Interactive Investor

Shares round-up: big moves for these three mid-caps

20th October 2020 13:59

Graeme Evans from interactive investor


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There were mixed fortunes on the second-tier index following latest trading updates. 

Rising stars Softcat (LSE:SCT) and Gamesys (LSE:GYS) suffered share price setbacks today as soft drinks company Britvic (LSE:BVIC) struck a blow for the old guard in the FTSE 250 index.

The maker of iconic brands including Robinsons, Tango and J20 rose 6% to 794p after a flurry of developments, ranging from an upgrade to November's full-year results expectations to the 20-year extension of its long-running bottling agreement with US giant PepsiCo.

The disruption of Covid-19 to pubs and bars remains a factor in its current valuation, but analysts at Citi, Numis Securities and Jefferies think shares can still reach 900p or more.

Among them, Numis said:

“We think that the current valuation is attractive and that Britvic remains on track to deliver meaningful margin improvements over the coming years.”

The shares were down 17% year-to-date prior to this morning's update, leaving the stock trading at a discount against most of the company's peers at about 13.7 times 2021 earnings. 

Softcat has been one of the highlights of the year so far in the FTSE 250 index, although a more cautious tone from the IT infrastructure specialist in today's full-year results ensured that shares continued their retreat from the record high of 1,425p seen in early September.

The fall of 7% to 1,150p came despite an 11% increase in operating profits to £93.7 million. Higher profits are attributed to continued strong demand for cyber security and cloud-based solutions, meaning the Marlow-based company extended its record of revenues growth to 60 consecutive quarters.

After a string of upgrades in recent months, the new financial year has also started strongly, although there's growing concern that corporate customers are becoming more cautious. Softcat is still in a strong position to return excess cash to shareholders, however, with plans for a special dividend of 7.6p a share on top of 11.4% growth in the total dividend to 16.6p a share.

Last year's special divi was 16p a share, part of more than £200 million given to shareholders since Softcat arrived on the stock market in 2015. It is valued at more than £2.3 billion, but today's fall in shares widens the gap to rival Computacenter at more than £2.7 billion.

Shares in Gamesys, which operates online casino and bingo brands including Jackpotjoy and Rainbow Riches Casino, fell back from a record high after a strong trading update prompted investors to lock in profits.

The company reported a stronger-than-expected third quarter, with revenues up 31% to £190 million after particularly robust growth in Asia and a solid showing in the UK. It's likely that home working trends and the closure of gambling premises due to Covid-19 restrictions boosted the business during the period.

Previously known as The Intertain Group and more recently JPJ Group before last year's acquisition of Gamesys, the group said it had made a good start to the current quarter.

Shares have rocketed from 532p in March to above 1,300p, although they were 44p lower at 1,268p after today's trading update. Edison Group director Russell Pointon increased his earnings forecasts by 2-3% and said a forward price/earnings multiple of 9.1x is well supported by the free cash flow yield of 9.2% and improving financial position.

Among other fallers in the FTSE 250 index, shares in Trainline (LSE:TRN) dived 13% to their lowest level since April after CEO Clare Gilmartin announced her intention to step down in February. She will be succeeded by chief operating officer Jody Ford.

Gilmartin was at the helm for Trainline's flotation in June 2019, when the rail and coach ticketing platform was valued at £1.7 billion before surging 25% on its first day of trading. Shares were priced at 350p in the IPO, but fell 42.8p to 290.2p today.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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