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WEEKLY MARKET ROUND-UP – 12/07/19

Amazon takes top spot

Amazon rose to No. 1 in the BrandZ Global Top 100, surpassing Google and ending a Google-Apple duopoly that began in 2007, when Google surpassed Microsoft to capture the No. 1 rank.

Imperial reviews dividends on e-cigarette focus

British tobacco giant Imperial Brands is to cut its dividend growth targets and launch a £200m share buyback scheme as it builds out its e-cigarette portfolio.

The company said it would continue to grow its dividends but through a more “progressive” policy that reflects underlying business performance. Imperial had regularly raised dividend payouts, however, its share price has fallen as much as 17% this year as the sector as a whole has struggled with an increased focus on ethical investments. But markets appeared receptive to its more “sustainable” dividend plan with the share price rising around 2% on Monday (8 July).

Imperial stated the new dividend policy would help reduce debt and allow for both organic and M&A growth in the tobacco and vaping sectors.

Bain buyout of Kantar to boost high-yield market

Advertising giant WPP looks set to sell a majority stake in data analytics business Kantar to private equity firm Bain Capital in a $4bn deal that could boost the high-yield market.

Following news of the buyout, reports suggest Bain will raise $3bn of debt from 11 major banks to fund the acquisition in the form of euro and dollar-denominated senior leveraged loans and high-yield debt.

Tim Li, credit analyst at Quilter Investors, says: “The trend of large corporates seeking to enhance shareholder value by selling non-core assets will continue to feed the high-yield market with new supply. In the past, we’ve seen carve-outs such as Nouryon and Refinitiv aspire to become more profitable and cash generative as standalone entities thanks to more dedicated management teams.”

Virgin Galactic targets stock market

Richard Branson’s Virgin Galactic is reported to be planning an IPO before the end of the year, to become the first space tourism business to list publicly.

The move will look to provide the business with additional capital to take on space rivals in the form of Jeff Bezos’ Blue Origin and Elon Musk’s SpaceX.

Virgin Galactic is expected to list its shares as part of a merger with Social Capital Hedosophia Holdings, which will reportedly invest $800m in the business for a 49% stake. The combined business is expected to be valued at around $1.5bn.

Launched in 2004, Virgin Galactic aims to provide suborbital space flights for tourists, with celebrities such as Leonardo DiCaprio among those to have paid deposits for the first flights.

Jaguar Land Rover chooses UK for electric cars

Car manufacturer Jaguar Land Rover (JLR) is to plough millions into its Birmingham factory
as it confirmed a range of electric cars would be made in the UK despite Brexit uncertainty.

JLR is Britain’s biggest car company, making 30% of the UK’s 1.5 million cars last year, and it has committed to offering electric versions of all new models from 2020. CEO Professor Ralf Speth said: “As a visionary British company, we are committed to making our next generation of zero-emission vehicles in the UK.”

The plant at Castle Bromwich would become a “powerhouse of electrification” and would initially make an electric version of the luxury saloon car, the Jaguar XJ. JLR said the move would secure 2,700 jobs, just months after it revealed plans to cut 4,500 jobs with most coming from the UK.

Chart of the week

Semi-conductor u-turn? Despite lower prices and struggling sales, US semi-conductor stocks
are soaring. But are they heading for a fall?

If any article in this market update has an effect on your finances and you would like professional advice, then please get in touch.

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