Today I am looking at three London giants making the headlines in Monday trading.
KAZ Minerals
It comes as no great surprise that KAZ Minerals (LSE KAZ) continues to suffer the wrath of the market. The copper miner is currently down an eye-popping 20% in start-of-week business, meaning its shares are now worth 95% less than they were just 12 months ago! But I do not believe the worst is over just yet.
KAZ Minerals’ latest dive has coincided with another fall in the red metal price, and copper is now back below the $5,000 per tonne level, at $4,943. The commodity is now just $80 off the six-year troughs struck last month, and I believe a fall back through this level is an inevitability given the industry’s reluctance to meaningfully shutter production, not to mention relentless stream of negative economic news flow from China.
With metal prices back in free fall, and Credit Suisse slashed its rating on KAZ Minerals last week owing to the difficult industry backcloth, commenting that “given [the company’s] high debt levels, the funding risk is high and the valuation very sensitive to medium- to long- term copper price assumptions.” I reckon both copper price, and consequently KAZ Minerals’ bottom line, should continue to worsen as supply/demand dynamics deteriorate.
Pennant International Group
Those suffering from heart palpitations had best steer clear of Pennant International (LSE: PEN), too, the business having conceded 23% so far on Monday. Sickly investor sentiment was prompted by the firm’s latest interim statement, which showed revenues tank 41% during January-June, plunging to £5.7m. As a result the firm swung to a pre-tax loss of £750,000 from a profit of £1.18m a year earlier.
Pennant International said that “contract awards have been delayed by the weakness of the oil price, election uncertainty in the UK and the complexities of public sector procurement.” Although the logistics specialists remain bubbly over its prospects for next year the market clearly disagrees, thanks in no small part to the likelihood of further pressure from the oil sector.
Indeed, investors paid little regard to news that Pennant International had inked a major contract with a global aerospace and defence contractor worth more than £7m, a deal which could rise to £9m. But with the company advising that the outcome for 2016 “could either be in line or significantly below market expectations” according to the timing of anticipated contracts, more bad news could be lurking around the corner for the Cheltenham-based business.
Shanks Group
Sentiment towards Shanks Group (LSE: BLT) has been far more settled compared with its two FTSE peers, however, and the business was last dealing 0.3% higher in Monday’s session. The waste and resource management specialists advised that “trading performance has been in line with the Board’s expectations” during April-September, it announced today.
And promisingly Shanks said that conditions in its Netherlands unit continue to improve, a situation that should offset the impact of weak oil prices on its Hazardous division and delays to its waste management facility at Wakefield. The latter is is likely to result in additional costs to the tune of £5m, the business noted.
The City expects improving demand for Shanks’ services to flip the business from a projected 6% earnings dip in the 12 months to March 2016, to a 14% advance in the following year, pushing a P/E ratio of 19.3 times for the current period to a very-respectable 17.1 times for 2017. Although investors should of course be vigilant concerning the state of the oil market, I reckon the company’s long-term earnings prospects are encouraging as market conditions elsewhere keep on improving.