Interactive Investor

Shares round-up: Rolls-Royce and BT attract more buyers

There’s more positive news for owners of both these stocks as values continue to appreciate. City writer Graeme Evans looks at these popular FTSE 100 companies and interesting activity in the FTSE 250.

20th June 2024 13:45

by Graeme Evans from interactive investor

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Rolls-Royce jet engine in Singapore

Confidence in the Rolls-Royce Holdings (LSE:RR.) transformation sent its shares nearer £5 today as the engines maker joined Land Securities Group (LSE:LAND) and BT Group (LSE:BT.A) among the FTSE 100 front-runners.

The latest City upgrade for Rolls came from Goldman Sachs, which sweetened its buy stance from 524p to 545p. The shares peaked at 488p early in Thursday’s session before settling at 482.4p, representing a rise of about 60% this year and up from 100p in early 2023.

Rolls is due to post half-year results on 1 August, having left its guidance unchanged when chief executive Tufan Erginbilgic last gave an update at the AGM on 23 May. He told shareholders at the meeting that his work to turn Rolls into a “high-performing, competitive, resilient and growing business” was continuing with pace and intensity.

UBS last week reiterated a price target of 550p, while recent credit rating upgrades by Fitch and S&P have boosted hopes that Rolls will soon be in a position to resume dividend payments.

In contrast to Rolls, the stock market recovery of Land Securities has yet to take shape.

Its shares are down 12% this year, underperforming the wider sector despite solid annual results and signs of stabilisation in its portfolio of shopping centres and London offices.

UBS believes the shares are at an attractive entry price for this point in the cycle, noting that a 28% discount to 2024’s net tangible asset figure appears to suggest the market is braced for further valuation declines and very limited rental growth going forward.

The bank said: “Barring an unexpected event or a significant change in interest rate expectations, we think this is a highly unlikely scenario and at an 8% earnings yield the shares are so discounted the company doesn't need to deliver much upside to make this an attractive risk-adjusted proposition.”

Shares rose 18p to 627.5p as UBS lifted its price target to 730p from 685p previously.

Other strongly performing FTSE 100 stocks included BT Group, which is now up 11% since the disclosure just over a week ago that Mexican billionaire Carlos Slim is a major shareholder.

His interest in BT has been viewed as a vote of confidence in the strategy of new boss Allison Kirkby, particularly after her improved results-day guidance on free cash flow.

The shares lifted another 2.2p to 143.5p in today’s session, the highest level in just over a year.

In the FTSE 250, Harbour Energy (LSE:HBR) shares were the beneficiary of City support after Bank of America took a closer look at this year’s transformational deal to buy Wintershall Dea’s upstream assets.

The $11.2 billion acquisition of the gas-weighted portfolios in Norway and Argentina and growth projects in Mexico is due to complete in the fourth quarter.

It is Harbour’s fourth major acquisition, having bought a package of UK North Sea assets from Shell for $3 billion in 2017 and ConocoPhillips UK North Sea for $2.7 billion two years later.

Bank of America said: “We see Harbour's equity story transformed with the Wintershall deal: tripling production, diversifying the portfolio, lowering its cost base and ultimately delivering a step change in cash flow visibility.”

In light of Labour’s windfall tax proposals, it added that Harbour's pursuit of geographic diversification formed its main defence against UK fiscal risks.

The shares today jumped 13.2p to 314.1p, which compares with the bank’s 450p target.

Harbour was joined on the FTSE 250 risers board by Mediterranean energy firm Energean (LSE:ENOG), which lifted 20p to 1,050p after it revealed plans to pay a special dividend worth up to $200 million from the sale of its assets in Egypt, Italy and Croatia.

Chief executive Mathios Rigas said the deal’s enterprise value of $945 million generated  a significant return in the four years since Energean acquired the assets.

He added that it also marked an “exciting new chapter” as Energean focuses on its flagship Karish field in Israel and a new venture in Morocco.

Nasdaq-listed Carlyle has bought the assets, which will form part of a new standalone business chaired by former BP chief executive Tony Hayward.

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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