decline was due to strong performance in the prior year, and the ongoing high-interest rate environment that has impacted the conversion rate for borrowing products.

In response to the positive financial results, Moneysupermarket’s CEO, Peter Duffy, expressed confidence in the company’s ability to meet its full-year expectations. He emphasised the company’s commitment to helping customers save money and their strategy of expanding their offerings while efficiently attracting and retaining customers.

The market has reacted positively to Moneysupermarket’s performance and the shares rallied sharply on Tuesday – taking prices back within touching distance of their summer highs.  

MONY Daily Candle Chart

MONY Daily Candle Chart

QinetiQ on track to exceed expectations

In a Q2 trading update, released last Wednesday, QinetiQ (QQ.) said it had delivered a robust performance in the first half of the year, positioning the company on course to meet its full-year expectations.

The defence tech firm secured a record order intake of around £950 million for the first half, bolstering their revenue prospects for the entire year. Although cash conversion in the first half was lower due to timing issues, the company anticipates the full-year cash conversion to align with their previous guidance. QinetiQ said it has secured substantial new orders and contract renewals, mitigating risks for the second half, and sustaining their growth in line with long-term expectations.

In the Global Solutions segment, which includes the former Avantus business in the US, the company performed exceptionally well. They’ve secured strategic contracts and demonstrated strong revenue growth with stable margins. In the US, they managed to win contracts worth roughly $600 million during the first half of the year. Simultaneously, the EMEA Services segment reported impressive organic revenue growth and improved profit margins, securing orders exceeding £600 million.

CEO Steve Wadey expressed his satisfaction with the company’s performance, stating:

“I am extremely pleased that the Group continues to perform well, delivering strong organic revenue growth at stable margins in the first half of the year, moderately ahead of expectations.”

He highlighted their record first-half order intake, demonstrating strong demand for their services and products in the defence and security sectors across their home countries. He also stressed that they have de-risked their full-year results and are on track to achieve another year of good organic revenue growth at stable margins, in line with their full-year expectations.

QQ. Daily Candle Chart

QQ. Daily Candle Chart


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