Proactive Investors -
- FTSE 100 down 85 points at 7,598
- Entain (LON:ENT) slips after warning of soft online gaming revenue
- Aviva (LON:AV) swoops for AIG (NYSE:AIG)'s UK protection business
Goldman expects further weakness in sterling
Sterling has continued to decline after the recent weak economic data prompted the Bank of England to leave interest rates unchanged last week.
Goldman Sachs (NYSE:GS) has lowered its GBP/USD forecast path to 1.18, 1.20, 1.25 in 3, 6, 12 months (vs 1.24, 1.29, 1.33 previously) and has officially “shifting back to sterling bears.”
It thinks the main headwind to further GBP weakness would be if incoming data surprise to the upside, revealing the recent progress to be a red herring and pushing the BoE back towards a more “forceful” response.
But it reckons such a shift would likely take some time to play out, “leaving us comfortable with a tactically bearish view for now.”
Today's risers and fallers
Here's a summary of today's top risers and fallers
Risers:
Tertiary Minerals PLC (LON:TYM) the African mining company, jumped over 22% after it signed a term sheet for an earn-in and joint venture agreement with its local partner Mwashia Resources.
Fallers:
Entain PLC (LON:ENT), the owner of Ladbrokes and Coral, is trading 11% lower on Monday after disappointing investors with a warning that revenue growth has been slowing in 2023.
Shares of Pelatro PLC (LON:PTRO), a provider of campaign management solutions, dropped 14% following an announcement that the company is facing project delays.
SpaceandPeople PLC dropped close to 20%, with the stock's Level-2 page - giving live prices - suggesting the fall was the result of a small, early trade of around 7,000 shares worth £5,800. Perhaps this was someone using the interims as their cue to cash out of the investment.
Aviva's AIG deal price multiple on the 'high side'
Back to the start of the day and UBS thinks Aviva has paid a high price for AIG’s UK protection business.
The Swiss Bank explained AIG Life Limited's own funds at 2022 were £261.6 million implying a multiple of 1.76x own funds (ex- synergies).
“This multiple appears on the high side relative to a range of 0.8x-1.0x for prior UK life insurance transactions,” it said.
Aviva has paid £460 million for the business in a deal it said would “deliver strong financial returns with an expected low-teens internal rate of return.”
UBS thinks the transaction could be funded through the proceeds from the sale of Aviva's Singlife stake which was sold for a £500 million plus a cash payment of £300 million for two debt instruments on top.
But it expects a negative reaction given the high headline own funds multiple and lower expectations of higher capital returns post the Singlife deal.
Astra's non-oncology assets overlooked, says Jefferies
A bit more on the AstraZeneca (NASDAQ:AZN) upgrade by Jefferies - the pharma giant remains in the green, 1.8% to the good.
The broker has upgraded the stock to buy from hold and set a 13,000p price target, up from 10,500p.
“We flag R&D assets outside oncology are being largely ignored, offering significant upside optionality, with our deep-dives underpinning up to +8% above consensus sales & EPS,” it said.
Jefferies highlighted the asthma drug Airsupra where it sees near $1 billion more sales backed by a US proprietary physician survey.
It also has taken a look into what it calls “blockbuster opportunities” for tozorakimab, Farxiga follow-ons and eplontersen.
Tozorakimab in Phase III for acute respiratory failure and smokers' cough seems underappreciated, it said, with Jefferies estimating peak sales of $4.5 billion peak, while it is “optimistic Farxiga combos can at least sustain this $8 billion franchise.”
The bank estimates a $3.5 billion peak for eplontersen for rare cardiac disorder.