Three companies are stealing headlines at the moment for different reasons. Our City writer explains what’s going on and why.
High-yielding Energean (LSE:ENOG) and dealmaker PureTech Health (LSE:PRTC) today stole the mid-cap limelight in a session that featured a big fall for shares in leading FTSE 250 stock Inchcape (LSE:INCH).
The nervous market mood was highlighted by the reaction to results by global car distributor Inchcape, which tumbled 128p to 739p despite 2022 figures being in line with expectations.
Inchcape, which is among the top 10 biggest stocks in the FTSE 250 index, added that recent trading had been in line with hopes as earlier industry supply issues continue to ease.
Profits of £373 million were 50% higher than a year ago and the company is planning the June payment of 21.3p a share, lifting the dividend for the year by 28% to 28.8p a share.
Peel Hunt responded to the results by highlighting a “buy” recommendation and price target of 1,200p, adding that the investment case remained intact.
The broker said: “The strong model, improving earnings mix to structurally attractive markets, opportunities to develop market share (including M&A) and the strength of cash backed returns are not reflected in the current rating.”
The biggest gain in the FTSE 250 index came from one of the benchmark’s smallest stocks after clinical stage biotherapeutics firm PureTech Health unveiled a deal to monetise royalties in potential schizophrenia drug KarXT.
In an agreement with Royalty Pharma (NASDAQ:RPRX), PureTech will get $100 million up front and a further $400 million of additional payments subject to regulatory and commercial milestones.
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KarXT was invented at PureTech, having worked out how to adapt a shelved Eli Lilly drug and then establishing a ‘founded entity’ in Karuna Therapeutics to develop the drug further.
PureTech retains a 3.1% equity stake in Karuna (NASDAQ:KRTX), which is currently worth around $180 million. Karuna has been the best-performing biotech IPO since 2018, after being listed on Nasdaq by PureTech in 2019.
PureTech shares rose 21.5p to 224.5p but Peel Hunt sees a big upside to 930p.
It said: “We think this is a very high-quality, clinical stage biotech with a great management team and a very broad portfolio of assets. It is no accident that we have such an upside on our target price.”
The next best performance in the FTSE 250 came from Energean as the Mediterranean oil and gas explorer highlighted its dividend potential as it continues to ramp up production following the first delivery of gas from its flagship Karish project in Israel.
The company is due to pay another quarterly dividend of 30 US cents a share on 30 March, representing an annual yield of about 9% as part of a recently launched plan to return at least $1 billion (£810 million) to shareholders by 2025.
In addition, it also highlighted a post-2025 target to maintain a progressive dividend policy, underpinned by existing reserve volumes.
The group’s financial performance for 2022 and production forecasts for 2023 were in line with City expectations, helping shares to lift 108.4p to 1225.4p. Peel Hunt, which has a price target of 1,850p, believes the latest guidance signals the potential for a “step-change in profitability and cash flow generation.”
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