MarketLine Blog

Posts written by Christopher Leyman-Nicholls

Booz Allen Hamilton: FY2019 highlights strong growth, but with reason to worry about US government

MarketLine

Revenues for Q4 stood at $1.8bn, representing a 9.1% increase for the same period a year ago, while financial year end revenues reached $6.7bn – a huge 8.7% increase year-on-year. EBITDA for the year increased 15.4% to $675m, while net income was the company’s biggest mover compared to 2018, with a 34.2% increase to reach $395m. Booz Allen Hamilton is also wary of the company’s reputation being damaged by the US government. Reputation issues could be pointed towards President Trump and his potential to create public outcry for the company,… Read more

Boeing 737 MAX: Public action needed to rebuff long-term threats

MarketLine

Even before the deadly crashes, Boeing had already staked much on sales of the MAX. Created to catch-up with new offerings from Airbus, the 737 MAX was reportedly rushed into service. According to a ’60 Minutes’ investigation, development was carried out under demands from the higher management echelons that the new version of the plane be as close to the previous version as possible. So far only one airliner, Indonesian based Garuda, has cancelled an order. The company was scheduled to receive 49 more MAX aircraft, having already been delivered… Read more

Beyond Meat: Vegan burgers are going public

MarketLine

Beyond Meat raised the price range for its shares before floating on the stock market, valuing the plant-based meat producer at almost $1.5bn. The American company, which counts the actor and ecologist Leonardo DiCaprio its investors, will now offer their shares at a price of $23 to $25. The decision to increase the price from the original price range of $19 to $21 indicates strong demand for shares. But Beyond Meat has made big losses and does not know when it will make a profit. Financial results for 2018 reveals… Read more

The Body Shop: Plans to expand in the growing Indian cosmetics market

MarketLine

The Body Shop is a manufacturer and retailer of personal care and cosmetics products. The company classifies its offerings under seven product categories: face care, body care, hair care, make-up, fragrances and gifts. The Body Shop operations spread globally with a presence in over 65 countries and employs 22,000 people. Prior to being acquired by Natura, The Body shop’s sales were declining in the UK, reflecting the UK high street malaise. Results for 2016 show total sales were EUR920.8m ($1.1bn), down from EUR967.2m ($1.14bn) in 2015. Moreover, competition from an… Read more

CMA blocks Asda Sainsbury’s merger: Ending merger will stifle competition and dissuade future investment

MarketLine

On Wednesday, April 25th 2019 the Competition and Market Authority announced that the proposed merger deal between leading supermarket food retailers, Sainsbury’s and Walmart-owned Asda, would not go ahead. Despite being expected, the decision has shook investors; Sainsbury’s share price fell to a near three-year low on the day of the announcement. It leaves Sainsbury’s CEO Mike Coupe in the unenviable position of having to come up with a strategy for the future of the company as a solo act, a situation made tougher having already invested so much into… Read more

Robinhood: Fintech start-up and zero-fee trading app applies for traditional banking service charter

MarketLine

The company has stated “This is a first step towards being granted a national bank charter which would allow Robinhood to offer traditional banking products and services,” a strategy that will please users and potential investors. The move will mean if the charter is approved, the company will be able to offer a full-service bank product alongside its no-fee trading platform. The application will without doubt be supported by the company’s upcoming IPO, said to be worth $5.6bn. The US-based company raised $363m in its latest Series D round of… Read more

Debenhams: The latest victim of the UK high street

MarketLine

Even though Debenhams has announced store closures under a proposed CVA, the retailer is far from being alone in experiencing high-street woes. Numerous retailers, including House of Fraser, New Look, Next, Arcadia, and Marks & Spencer have been facing increasing financial difficulty on the UK high-street, while others, such as Toys R Us, have exited the market altogether. Debenhams’ difficulties are the result of an often seen tale of too many stores, too much debt, and a failure to keep up with consumer trends. On top of the problems that… Read more

Chevron buys Anadarko: $33bn purchase is big move into US shale

MarketLine

For now the purchase of Anadarko Petroleum Corporation – a company that in 2018 registered $13bn in revenue but which consistently lost billions of dollars each year before turning a profit in 2018 – remains the largest of its type and places Chevron level with ExxonMobil and Royal Dutch Shell in terms of production. Last year the newly combined company would have generated greater revenues than ExxonMobil. Investing so heavily reveals the degree of confidence big oil players have in shale gas extraction. The scale of operations such companies will… Read more

McDonald’s: Tech-heavy strategy at the forefront of driving growth

MarketLine

McDonald’s recently announced its purchase of tech start-up Dynamic Yield Ltd for a price tag of $300m, making it the company’s biggest deal in decades. The fast food giant isn’t best known for embarking on M&A activity, but it has been investing heavily in more recent years in a bid to bring technology to its services, indicating that tech lies at the forefront of the McDonald’s future. McDonald’s recent acquisitions are the latest in a string of digital investments which have taken place over the last few years, which have… Read more

The Entertainer continues expansion with ELC acquisition: Retailer bucking the high street trend

MarketLine

The UK high street has seen a number of casualties in recent times, with many retailers collapsing and others significantly scaling down operations. In the toys & games market, Toys ‘R’ Us has been the stand out casualty with the retailer closing all of its stores in the UK during 2018 following bankruptcy. Prior to this, Toys ‘R’ Us had been the leading toy retailer in the UK for most of its history after entering in 1985. The Entertainer seized this opportunity, making 2018 the year for expansion. The retailer… Read more

Primark: Fashion giant continues to break the rules of retail

MarketLine

Associated British Foods, the parent company of Primark, announced in late February that it expects profits will be “well ahead” of last year despite a drop in underlying sales in its stores. The company also managed to perform well in 2018, despite the retail environment being particularly tough, with revenues reaching £7.4bn ($9.8bn), 6% ahead of last year at constant currency rates. Primark believes future growth prospects lies in further expanding its store portfolio and has ambitious plans to open more stores in the coming year, including 19 across, France,… Read more

AstraZeneca agrees $6.9bn deal with Daiichi Sankyo: UK drug maker could dominate the future breast cancer therapy market

MarketLine

The joint development and commercialization of a new breast cancer therapy indicated for the treatment of HER-2 positive breast cancer has the potential to help the AstraZeneca in its quest for a larger oncology market share. If approved, it will join Lynparza (olaparib) – a PARP inhibitor marketed by AstraZeneca for the treatment of HER negative breast cancer. The addition of a new breast cancer therapy to the AstraZeneca product portfolio will almost certainly increase the company’s market share. Roche currently dominates the treatment of HER-2 positive breast cancer with… Read more

Saudi Aramco financials released: Despite huge net profit, financials reveal fundamental problems

MarketLine

For the first time in over four decades of operation state-owned oil major Saudi Aramco released financials, revealing the firm to have produced the highest net profit of any company in the world. Despite the attractiveness of headline figures, the financial condition of the firm falls far short of the $2tn valuation the government declared when launching an IPO was first mentioned publically. Evidence on which that valuation could be supported is lacking, exacerbating the economic problems the state has experienced of late, thus revealing the need for diversification. In… Read more

Argentine agricultural exports: Tax on exports not helping to initiate economic recovery

MarketLine

Even during numerous economic crises during the early 2000s Argentina routinely registered a trade surplus, but that is no longer the case. To combat biting economic conditions the government has imposed austerity alongside a plethora of policies which include higher taxation on exports. The decision to tax exports at a higher rate to lower the deficit is therefore flawed. Instead of agriculture being helped to improve the economy, higher export taxation makes key Argentine products more expensive in an industry which is notoriously price sensitive. Instead of targeting the agricultural… Read more

Vale disaster: Mining giant will survive, but repercussions will be severe

MarketLine

The collapse led to the flooding of the town of Brumadinho with 12 million cubic meters of mining waste, wreaking havoc across the landscape. This has not only caused a huge environmental disaster but also led to the deaths of an estimated 169 – a figure which is expected to rise. While Vale is a metal and mining and logistics company, it derives the bulk of its revenue from the ferrous minerals segment, which accounted for 74% of total revenue in FY2017. Vale expects that the anticipated decline in output… Read more

Nigerian e-commerce market will lead economic growth: However companies are struggling in the current market environment

MarketLine

Nigeria is seen by many investors as a gateway to the African market: the country has the highest GDP in Africa. Investment has enabled the country to develop its digital market; improving internet services and accessibility has created opportunities for digital businesses. E-commerce has become one of the most lucrative online markets in Nigeria; the rate of internet usage and purchases has continuously increased over the years. The rising amount of online retail purchases has resulted in the e-commerce market in Nigeria reaching a value of $13bn within just ten… Read more

Toshiba operational profit downgrade: Japanese company now more dependent on turnaround plan succeeding

MarketLine

The announcement of a five-year turnaround plan towards the end of 2018 was met cheerily by stock markets; even though several profit-making businesses had been sold, expectations were the company would begin to recover after being flushed with funds from the NAND sale. Yet now the company has reported results that are well down on original expectations, casting doubt over how soon the company can return to being a safe bet for investors. The stated ambition is to reach profit margins of at least 10% when the five-year plan concludes… Read more

African ports are driving economic growth: Expanding the port network will bring big benefits

MarketLine

According to SAP, 90% of imports and exports to and from Africa are transported by sea, and with the global middle-class population predicted to balloon to five billion people in just over a decade, expectations are African ports will take on greater economic significance. Problems, therefore, must be solved. Durban in South Africa is one of the more egregious examples of ports failing: the port is highly expensive and suffers from crippling congestion in the surrounding areas, causing it to only operate at 75% of the efficiency expected of an… Read more

Huawei exerting soft power: International relations strained as Chinese giant seeks overseas expansion

MarketLine

Many governments fear, to varying degrees, the signing of contracts with Huawei will grant intimate access to the government of China – certainly that is the line being pushed by the US government. The New Zealand government gained international attention towards the end of 2018 after the Communications Security Bureau successfully banned mobile phone company Spark from using Huawei equipment in the planned 5G network upgrade. An abrupt cancelling of official Chinese representation at the launch of the much vaunted Year of Chinese Tourism campaign was a rare public statement… Read more

No hope for HMV after second administration in six years: HMV will not be able to survive long-term due to recent difficulties

MarketLine

HMV entering administration was triggered by the current struggle of the retail industry, and now the company will find it difficult to recover in the current retail conditions. Uncertainty over Brexit has caused the value of the pound to drop, which has increased the cost of supplies from abroad. An increase in business costs and online shopping has also put HMV in jeopardy, making it harder for HMV to gain traction in the retail industry. HMV needs to find a buyer that has the resources and ability to turn around… Read more

BP back in Libya: British oil major is taking risks returning to chaotic country

MarketLine

For BP, a company which has suffered following massive bills incurred from the Deepwater Horizon disaster in the Gulf of Mexico, entering such a market may not immediately appear to be an example of prudent business decision making. Provided BP can drill oil reliably, and the country remains sufficiently stable to enable foreign companies to operate freely, the partnership with Eni to begin exploratory drilling in the early part of 2019 could prove fruitful. Exploring for oil at this stage could prove to be a valuable strategic move when viewed… Read more

US becomes world’s leading oil producer: Expanded oil production changes global industry dynamic

MarketLine

For a long time the US has been a leading oil player, but the combined might of OPEC was sufficient to reduce the global influence the country could have. However, thawing relations between Russia and Saudi Arabia reveal a decline in the ability of Gulf oil states to shape the international oil price according to domestic wants. Under such circumstances, expanding US production over much of the last decade has gone up against comparatively steady production from both Russia and Saudi Arabia. The US Energy Information Administration (EIA) predicts the… Read more

China Three Gorges takeover of EDP: Deal would leave Portugal dangerously exposed to China

MarketLine

The $10.9bn bid from China Three Gorges, the largest clean energy company in China, was rejected by EDP but the takeover remains very much the most likely outcome – only at present the shareholders would prefer to extract a larger sum of money for a prized asset. Current trading conditions are ideal for China Three Gorges. A relatively poor government (although now at least managing a growing economy and rising employment) in need of foreign investment makes EDP ripe for a takeover bid. Yet to secure this the government will… Read more

Vincent Bolloré charged in France

MarketLine

The arrest of French billionaire Vincent Bolloré, head of one of the largest companies operating in Africa, Bolloré Logistics, is unlikely to hurt the operations of the company recently valued at EUR12.9bn ($15.4bn). Insufficient logistical infrastructure has long held back economic growth for many countries situated on the world’s poorest continent. The French company has been important to developing critical infrastructure that has been driving growth of late. Odds are investigations in France will not significantly damage the company in Africa. Vincent Bolloré has already gained vocal support from Guinean… Read more

Sears seeks to sell assets to ESL Investments: Strategic call of CEO Eddie Lampert is sign of failure

MarketLine

Under CEO Eddie Lampert, Sears has always found enough money to struggle onwards. Now the much criticized hedge fund billionaire is seeking to buy the Kenmore appliance brand from his own company via his own hedge fund, ESL Investments. Lampert himself claims the sale “will provide an important source of liquidity” for Sears and help “to complete its transformation to respond to the challenging retail environment.” Few expect that sort of turnaround. Conventional wisdom dictates a troubled retailer needs to maintain the most lucrative assets under its control, not sell… Read more

Chinese regulator takes over Anbang: Massive insurer made example of in wider effort to keep money at home

MarketLine

President Xi Jinping has plenty of motivation to take action on Anbang Insurance Group. Not only had the company come to symbolize debt-ridden conglomerates through a series of lavish overseas purchases, but the speed at which the company had expanded raised concerns as to the wider impact failure could have. So far it would appear policy revisions have been successful in halting the flow of money out of the country. The messages many businesses in China will have deduced very swiftly is the President, now rated among the most powerful… Read more

Saudi Arabia and Russia oil alliance: Desert kingdom requires Russian co-operation to solve economic problems

MarketLine

Petrostates have historically been wasteful in regard to spending the wealth generated by large-scale fossil fuel extraction. The desert kingdom of Saudi Arabia is no different, spending vast sums on subsidizing fuel and extensive social programs; most of the workforce is employed by the state, funded by oil. Now the country is undergoing significant reform to correct economic imbalances and diversify the economy. The Aramco IPO is driving Saudi Arabian policy, which in turn is likely to be directing the nature of OPEC policy. Oil futures for March 2019 are… Read more

Nissan $9.5bn China investment: Scale of spending required to stay relevant in world’s largest car market

MarketLine

Whilst Nissan is not regarded as being a member of the top-tier car manufacturers – the likes of Volkswagen Group and Mercedes Benz are much larger – that has not stopped the company from pumping $9.5bn into car manufacturing in China. Such investments are now essential, particularly for the less popular global brands. The move represents significant ambition from the Japanese car maker: Toyota, recently the second largest player in the Chinese market, is declining in China and an opportunity exists for Nissan to climb up the hierarchy. Large investments… Read more

Qatar Eurofighter Typhoon deal: BAE sale should not distract from harsh reality of lost markets

MarketLine

The decision of the Qatari government to buy 24 Eurofighter jet aircraft built by BAE is useful but should not disguise a stark reality: at present the jet is losing out badly to the French made Rafale, especially in what were formerly highly productive markets in the Arabian Gulf. The danger in placing too much faith, or emphasis, in attempting to turn around sales is that very few nations have the available resources to buy in the numbers BAE would ideally like. The current geopolitical problems in the Gulf suggest… Read more

Tata-ThyssenKrupp merger: Deal will have short-term impact but doubts remain over long term

MarketLine

The merger of the European steel making section of Tata and German based ThyssenKrupp will likely have useful short-term impacts upon European production, but the benefits heading into the long-term future are less clear. Soon to be the second largest steel maker in Europe, the combined company will have sufficient bulk to compete much better with Chinese producers who are under pressure from the central government to consolidate. Chances are the new company will gain substantial efficiencies and improve product quality beyond other major rivals, but this only solves some… Read more