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Markets Live: Tuesday, 13th December, 2016

Summary:
11:01 am BE11:02amLook at the time! We need to get on. J L Morning BE11:03amWelcome. ML. AV's thing. Stocks going up and down. Typos. BE11:03amRubbish jokes. Occasional subject overlap between the right and left sides .... You know. We've been here long enough for you to know. twolegsgoodfourlegsbad Morning 11:03 am BE11:03amSpeaking of, have a portrait. BE11:03am [embedded content] BE11:03amIf you don't read the newspaper, you're uninformed. If you do read it, you're misinformed. Mouselet Morning, I guess 11:04 am BE11:04amHere at ML we feel we can provide both functions. BE11:04amBut anyway, let's get on.

Topics:
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Bryce Elder writes Markets Live: Friday, 24th March, 2017

David Keohane writes Snap AV: Goldman calls peak cash

David Keohane writes For the brave China SOE reform optimists out there

Siona Jenkins writes FT Opening Quote: Sterling boost for Smiths Group

BE11:02am

Look at the time! We need to get on.

J L Morning
BE11:03am

Welcome. ML. AV's thing. Stocks going up and down. Typos.

BE11:03am

Rubbish jokes. Occasional subject overlap between the right and left sides .... You know. We've been here long enough for you to know.

twolegsgoodfourlegsbad Morning
BE11:03am

Speaking of, have a portrait.

BE11:03am
BE11:03am

If you don't read the newspaper, you're uninformed. If you do read it, you're misinformed.

Mouselet Morning, I guess
BE11:04am

Here at ML we feel we can provide both functions.

BE11:04am

But anyway, let's get on.

BE11:05am

And ... straight into the microcaps.

Gulf Keystone Petroleum Ltd (GKP:LSE): Last: 145.21, up 18.21 (+14.34%), High: 147.00, Low: 124.00, Volume: 3.66m
Patience Morning aal.
BE11:05am

There's a bid story out there!

cleverhedge <--- yeah , remember the FT on the ECB decision last December ???
BE11:05am

It must be Christmas!

BE11:05am

Hang on, let me grab it.

BE11:05am

US oil supermajor Exxon Mobil is understood to have sounded out London-listed Gulf Keystone Petroleum (GKP) over a possible deal that could value the Kurdistan-focused group at around £7bn.

BE11:06am

It is thought that the board would not accept the estimated £8-a-share that Exxon is considering and that a number of other companies, perhaps including China's Sinopec and Californian giant Chevron, are monitoring the situation. There is even some speculation that an informal four-way auction for GKP might be under way, while it is also believed that the company has spoken to at least two smaller businesses about potentially developing its assets in a joint venture.

cleverhedge "The FT deeply regrets this serious mistake and will immediately be reviewing its publication and workflow processes"
BE11:06am

Wait! No, sorry. I'm getting confused.

BE11:06am

That's from December 2011.

chad_john Ha. Had me there BE.
chad_john I was like "£7 a share? Do I actually have to buy some GKP now?"
chad_john (£8)*
BE11:06am

(@cleverhedge: yep, we f___ed up. Sorry. What else do you want?)

BE11:07am

For the latest update we need to skip forward five years.

Otter Hello Online Chums
BE11:07am

By Dinesh Nair and Manuel Baigorri
(Bloomberg) -- China Petroleum & Chemical Corp., the world’s biggest refiner, is weighing a takeover of beleaguered Kurdish oil producer Gulf Keystone Petroleum Ltd., people familiar with the matter said.

BE11:07am

The state-owned oil giant, known as Sinopec, is working with advisers and has made an approach to Gulf Keystone, said the people, who asked not to be named because the deliberations are private. The company, which has a market value of about 293 million pounds ($371 million), may also attract other bidders, they said. No final decisions have been made and any talks may not lead to a deal, the people said.
A spokesman for Gulf Keystone declined to comment. A representative for Sinopec didn’t have an immediate comment.

BE11:08am

This is by memory, so might be wrong, but I think that even though GKP has a Bermuda HQ it has an informal agreement to abide by UK listing rules ......

chad_john BE, whilst in the smalls, do you have anything on CloudTag (CTAG)? It's the current Bulletin Board ramp-du-jour but was suspended last week for reasons as yet unclear. The story looks interesting.
BE11:09am

..... Does that mean the Panel can lean on the company to make a statement?

BE11:09am

Does it even need to make a statement, given the Bloomberg story doesn't suggest there's an actual approach in?

Mouselet There is clearly another Srebrenica happening in Aleppo, and we're not even going to see the Dutch government resign over it. I hate realpolitik.
BE11:10am

Should we hold out for Exxon to be drawn into reviving that £8 offer -- which of course would be £800 post the share consolidation?

BE11:10am

Just for the sake of clarity, here's GKP's market cap over time.

Otter I am happy that I do not live in the Aleppo :c
BE11:11am

I've added a white line for Exxon's "rejected" 2011 "offer"

BE11:11am

Markets Live: Tuesday, 13th December, 2016

BE11:11am

Thumbs up

Hamster on a Piano I remember a lot of BB muppets saying £8 was low ball and they weren't selling for anything less than £20
BE11:11am

(It does occur that Mark Leftly, the hack who wrote that GKP-Exxon story five years ago, is now freelance ....

Mouselet and today, in 'graphs indistinguishable from the X axis' ...
BE11:12am

(While the colourful Mr Kozel seems to have left corporate life to spend more time with his lawyers: http://nypost.com/...ts-to-pay-ex-wife/ )

BE11:13am

(I for one would be interested to read something from Mark on how that Exxon story came to be. Just to let a bit of daylight into magic.)

BE11:13am

Anyway! Let's get out of the gutter and head up the market.

BE11:15am

FTSE up. Ahead 0.5%, 34 points, at 6925.

BE11:16am

No particular trend to the risers.

Lemmy Is Donald Trump's new foreign advisor the same man who wanted to spend £8 on GKP?
rw42 Dunno if intentional, but X/Y axes on that graph were too small to be readable yeah. Would be nice if stuff like that could be clicked on to pop out a zoomed/full view window for graphs etc.
DogsEars Would love to hear thoughts on CTAG as well
BE11:16am

Some trend to the fallers.

Tesco PLC (TSCO:LSE): Last: 207.18, down 5.67 (-2.67%), High: 214.50, Low: 206.55, Volume: 9.14m
BE11:17am

Neilsen data reverses the recent trend of Tesco adding and the discounters slowing.

BE11:18am

As does Kantar, which shows food deflation easing to –0.1% for the 12 weeks to 4 December, up 40bps.

FJ Rising CPI is discounters' BFF
BE11:19am

Extrapolate that to a four-week window and it means prices are rising again.

BE11:19am

Though it's a difficult month generally. Black Friday and all that.

BE11:20am

Here's HSBC to summarise.

BE11:20am

Bad month for the industry does not overly concern us. November has become increasingly dominated by Black Friday, with consumers apparently deferring purchases and saving money in the period between Halloween and Black Friday. This is impacting the industry, but we expect a good December and do not anticipate much change in the pecking order between now and the New Year. Tesco remains the strongest performer amongst the Big 4, with ASDA once again the weakest. Discounter growth continues to slow, particularly at Lidl, where LFLs appear firmly negative

BE11:20am

Tesco (sales +1.7% market share 27.5%, up 20bps). Tesco once again won market share across the period, and while it was not immune to the November slowdown, it continues to be the momentum play running into Christmas. Tesco appears to be the best positioned of the Big4 and in our store visits last week, the stores looked in good shape for increases in trade.

Sainsbury's (sales -0.8%, market share 15.5%, down 20 bps). Sainsbury lost share again and the gap with Tesco continues to widen. Nielsen data indicate that Sainsbury continues to win more shoppers, but with the basket size falling. We regard this as a worry, as it suggests that core shoppers may be defecting and are being replaced by "light users" and/or convenience shoppers. It is a concerning trend, in our view.

Morrisons (sales -2.0%, market share 10.2%, down 30bps). Total sales continue to fall, but the company has annualised against last year's closures and disposals, meaning the rate of decline is slowing.

ASDA (sales -4.4%, market share 14.3%, down 80bps). Asda continues to lose sales and appears to be hurt by the recovery at Tesco and improved underlying performances by Morrisons. It is now too late for any major price repositioning to be effective this year. We may see something in the New Year.

BE11:20am

The Others: M&S (+2.9%) continues to win share mainly through space growth. The Co-Op (+4.2%) is still a strong performer. Waitrose (+1.6%) is still benefitting from New Space, and appears to have regained a bit of momentum more recently

Discounter slowdown. Aldi was +8.5% and Lidl 2.7% are both experiencing decelerating growth. Lidl, which has recently had a change in senior management, appears to be slowing quite markedly.

The industry. In the last 4 weeks, the multiples growth was -0.4% in value and -0.3% in volume. But timing has played a part in this - Christmas is later every year. See inside for details and analysis of market share movements by company.

BE11:21am

And Jefferies.

BE11:21am

A drastic reduction in the German discounters' sales growth had been the story of recent months. In the 4 weeks to 4 Dec, their growth rebounded to 9.8% from a multi-year low of 6.4% in the previous period. This is still markedly below a 14.2% gain in H1 2016, and implies limited LFL progress. Aldi's growth of 12.8% is certainly better than Lidl's (where cash sales of 6.1% suggest clearly -ve LFL sales).

BE11:21am

Consumers' reduced propensity to trade up looks to be also confirmed by anaemic growth at quality operators, where sales of 2.3% compare to 3.4% YTD. M&S' grocery sales gains of 1.8% represent a remarkable slow-down on 6% YTD, while Waitrose at 2.7% was ahead of 1.8% YTD. Overall industry growth was poor at -0.8%, the weakest (non calendar impacted) reading of 2016, and well below +0.4% YTD. This appears to reflect a major deterioration in UK majors' growth (to -1.3% for the period, after +0.1% in the previous reading). The biggest determinant for the latter was a swing in Tesco's reading from +3.6% in October to -0.9% in November. At this juncture, we assume that Black Friday dynamics have not had a bearing, but we are aware of the extent to which this event may have impacted overall trends.

urgeview let alone being suspended
BE11:21am

While today's reading points to a marked slow down in momentum, we suspect that the underlying dynamics may have softened by less than the 450bps highlighted above. Firstly we note that grocery sales of -1.1% (vs 2.1% in the previous four periods) become +0.6% in food and drinks terms, once the dilutive impact of BWS promos is stripped out. Secondly, we note the lapping of Clubcard non-food Boost as another factor (and one we expect to also weigh on the upcoming 10 Jan 2017 reading).

BE11:22am

(@urgeview: mate, we don't wear your legal risk here. Tone down the language thanks.)

BE11:22am

ASDA's in store standards continue to improve, and evidence of stepped up gross margin aggression remains elusive. A fall of -3.9% (exactly the same as the previous reading, but still better than -5.1% YTD) suggests a gradual reduction in pressures.

BE11:22am

Cash sales growth for MRW of +0.2% suggests LFL gains of c.+1%. This is a strong delivery considering a very tough comp, as well as an improving ASDA/Aldi combo. Still, we continue to assume fractionally -ve LFL sales for Q4 given the weight of the upcoming weeks of trading on the overall quarter.

BE11:22am

Sainsbury still delivering on non-food, struggling in food where sales fell -3.2% (compared to +10.7% in non-food), to provide an overall till roll reading of -0.6%.

WM Morrison Supermarkets PLC (MRW:LSE): Last: 226.40, up 1.4 (+0.62%), High: 228.30, Low: 223.50, Volume: 7.82m
Tesco PLC (TSCO:LSE): Last: 206.88, down 5.97 (-2.81%), High: 214.50, Low: 206.55, Volume: 9.26m
urgeview oh ok , np !!
BE11:24am

Reading through the bumf, it looks like Tesco’s weak Kantar reading is due to poor sales of booze.

BE11:25am

That's largely down to promotion strategy, right? Litre of Gordon's for £15, etc?

BE11:25am

Dunno, but in that context maybe today's fall's a bit overdone.

Alchemy30 MorningPAYS ?
BE11:27am

One moment, just have to deal with something offscreen.

maverick paysafe?
maverick short report?
Cabin Fever @BE Spilt coffee on keyboard?
BE11:28am

... Right, done. Back. We're chasing a few stories right now, none of which are in a shape to be shared yet, but it is tremendously time consuming.

Residual Anything on UBM?
liam1om Re Payshttp://seekingalpha.com/article/4030093-paysafe-material-risks-regulatory-enforcement-action?auth_param=nmd8l:1c4vhl6:784e5830e267ff7b26b5f67f46e7c86f&dr=1
BE11:29am

On, Paysafe ... We'd rather not comment I think.

Paysafe Group PLC (PAYS:LSE): Last: 367.10, down 3.7 (-1.00%), High: 381.00, Low: 366.72, Volume: 3.42m
BE11:30am

There's a bear report out from "Spotlight Research" (?), which I won't link to but commenters can.

BE11:33am

The report touches on some familiar themes for the payment processing sector. But without going through it in detail, line by line, and putting each point to the company and getting a "no comment" back, there's really nothing we can do immediately. One assumes they'll respond in time.

J L @BE: Can you do that quote again ;-)Down 9% now
Mouselet IK continues her fearless investigation of the fact that changes to the law allowing exploitative working conditions have caused exploitative working conditions
BE11:34am

Shares now down 20% .... Sheesh.

BE11:35am

I struggle with this stuff. Either investors know what they've bought and shouldn't have their confidence bought by a bear case from a short seller, or they've no idea what they've bought and should never therefore have bought it .......

BE11:35am

Anyway, we're in dangerous territory. Let's move out of it.

erlkin rbc ups industrial Celanese.....
Lemmy Mouselet, is it legal changes that have driven this or tech + a tsunami of VC funding?
Mouselet The problem is that it is difficult, having created non-exploitative working conditions (eg temp workers must be working for an agency at full-time-at-least-minimum-wage and it's the agency's problem if they can't find out how to deploy them) to force people to employ workers
Mouselet I think it's tech having made practical things that the legal changes enabled. The VC funding doesn't hurt, but actually redistributing wealth from venture capitalists into the pockets of people who want to deliver food by bicycle for extra pocket money isn't so bad a thing
BE11:37am

What's happening in sellside? That'll change the subject.

Mr. Orange PAYS' Chinese market exposure is well know though and their relationship with bet365 too
BE11:37am

Huge note out of Panmure on the tour operators.

Mouselet An absolutely explicit 'work for Uber, Deliveroo &c is not considered work or income for the purpose of benefits' would be kind, but this is not a Government keen on being kind to people on benefits.
BE11:37am

We initiate coverage of seven UK travel companies: TUI, Thomas Cook, easyJet, Ryanair, Wizz Air, IAG and online travel business On The Beach.

Patience @Mouselet - did you read this morning's post on Deliveroo. 60% of the delivery charge goes to Deliveroo, 40% to the cyclist. That's reverese redistribution.
BE11:38am

That's range for you. Mark Irvine-Fortescue is an analysis renaissance man.

erlkin is it Friday yet?
BE11:38am

An eclectic mix, perhaps. But we write at a time of dynamism in the industry, with a plethora of businesses competing for a share of consumers' travel wallet. We cast our net wide to identify investment opportunities from across the travel value chain.

Mouselet The cyclist gets paid a pound, which is clearly too low, but the fact Deliveroo also gets paid is I think independent of that.
BE11:39am

Our findings are polarising. We see conviction BUY opportunities in Wizz Air, Ryanair and On The Beach. We view each of these companies as structural winners in their market, with levers to drive above average organic top line growth, translating into superior shareholder returns. The market is not giving due credit for this potential, which creates attractive buying opportunities, in our view.

Lemmy Mouselet, often the redistribution goes to the customers who often pay below the cost of their ride/meal etc as the firm tries to build market share
BE11:39am

Top pick = Wizz Air (Buy, 2300p TP): low cost DNA enables Wizz to charge low fares profitably, taking advantage of positive structural trends: 1) increasing propensity to fly, 2) migration trends, and 3) limited low cost carrier penetration. Core Central & Eastern European markets are robust with upside scope to our 13% revenue CAGR FY16-19E. We expected the 20% valuation discount to Ryanair to narrow in time.

Wizz Air Holdings PLC (WIZZ:LSE): Last: 1,841, up 18 (+0.99%), High: 1,880, Low: 1,821, Volume: 94.93k
BE11:40am

Separately, we would highlight SSP Group (BUY, 400p TP) for its exposure to positive structural travel trends (robust traffic growth, less in-flight catering) without the volatility or capital intensity inherent in tour operators and airlines.

SSP Group PLC (SSPG:LSE): Last: 380.50, up 2.9 (+0.77%), High: 382.10, Low: 371.40, Volume: 102.30k
BE11:40am

We initiate with SELL ratings on easyJet, TUI and Thomas Cook. We believe the market is underestimating a more challenging outlook for these companies, with growth vs. FCF vs. dividend tensions for TUI and easyJet, and a 50% post-Brexit rally leaving Thomas Cook's equity risk/reward skewed to the downside, in our view.

Tui AG (TUI:LSE): Last: 1,058, up 7 (+0.67%), High: 1,061, Low: 1,049, Volume: 246.48k
easyJet plc (EZJ:LSE): Last: 976.68, up 6.68 (+0.69%), High: 987.00, Low: 964.00, Volume: 652.98k
Thomas Cook Group plc (TCG:LSE): Last: 87.60, up 1.9 (+2.22%), High: 87.75, Low: 85.45, Volume: 1.22m
Mouselet yes, I think deliveroo is awful, because I can't see where the VC is getting to the individuals - the cyclists are poorly paid, the food-providers are ripped off because they don't have the pricing power to say 'Deliveroo is charging us £4 for your £40 order so your order will in fact cost £50'
Cabin Fever I think there is quite a lot of government hypocrisy re employment rights. E.g I recently learnt that passport office outsources some of its services. People are paid considerably less and may be pressured to go home if workflow is expected to slow at any point.
BE11:41am

IAG (HOLD, 450p TP) probably merits core holding status but we feel the shares are up with events given management change and cost saving/cash returns expectations.

BE11:42am

In the full report we analyse two main areas:
1. The demand and macro setting for air travel and holidays. We are generally cautious on outbound demand, particularly in the UK. Post-Brexit cracks are not in evidence (yet?) but real wages are stagnating and the UK may be approaching ‘full employment’ at a time of rapid technological advancement, making us wary. The peak New Year booking period takes on additional significance in 2017.
2. Competition and the supply-side environment. High airline capacity growth is now being acknowledged in several key markets. But aggressive LCC growth means intra-Europe capacity is not adjusting down fast enough for our liking. Growth on North Atlantic routes is stepping down 100bp this winter, more from the UK, which is more encouraging.

Mouselet It seems very difficult for governments to say 'we have good employees, they have job security, they are paid well, and we let them use their hard-acquired judgement'; and if you lose the last clause then there's no point having the first three any more and you might as well outsource to J Random Temp Agency
J L @Cabin Fever: is that not called efficiency?
andyalan10 Not sure how much of gigification is tech or law changes, surely a lot of it is govt. just choosing not to enforce law, to the detriment of workers. If your income comes from a single source you are employed, if multiple customers, self employed, not difficult.
BE11:44am

Paysafe now down 25%. It's a while since we've seen a short-seller ambush like this be so successful, and in a FTSE 250 company as well.

Otter I like the story on Deliveroo I think it is interesting journalism
BE11:46am

Just spinning back on the archive for some initiation notes to familiarise myself with the business.

BBOC Trustly in a similar bind as Paysafe I reckon
Patience @andyalan10 - exactly.
BE11:47am

Online gambling is the most significant vertical for Optimal PaymentsMore than 50% of group revenue is
derived from this end-market. Other end markets include FX trading, online dating, global remittance and online retail
.
The group’s digital wallet brands NETELLER and Skrill both hold dominant market positions as digital wallet providers for the online gambling industry. We estimate the success relates to strong merchant relationships specialized in gambling and
targeted reward programmes for high volume (or VIP)
customers.

BE11:48am

This is from Citi.

BE11:48am

(@ROTR: apologies if your comments disappear. I have work to do this afternoon, and would rather spend as little of it as possible with the lawyer.)

BE11:49am

Online gambling remains a “high growth” industry. H2GC estimates show gross gambling revenues online reaching US$47 billion by 2017e, a 9% CAGR from 2014. Growth is underpinned by continued regulatory liberalisation
which opens new markets for online gambling merchants. The growth in merchant numbers directly grows Optimal Payments network of customers
.

BE11:49am

While regulation is an opportunity it is also a risk in online gambling merchants operating within unregulated or “grey” markets
. Optimal Payments categorises more than 40 countries and territories as ‘‘banned’’ or ‘‘non -serviced’’ as a result of the legal or cultural risk is sues arising from offering its services in that country. Similarly, the recently acquired Skrill Group regarded more than 60 countries as ‘‘prohibited" as a result of the strict regulation of online gambling in that country or other legal or cultural risks.

erlkin hang in there BE you're doing well.....
willosaurus Paysafe - CFO sold close to a million quids worth yesterday. (tax related)
BE11:50am

Shares now down 32% .........

BE11:51am

........ Sheesh. This isn't a new story. It's a story -- or at least a theme -- that's come up in every single conversation I've had with professional short sellers for the past five years.

willosaurus looks like half his holding.
BE11:52am

Though, as Willosaurus notes ....

erlkin how about a new product we can call it Tradesafe...
BE11:52am

Paysafe Group plc

Increase in Shareholding of a Director

BE11:52am

Great!

BE11:52am

Paysafe Group plc (LSE: PAYS, the "Company") has been notified by Brian McArthur-Muscroft, Chief Financial Officer of the Company, that on 12 December 2016 he exercised options over 516,844 Ordinary Shares of 0.01p each in the Company ("Shares"), in respect of the awards granted to him under the Company's Long-Term Incentive Plan, at an exercise price of 0.01p per Share.

243,778 shares have been sold on the open market at a price of 371.85p per share to satisfy tax and national insurance obligations and the option cost of the exercise. All the remaining shares have been retained by Mr McArthur-Muscroft.

Following this transaction, Mr McArthur-Muscroft has an increased interest in a total of 273,066 Ordinary Shares, representing approximately 0.04 per cent of the issued share capital of the Company.

BE11:53am

Wait, that's quite a nuanced definition of "increased" ......

BE11:54am

Corporate news wise, we have information assurance.

NCC Group PLC (NCC:LSE): Last: 190.36, down 14.34 (-7.00%), High: 195.10, Low: 171.50, Volume: 3.77m
Cabin Fever @JL Yes it is efficient not to guarantee work. There is a social cost Are you treated like that? I am as I am self employed.
andyalan10 Oil still rising, the oil companies I own going nowhere today :-(
BE11:56am

Muddy figures. Headline no worse than its recent update, but lots of stuff happening below the line.

BE11:56am

Shore can explain.

BE11:56am

The IT Security services specialist updates the market with more detailed guidance on its full year this morning, this follows the update given on 20th October identifying deferred contract in the Fox unit and three cancelled client contracts. We are pleased to report that our initial assessment of the likely impact upon the group falls within the more detailed guidance being given this morning. EBITDA is now guided to fall within a range of £45.5m to £47.5m for the current full year to May 2017 – our forecast £46.6m. Accordingly we leave our assumptions for the core trading performance unchanged this morning. The split between Escrow services and the IT Assurance business appears as expected. Margins appear as implied by our model, with the expected operational leverage. However, we do note that depreciation and amortisation, reflecting past and ongoing growth investment have stepped up faster than in our model. Accordingly, our adjusted EPS forecast for the current year falls from 10.6p to 10.1p. Our cash flow assumptions barely change. Whilst this is a fall from the EPS of 11.2p reported for the year to May 2016, we regard this as a better outcome than the range that we had feared.

BE11:56am

Looking to the long term, the outlook does still look bright to us. Demand for NCC’s core Assurance services continues to rise, we believe that the issues encountered in the past few months are one-off in nature and reflect ‘growing pains’ to a degree. Strong growth is thus set to resume next year to May 2018, in our view. Financially, NCC’s balance sheet remains robust with Debt to EBITDA at c1.0x and with strong cash generation continuing. We regard the current share price as a strong opportunity to invest in NCC. We retain a BUY stance.

BE11:56am

And Peel Hunt.

BE11:57am

NCC has provided a trading update for the first six months of the
financial year to 30 November 2016, following the group’s fourmonth
trading in October. Adjusted EBITDA for the full year is
now expected to be in the range of £45.5m-47.5m (vs PH prior
forecast of £52.7m). As a result, we lower our estimates for
2017E and 2018E EBITDA to £46.5m and £53.0m (from
£52.7m and £62.7m, respectively, or by 12% and 16%,
respectively). As a result of lower EBITDA and higher
amortisation charges, EPS in 2017E and 2018E falls by 16% and
22%, respectively. We lower our target price to 245p (330p).

andyalan10 Should clarify, I own part of, don't own any whole ones
J L @willosaurus: Funny that the announcement read: "Paysafe Group PLC Increase in Shareholding of a Director"
BE11:57am

And, perhaps more importantly, Berenberg.

Mr. Orange Paysafe's past in US is known. China exposure as of today is around 12% of revenues and on Anti Money Laundering regulation risk, the company hosted a call with investors in JUNE
BE11:57am

Starting coverage on results day with a rather downbeat one.

BE11:58am

Summary: NCC Group provides cyber security and risk mitigation services to corporate and public sector clients. We believe NCC’s breadth of capabilities and global presence positions it well to capitalise on the strong underlying growth of the cyber security industry. NCC’s Q1 trading statement, however, highlighted major setbacks caused by contract delays and M&A integration difficulties. While management has guided that these issues would have a “material impact” on EBIT margins, it has refused to give clarity on its magnitude. While we like the business model, we remain apprehensive given the lack of available information with which to make a decision. We initiate with a Hold rating and a price target of 200p.

BE11:58am

Structural tailwinds: Cyber crime has grown to be one of the largest threats to global business and the frequency and cost of attacks are still increasing at double-digit rates. NCC’s services and software help protect corporates against these risks. Given its global platform and breadth of services, we continue to believe NCC will grow revenues strongly over coming years. Specifically, we forecast a c12% 2017-19E organic group revenue CAGR, yet recognise this is substantially below the company’s historical rate of ~16% seen in the past five years.

BE11:59am

Black-box margins: On 20 October 2016, NCC announced contract cancelations in its core Assurance business, a delayed contract in Fox-IT, which was acquired in 2016, and execution issues in its managed services unit. While management has given no guidance, we have assumed margins in the affected Assurance business (56% EBIT 2016A) reduce from c15% to c13.2%. With little clarity on Accumuli’s operational rebuild, we recognise there could be significant volatility in the near term. Specifically, a +-3.5% change to our Assurance margin assumption results in a +-18% change to our base-case DCF price target of 190p. With this level of volatility, we have erred on the side of caution and forecasted a 2017E group EBIT margin of 16.7%, implying a 170bp contraction on 2016A.

BE11:59am

Buy and build: With a track record of deals, £115m of new debt facilities and an OpFcF/EBITDA conversion of ~90%, NCC has scope for further deals. While our scenario analysis shows there could be considerable upside from completing deals, recent evidence suggests this strategy carries significant risk. As a result we remain wary until delivery on NCC’s existing acquisitions improves.
● Valuation: We value NCC on a target 2017E P/E multiple of 18x, in line with UK Smid-cap TMT peers, implying a price target of 200p. NCC currently trades on ~18.3x 2017E P/E.

BE12:00pm

Paysafe coming back a bit. Now down just 25%.

erlkin andyalan10 perhaps some m/a would ignite ....
J L Thanks all..
erlkin dreaming of a white Christmas......
Otter I look forward to having pleasant pre-Christmas discussions with my internet friends next week.
BE12:02pm

....... just scanning back the archive for what we've written about Optimal Payments in the past.

BE12:03pm

Which reinforces my view that, if the bear case is new to anyone, they're really not paying enough attention and should probably just buy a tracker instead. Or Premium Bonds. Or scratchcards.

SoS I look forward to being able to use a train sometime this month
BE12:04pm

Anyway.

BE12:04pm

That's midday, somehow.

Gladys My premium bonds have yielded 3% this year
BE12:05pm

Thanks for joining. I'll try to put more effort into tomorrow's session -- though that depends on having fewer actual potential stories to distract me, so perhaps that's suboptimal as well.

BE12:05pm

See you tomorrow. Afternoon all.

Je Suis Muppet cheers BE
Lemmy Thanks
SoS Yep thanks BE
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Bryce Elder
Bryce is a sporadic Alphaville contributor and has been the FT’s UK equities reporter since 2008. Before that he wrote about UK equities at Morningstar. Before that he wrote about UK equities at The Times. Before that he wrote about UK equities at Bloomberg. Before that he wrote about UK equities at AFX News. Before that he did not write about UK equities.