It’s been a mostly negative session for blue-chip shares, but there are a trio of multi-billion-pound companies doing very well indeed. Our City expert names them here and explains why they’re so popular.
The trainers and sportswear business got a helping hand from rival Mike Ashley’s Frasers Group (LSE:FRAS) as investors digested a better-than-expected trading update by the Sports Direct owner.
Frasers Group shares jumped more than 20% in the FTSE 250 index after it increased its profits guidance, with the read-across for JD helping its shares add another 4.3p to 144.1p.
JD shares had been 233p in November, but a combination of consumer uncertainty and May’s abrupt departure of long-serving executive chairman Peter Cowgill left the shares at 102.6p in June.
When JD reported robust full-year results last month, Peel Hunt said the price overlooked “far too many good bits” about JD. With a target of 250p, the broker added: “Board issues may continue to be a burden to the shares but they look so cheap.”
Since then the company has appointed former Morrisons chair Andy Higginson to lead its board, with the Finish Line owner still in the process of hiring a new chief executive.
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JD shares were joined at the top of the FTSE 100 risers board by Howden Joinery after the kitchens supplier talked up its growth potential alongside interim results.
Howden generated UK revenues of around £2 billion last year, but latest research by the company suggests that its addressable market is now worth around £11 billion. This reflects a bigger £6.5 billion from kitchens and £4 billion across the “large and very fragmented” market covering the four segments of joinery, doors, flooring and hardware.
Plans to target these market opportunities include through the potential growth of its UK depot estate from 788 to 1,000, as well as via digital platforms. It has also launched 19 new kitchen ranges so far this year, with more emphasis on higher priced products.
Chief executive Andrew Livingston said: “Our kitchen and joinery markets are large and attractive and we are prioritising investment in future growth.”
His bullishness and the company’s strong interim results performance countered City concerns about weaker consumer spending and the impact of soaring supply chain costs.
In a performance well ahead of pre-Covid levels, Howden reported revenues 16.3% higher at £913.1 million and pre-tax profits up 21.6% to £145 million. The interim dividend jumped 9.3% to 4.7p a share as Livingston also highlighted “good momentum” at the start of the second half, with like-for-like sales in the UK up 6% in the first four weeks of the period.
The shares have dropped 30% year-to-date, in line with the average for builders’ merchants, leaving Howden trading on 10.8 times forward earnings. Peel Hunt said this looked far too low, based on the company’s historic average and potential for higher returns.
The broker has a target price of 1,095p, while UBS reiterated its “buy” recommendation and price target of 1,022p. The stock peaked at 960p in September.
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Investment firm 3i also countered the stock market’s retail jitters today when it reported an “impressive” performance by Netherlands-based Action.
The chain, which trades in seven countries, accounts for more than half of the assets in 3i’s private equity division. Its sales for the most recent quarter were 22% above last year and 70% higher than their pre-pandemic level at just over two billion euros (£1.7 billion).
Action’s performance contributed significantly to a 6.6% increase in 3i’s net asset value per share to 1,406p in the June quarter. The FTSE 100-listed company’s shares fell to 1,060p in mid-June but have since rallied to 1,242p, including today’s improvement of 45p.
Other investments in the 3i portfolio include specialty chemicals firm Tato and ferry operator Scandlines. Chief executive Simon Borrows said: “We see broader economic conditions deteriorating over the rest of the year but remain confident in the composition of our portfolio.
“We continue to focus on actively managing our portfolio and making sensibly priced investments and bolt-on acquisitions.”
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