Interactive Investor

Shares round-up: Hochschild Mining, Vivo Energy, Eco Animal Health

25th November 2021 13:36

Graeme Evans from interactive investor

There’s plenty of action on markets today, and the eye-catching movers are being driven by an exciting variety of international events.  

Chinese pig prices, Peruvian politics and African filling stations today provided interest on the London market after big moves for Eco Animal Health (LSE:EAH), Hochschild Mining (LSE:HOC) and Vivo Energy (LSE:VVO).

Cognac drinkers in China and the US were also a factor in trading after better-than-expected results from Remy Cointreau helped lift shares in Guinness and Smirnoff rival Diageo (LSE:DGE) by 1%.

Bank of America called the Paris-based group's half-year figures “remarkably strong”, noting that underlying earnings beat forecasts by 27%. But with Remy already trading at a chunky premium to the rest of the EU staples sector, the Bank's analysts are not tempted to change their “underperform” recommendation.

They are more interested in FTSE 250-listed Hochschild Mining, whose shares they view as investable again after Peru backed down from last weekend's threat of mine closures.

Hochschild's two mines in southern Peru — Inmaculada and Pallancata — account for about 70% of earnings and employ more than 5,000 people and a further 40,000 indirectly.

Shares lost more than 50% of their value at one point on Monday following the closure threat, which was reportedly based on environmental grounds. Hochschild said today that the government had since clarified its position, with a commitment to uphold the rule of law while also recognising the continued rights of mining companies in the country.

The stock rallied 16% or 19.4p to 141.4p but remains below the 254p seen before this year's election of the socialist candidate Pedro Castillo in the country's presidential election.

Bank of America upgraded Hochschild to 160p but warned the political risk in Peru remains real. It values the gold and copper miner on 0.9 times net present value, compared with 1.6 times before this week and still at the low end of the historical trading range.

Hochschild was joined at the top of the FTSE 250 index by Vivo Energy, whose shares jumped 19% after it backed a £1.7 billion takeover from its biggest shareholder.

Energy trader Vitol set up Vivo with private equity partner Helios in 2011, with the business now selling Shell-branded fuels and lubricants at more than 2,400 filling stations in Africa.

The company was valued at £2 billion when it listed on the stock market in 2018, in what was then the UK's largest flotation of an Africa-based company for more than a decade.

Vivo generated revenues of $8.3 billion (£6.2 billion) and profits of $246 million (£184 million) in the year before the pandemic. It has been the subject of takeover speculation for much of this year after Netherlands-based Vitol made an initial approach in February.

Other big movers in the FTSE 250 index included motorway gantries firm Hill & Smith Holdings (LSE:HILS), whose shares surrendered some of this year's big gains with a fall of 7%.

The trading update for the four months to 31 October showed revenues up 4% to £237.1 million amid further robust trading in its core UK and US markets. It is also on track to meet 2021 expectations, but shares fell 130p to 1,736p, even though the company continues to manage supply chain headwinds relating to the availability of materials and labour.

In the US, this has seen the company focus on higher margin work after staff shortages limited production capacity in some galvanising plants.

On AIM, Eco Animal Health shares slumped 20% after its half-year results showed a bigger-than-expected impact from the recent dramatic fall in the pig price in China. Its flagship product Aivlosin is used as an antibiotic for respiratory and enteric diseases in pigs and poultry.

Sales for the six months to 30 September fell by £4 million to £38.5 million, leaving the loss per share at 0.21p. Like animal genetics firm Genus (LSE:GNS) yesterday, Eco said it regards the situation in China as cyclical and one which is expected to start to reverse during the second half of the year.

Analysts at Peel Hunt cut their pre-tax profits forecasts by 45% for the current year and 28% for next year but believe the company is well placed to benefit from the rapid change in the Chinese market over the long term. They also noted continued sales progress outside China.

The broker reduced its price target from 430p to 350p but continues to have a “buy” recommendation. Shares were today 40.5p lower at 160p.

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