Langton Capital – 2016-01-21 – Daily Wrap: JDW, Premier Foods, interest rates, commodity prices & other:
Leisure Wrap & Other:
So the trading day is grinding to a close. We’re another day older but are we any wiser? After a day of intensive head-scratching, pen flipping and gossip, we have been considering the following. As always, contact us if you’d like further details:
JD Wetherspoon buying back shares:
• No surprise but JDW yesterday bought back 558k of its own shares at an average price of around 613p per share
• We mentioned in our first Flash Note on the subject yesterday ‘given that the group has always maintained that it can use its cash flow to either pay a dividend, buy back shares or open new pubs, if the third of these is coming down, it will be interesting to see what happens to the other two’.
• And now we know.
• JDW (and it admittedly may be wrong) believes that its own shares represent better value than does opening marginal pubs
• Though that is a little unfair as buying in freeholds for previously leased units does amount to a similar thing
• Overall, we believe that JDW is an excellent company and that its shares offer good value at these levels
• Premier Foods updated on Q3 (to end-Dec) sales this morning saying that Sweet Treats had had an excellent quarter but that branded grocery products (gravy, custard, sauce mixes, soups) had suffered from the warm weather in December.
• No surprises, rehabilitation remains on track, drop us a line if you would like more details and/or our take on developments.
UK (and global) interest rates:
• You can almost hear the air leaking out of the ‘interest-rates-are-going-up’ balloon.
• Mr Carney was going to put rates up when unemployment fell below 7%.
• It’s now 5.1% and his ‘forward guidance’ is in tatters.
• Or rather it isn’t because it’s been conveniently forgotten but it looks as though the Fed’s ‘four-rises-in-calendar-2016’ might be going to go the same way.
• Inflation is notable for its absence, real wage growth has slowed (a little) in the UK and a UK rate rise may not be consigned to calendar 2017.
Random information, hopefully not all of it useless:
• UK markets. Only two of yesterday’s FTSE100 constituents yesterday managed a rise in price.
• Official ‘bear market’ now in that the FTSE100 has lost more than 20% of its value from its recent highs (7123) to yesterday (5673).
• Global oddities. Even the dyed in the wool bears at Davos have to admit that the world economy is in a much better (or at least less bad) position than it was in in 2008 – yet Shell is yielding 10%. What’s going on?
• Sterling down again. Now lost c10% of its value vs both US$ and Euro over the last month or so.
• Commodities. Even what we had been calling El Nino commodities are now seeing their prices fall. Oh, inflation, where art thou?
• Coffee prices now down 31% over the last year, feeder cattle prices down by 25%.
We’re so 21st Century, this morning’s Tweets (diff. font size denotes importance):
1. JDW shares extremely weak on continued caution. Sees profits at bottom of range. Exasperated holders bolt for exit.
2. SABMiller reports results impacted by the ‘significant’ depreciation of its key operating currencies against the dollar
a. SAB CEO Alan Clark reports: ‘This was a very strong quarter with volume growth of 4% and group NPR growth of 7%.’
3. Charles Wells reports FY to end-Sept. Revenues +0.9% at £188.9m with operating profits +4% at £8m.
a. Charles Wells. Attributes growth to ‘steady sales margins and strong cost control across group.’
4. BBPA cautions on arrival of new £5 & £10 notes. The ‘plastic’ £5 notes will appear in September with £10 + £20 following in 2017 + 2020
5. Pub and restaurant property prices rose by c10% in 2015 according to Christie + Co, says site costs continue to be an issue this year.
6. Brewhouse & Kitchen has seen LfL growth of 17% in its un-invested estate and some 79% in its invested estate in Q1 to end-Dec
7. Coca Cola has launched a new ‘one brand’ marketing strategy that will include all of the Cola variants available to consumers.
8. Aldi opens UK online wine shop, offering cases of six wines each ranging in value from £22 to £120.
9. STR reports US hotel industry REVPAR +6.4% in 2015. Rate rose by 4.4%, occupancy was up by 1.7%.
10. Reuters reports that 13 Nov Paris attacks cost city’s hoteliers as well as those elsewhere in the country €270m in lost revenues.
11. International tourist arrivals up to 1.2bn (+4.4%) in 2015 according to UN World Tourism Organisation
12. A 46% jump in airfares helped push UK inflation to 11mth high in December – the largest rise since 2002.
13. US consumer prices fell in Dec leading to suggestions that the March interest rate hike may be put on hold
a. London equities in bear market as the ‘official’ definition is a retracement of more than 20% from prior peak.
b. UK unemployment fallen to its lowest in over a decade at 5.1% but wage growth has slowed to 2%
14. 32 Red updates on trading, says full year EBITDA expected to be slightly ahead of expectations.
15. EasyHotel updates on trading, says it ‘is in line with the Board’s expectation in both its owned and franchised hotels.’
16. Hostelworld updates on trading, says results ‘are anticipated to be in line with the Board’s expectations.’