FTSE 250 movers: RHI melts away as Capco boosted by demerger pursuit
By Duncan Ferris
Date: Monday 05 Nov 2018
(Sharecast News) - London's FTSE 250 was down 1.40% to 19,054.44 in afternoon trade on Monday, with RHI Magnesita and Babcock leading the fall.
RHI Magnesita, a supplier of heat-resistant products for use in furnaces and incinerators, dropped even after reporting that it had continued to improve margins while its end-markets remained "solid".
The Vienna-headquartered company said its integrated model was continuing to benefit from a "structurally changed environment" as China's government controls reduce raw material output, which is expected to continue in the longer term.
Analysts at Peel Hunt, which rates the stock at 'buy', said "RHI represents a package of growth drivers, sustainable synergy gains and an opportunity to leverage scale as the global leader in the fragmented global refractory market".
Babcock dropped after a downgrade to 'sector perform' at RBC Capital Markets, which also slashed the company's price target to 700p from 1,000p.
The bank said that while a market-leading position, high barriers to entry and a long-dated order book should make the company an interesting investment proposition, it was telling that there is limited buying interest even on a CY19 price-to-earnings ratio of 8x.
"Persistent 'financial discipline' concerns and negative earnings surprises have ensured that the stock de-rating has continued. Putting this into perspective, Babcock has now underperformed the FTSE All Share 50% over the past five years - despite an 11% compound annual growth in operating profits," said RBC.
Specialist insurer Hiscox also slumped after saying that gross written premiums rose 14.3% to $3.04bn in the first nine months of the year, but that there had been more claims in the third quarter from US Hurricanes Florence and Michael and Typhoons Jebi and Trammi, which hit Japan.
Numis reiterated its 'hold' rating of the insurer's shares, arguing that its premium income growth was "good" but still represented a slowdown from the 21% achieved over the first half of the year.
Capital & Counties was the top riser in afternoon trade after it confirmed that it continues to advance preparations for a possible demerger.
Responding to press speculation, the property investment and development group said it is considering a number of proposals regarding its interests in Earl's Court, including discussions with Hong Kong-based property developer CK Asset Holdings regarding a sale of most of its interests in Earl's Court Properties, excluding the Lillie Square joint venture.
Oil and gas explorer Energean was on the rise as the White House imposed sanctions on Iranian oil exports, finance and shipping, while petroleum services providers Wood Group and Petrofac also gained on the news.
Sirius Minerals made gains after the company said it had entered into an engineering, procurement and construction contract with McLaughlin & Harvey for the development of a fertiliser port handling facility at Teesside.
No financial details were given but Sirius said the lump-sum contract would cover the design and build of works, including for product storage facilities for around 250k tonnes fertiliser, ship loading equipment, ship outload infrastructure and a final product screening facility.
Yuen Low, research analyst at Shore Capital, said: "All things considered, while Sirius is currently at development stage and still some years from becoming a cash-generating company, we remain of the belief that an investment in Sirius should become progressively de-risked and enjoy significant value uplift as it advances towards production."
FTSE 250 - Risers
Capital & Counties Properties (CAPC) 269.50p 5.85%
Drax Group (DRX) 415.60p 3.54%
Energean Oil & Gas (ENOG) 656.00p 2.50%
Wood Group (John) (WG.) 689.00p 1.95%
Daejan Holdings (DJAN) 5,926.67p 1.66%
Telecom Plus (TEP) 1,238.00p 1.64%
Ferrexpo (FXPO) 229.90p 1.64%
Tate & Lyle (TATE) 679.80p 1.58%
Auto Trader Group (AUTO) 423.30p 1.41%
Go-Ahead Group (GOG) 1,594.76p 1.25%
FTSE 250 - Fallers
RHI Magnesita N.V. (DI) (RHIM) 3,690.00p -8.89%
Babcock International Group (BAB) 575.80p -6.95%
Hiscox Limited (DI) (HSX) 1,540.00p -6.44%
Thomas Cook Group (TCG) 51.15p -6.15%
Playtech (PTEC) 474.30p -5.12%
Spire Healthcare Group (SPI) 126.00p -5.05%
Convatec Group (CTEC) 157.15p -4.99%
Man Group (EMG) 149.90p -4.89%
Rank Group (RNK) 153.78p -4.72%
Just Group (JUST) 91.00p -4.61%
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