Evening Standard 11/02/19 - Vox Markets | Vox Markets

Evening Standard 11/02/19

Petrofac’s woes deepen as fear of £400m legal action looms. A legal fund backed by one of the world’s biggest activist investors, Paul Singer, was on Monday preparing to pull the trigger on a £400 million legal claim over the bribery scandal engulfing oil engineer Petrofac Ltd. (PFC). The oil services group, headquartered in London, is in the firing line of litigation funding arm Innsworth — which is owned by Singer’s Elliott Management. It previously mounted legal action against Volkswagen and Tesco. Innsworth is gearing up to file a group claim on behalf of institutional investors such as large US and UK pension funds, claiming they suffered “substantial losses” on their Petrofac investments from 2010 onwards.

City turns against Thomas Cook Group (TCG) as planes arm sale is dubbed no-flyer. Last week Cook’s latest cunning plan was to ponder the sale of its planes — this would apparently be a great idea since they all have established slots at top airports and are always at least half-full with the company’s own holidaymakers. Those 103 planes could raise more than £1 billion, we were told, an amount that looked toppy to anyone who’s flown inside one. And if the planes really are worth £1 billion, why is the entire company’s stock market value below £500 million? Analysts at Berenberg joined the sceptics today, asking whether the strategic review of the airline makes sense, not least since if they make a hash of it (not entirely without possibility), the shares will fall further which would “all but make a capital raise impossible”. The shares, down 75% this year, moved up almost 1p to 30p today. Berenberg’s Stuart Gordon thinks even that’s too optimistic, telling clients the stock is worth just 12p.

TalkTalk, nearly as unloved as Thomas Cook, was biffed by a negative note from HSBC which put a fair value for the stock at 86p. Shares fell 2p to 95p. TalkTalk Telecom Group (TALK) chairman Sir Charles Dunstone is one who thinks HS2 should be binned and a slug of the money saved spent on ultra-fast wi-fi.

Merlin Entertainments (MERL) — owner of Alton Towers, Legoland and Madame Tussauds — might be a beneficiary of quicker train rides between London and Birmingham. BoAMerrillLynch reinstated its coverage of Merlin today with a Buy recommendation, claiming the shares are worth 420p.

Big Dish (DISH) is a tech start-up and, like all such businesses, is either going to take over the world or disappear without trace. The idea is to offer discounts — between 10% and 50% — to restaurant customers to fill empty space. Sounds familiar but unlike reservation platforms such as OpenTable, TripAdvisor, Zomato or Groupon, which push customers to go to the restaurants at any time, BigDish encourages diners to go to a restaurant at a particular time. It means restaurants can control the level of discount and the maximum number of discount diners. The model is simple, with BigDish charging the restaurant a fee per diner — about £1.50 — instead of charging the customer. The company raised £2.2 million at its float, most of which will be spent on marketing. In January the firm received a boost when it appointed Sanj Naha as incoming chief executive. Naha has experience in the industry having held senior positions at TripAdvisor and Bookatable. The firm is hoping to have signed up 6000 restaurants across England, Wales and Scotland by the end of this year. Analysts, however, warn that the business is hard to value at this point and Richard Gill at Align Research has a speculative Buy on the stock with a target price of 5.5p. The company itself has made no secret that should it reach a certain size then it will sell out to private equity. Founder Aidan Bishop points to the £112 million Bridgepoint Development Capital paid for deals site Tastecard back in 2015. This is a high-risk punt but if it works and is bought out, you’ll never forgive yourself for passing this up.

Whether it’s because the wives of City’s bankers don’t like the food in Frankfurt or find the riots in Paris a little too hot, the great Brexit exodus to the Continent is not happening, for now at least. Yet another survey has shown that the fears of UK-based overseas firms relocating across the Channel have been well and truly exaggerated. So far, the number of bankers and other finance experts who have been transferred to other European capitals is tiny: 0.5% of the 400,000 people who work in the financial services sector. The latest Reuters survey is fact-based rather than a forecast: it asked 132 of the biggest and most internationally focused UK-based banks, insurers, asset managers and private equity firms what their plans were at the end of January, just as the risks of a no-deal Brexit started to heat up. The results showed that firms said about 2000 jobs are likely to have moved, or have been created in EU countries. That’s a fifth of the 10,000 jobs that were feared would be lost when its first survey was released more than a year ago. Interestingly, HSBC, which made such a public warning a while back that a 1000 jobs would be moved to Paris, has not moved any yet. In total, the bigger investment banks are thought to have moved about 890 jobs collectively, mainly to set up “brass-plate” offices in case of no deal and no immediate future agreement on services.

Just Eat, which ousted its chief executive last month, on Monday came under fire again after an investor urged the takeaways business to start merger talks. Cat Rock, the US-based hedge fund, said in a letter to directors that Just Eat (JE.) would be better off merging with an unidentified “well-run industry peer” rather than searching for a new boss. Cat Rock also has a stake in Dutch-listed rival Takeaway.com. The remarks come less than a month after Just Eat parted ways with boss Peter Plumb, who was previously criticised by Cat Rock alongside chairman Michael Evans, over its strategy. Just Eat has been facing increasing competition from the likes of Deliveroo and Uber Eats, themselves subjects of merger speculation, and is investing millions in its own delivery service to keep up. The activist investor, which owns a 1.7% stake, blamed Just Eat’s “poor record” of appointing bosses for a slowdown in earnings in the past. It added: “Just Eat needs a world-class management team with online food-delivery experience and proven delivery capabilities. A merger is an obvious path for securing these advantages.”



Mentioned in this post

Big Dish
Just Eat
Merlin Entertainments
Petrofac Ltd.
TalkTalk Telecom Group
Thomas Cook Group