Interactive Investor

Shares round-up: Computacenter, DS Smith

10th December 2020 14:19

Graeme Evans from interactive investor

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Investors now have solid evidence to justify the recent vaccine-driven surge in market confidence.

After an inspired November for markets, investors today got evidence from Computacenter (LSE:CCC), DS Smith (LSE:SMDS) and Inchcape to justify the recent vaccines-driven surge in confidence.

Updates from the trio confirmed better-than-expected trends in trading over recent weeks, leading to share price gains of 3% for blue-chip packaging firm DS Smith, as well as for IT services business Computacenter and car retailer Inchcape in the FTSE 250 index.

Their optimism comes after various vaccine breakthroughs helped the FTSE 100 index and domestic-focused FTSE 250 climb by more than 12% in November.

DS Smith

DS Smith is up by 30% since the start of last month, with the consumer-focused stock today ahead 11.9p to 370.8p after the company restarted dividends alongside interim results.

The payment of 4p a share reflects a good start to the second half of the year, with volumes up 5% in November and 3% in October, compared with the 1% decline seen in the first half.

It is seeing strong demand from large pan-European and US consumer goods companies, with Covid-19 helping to accelerate favourable trends around e-commerce packaging.

Chief executive Miles Roberts said there was real momentum in corrugated box volumes and profitability at the start of the second half, alongside “excellent” cash flow generation.

Computacenter

The latest upgrade by Computacenter continues a strong year for the IT solutions company. It has benefited from home-working trends, as corporate and public sector customers turn to it for help at a tricky time for their IT functions. The group has also gained from heavy investment by those keen to boost their digital capabilities during the pandemic.

After boosting forecasts in July and September, Computacenter did so again today following a strong fourth quarter and amid good visibility on December trading. It now thinks profits for the year will be not less than £190 million, compared with the £180 million forecast in September and £146.3 million achieved last year.

From 936p in March, shares are now trading at 2,284p after rising 64p today. Investec Securities has a target price of 2,650p and said the recent performance supported a rating at the top end of the company's historic range.

Inchcape

This company also featured on the FTSE 250 risers board after revealing that annual profits will be ahead of the City's current consensus for a figure of £108 million. It has seen a much better-than-expected performance in November, with lockdown restrictions failing to put a dent in its business due to click-and-collect demand and the continuation of aftersales work.

Inchcape (LSE:INCH), which trades in 33 national markets and has been listed on the London Stock Exchange since 1958, upgraded expectations at the start of November but declined to give full-year guidance at that time due to the lockdowns.

A substantial improvement in its cash position now means the company is considering starting up dividend payments again. Shares rose 18.5p to their highest level since early February at 649.5p, having risen by 30% since the end of October.

Analysts at Jefferies have a price target of 685p, with the stock currently trading on a valuation of 11.2 times 2022 earnings.

Greatland Gold

This is another stock with momentum, as investors continue to see the potential of its Paterson exploration licences in north-western Australia.

Last year Greatland Gold (LSE:GGP) entered into a farm-in agreement with Newcrest Mining  to explore and develop the Havieron gold-copper discovery. The site is close to Newcrest's Telfer mine, which has produced millions of ounces of gold but is nearing the end of its life.

Berenberg said that today's publication of figures showing an initial inferred resource of 4.2 million ounces on a gold equivalent basis made it more likely that Newcrest will elect to move forward with the development.

The AIM-traded shares have risen from below 2p to more than 33p, valuing the company at £1.3 billion, although they fell back 4.6p to 28.65p today. Berenberg said: “We believe that it is likely that the ultimate scale of the resource will be larger than we previously envisaged.”

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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