3rd Jul 2024. 9.03am

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Regency View:


BP shares rally as oil prices hit two-month high

BP’s (BP.) share price has rallied this week after crude prices reached a two-month high, driven by a number of factors that have bolstered market sentiment towards the energy sector.

The increase in oil prices is primarily attributed to optimistic forecasts of rising demand during the Northern Hemisphere’s summer driving season and heightened geopolitical tensions in the Middle East, which have stoked fears of supply disruptions.

The summer months typically see an uptick in travel and transportation activities, leading to increased consumption of gasoline and other oil products. Market analysts have noted that this year’s driving season is expected to be particularly strong, further supporting higher prices.

Escalating tensions between Israel and Hezbollah, along with potential involvement from Iran and its regional allies, have raised concerns about possible disruptions in oil supply from the Middle East.

Additionally, OPEC+ have extended their production cuts into 2025. These cuts are designed to manage supply levels and support prices. With analysts predicting supply deficits in the third quarter due to these cuts, the market is responding with higher oil prices, which in turn positively affects BP’s share price.

BP. Daily Candle Chart

BP. Daily Candle Chart

Costain and MWH Treatment secure Southern Water contract

Costain’s (COST) joint venture with MWH Treatment, CMDP, has been awarded a £65 million contract by Southern Water as part of its AMP7 investment programme. The project will run until late 2025.

The initiative aims to enhance the resilience of local water supplies and upgrade wastewater treatment facilities at Testwood near Southampton and Burham in Kent.

The integrated CMDP team will work closely with Southern Water and its engineers to develop cost-efficient solutions, optimise asset performance, and deliver the implementation through to the end of AMP7.

Both sites will undergo major renovation, refurbishment, and expansion of existing assets to cope with rising demand for drinking water and increasing volumes of wastewater.

This contract extension bolsters Costain’s position with leading UK water companies, including Anglian Water, Northumbrian Water Group, Severn Trent Water, Thames Water, United Utilities, and Yorkshire Water.

Alex Vaughan, CEO of Costain, emphasised the importance of these critical infrastructure upgrades. He highlighted that this work will have a transformative impact on local communities by ensuring clean drinking water and improving future resilience.

COST Daily Candle Chart

COST Daily Candle Chart

ITV hits high note as J.P. Morgan raises price target and forecasts

ITV’s (ITV) share price jumped higher last week after J.P. Morgan raised its price target for the broadcaster from 112p to 120p and maintained an “overweight” rating. This upgrade has boosted investor confidence in ITV’s prospects, particularly highlighting an upgraded outlook for advertising growth and earnings per share (EPS).

The increase in J.P. Morgan’s advertising growth forecast, from 0.4% to 5%, signalled a more optimistic view on ITV’s ability to capitalise on improving market conditions. This upgrade came amidst expectations that the final rounds of Euro 2024 could significantly bolster ITV’s advertising revenue in July.

Moreover, J.P. Morgan’s upward revision of ITV’s EPS by 16% underscored confidence in the broadcaster’s operational efficiencies and financial performance.

The market responded favourably, driving ITV’s share price higher as investors positioned themselves to benefit from the broadcaster’s expected performance gains. ITV’s shares are up more than 20% year-to-date, reflecting growing investor optimism and confidence in the company’s strategic direction underpinned by strong analyst support.

ITV Daily Candle Chart

ITV Daily Candle Chart

Prudential ‘pop and drop’ after buyback announcement

Prudential (PRU) gapped higher last week following the announcement of its commencement of a significant share buyback program.

The company initiated the first tranche amounting to US$ 700 million out of a planned US$ 2 billion program aimed at reducing its issued share capital and returning capital to shareholders.

While the buyback initially sparked a positive response with a 6% increase in its Hong Kong-listed shares and over 7% rise in its London-listed shares, investors quickly refocused on Prudential’s strategic hurdles.

The buyback was seen as a modest step towards enhancing shareholder value amid expectations for a more substantial return, especially after rival AIA’s recent increased buyback program.

PRU Daily Candle Chart

PRU Daily Candle Chart

Saga reports strong start and strategic initiatives amidst market challenges

Saga (SAGA) shared a trading update ahead of its Annual General Meeting (AGM) covering the period from 1st February to 24th June 24.

The company reported that overall, it has traded in line with expectations for the first four months of the year and is on track to meet its full-year targets. Particularly noteworthy was the exceptional performance of its Ocean and River Cruise businesses, which boasted load factors ahead of last year’s figures at 83% and 78%, respectively.

Saga also noted positive trends in its Travel bookings, with a 14% increase in booked revenue driven by a higher number of passengers compared to the previous year.

However, the Insurance sector presented challenges, with Saga taking steps to stabilize its Broking business amidst difficult market conditions. Early improvements were noted in motor insurance, although home insurance faced emerging net rate inflation.

Financially, Saga successfully repaid a £150m senior unsecured bond that matured in May 2024, using available cash resources and funds from a facility with Roger De Haan. As of 31st May 31, Available Cash amounted to £93.5m.

Whilst Saga’s share price has performed poorly in recent weeks, value investing requires patience, often involving weathering short-term challenges before a company’s true worth becomes evident. This rings true for Saga…

The stock has been overlooked and undervalued for some time, and whilst we’re not rushing to add more shares at this time, we’re happy to maintain Saga in our list of FTSE Investor open positions.

SAGA Daily Candle Chart

SAGA Daily Candle Chart


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