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What’s happening

Restaurant Group led the FTSE 250 gainers after full-year results from the Frankie & Benny’s owner matched expectations thanks to a steady performance from its recently acquired Wagamama brand.

Like-for-like sales were down 2 per cent in 2018 and headline pre-tax profit slid 6 per cent to £53.2m, which was higher than the consensus, although it was flattered by a change to impairment provisions. Management said group like-for-like sales were up 2.8 per cent over the past 10 weeks, and that Wagamama alone had delivered 9.1 per cent same-restaurant growth in the 12 weeks to early February.

“Current trading is positive and the comparatives get much easier due to last year’s poor weather and absence of any major sporting event this summer . . . The share price has been dreadful but we think the bad news is now fully discounted.”

Canaccord Genuity

Hennes & Mauritz slipped after an underwhelming first-quarter sales update. Ahead of full-year results due March 29, the retailer said local-currency sales were up 4 per cent year on year, suggesting steady trends versus December and January.

“H&M is making progress on its recovery, however some expectations were for a stronger performance in February and we also think some renewed take-private media reports may have been inflating the shares a little recently.”


Tesla drifted lower in US pre-market trading following the unveiling of its much-anticipated Model Y crossover sports-utility vehicle. The automaker set a price range of $42,700 to $62,500, with a tentative timeline of 2020 to 2021 for initial deliveries, and began taking orders with a $2,500 refundable payment.

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“We got a chance to ride in the vehicle and it seemed . . . very Model 3-ish, just a little bigger [and] roomier,” said RBC, referring to Tesla’s mass-market sedan.

“There will of course be orders and cash will come in the door. However, even though Model Y is a bigger market than Model 3, we believe orders could be muted. The vehicle isn’t available for nearly two years and consumers may realize that putting down money early for the Model 3 didn’t yield many benefits. The question . . . is how much does Model Y cannibalize Model 3? We suspect it could be significant as globally crossover-SUVs have become more popular than sedans. Which begs the question, why show the vehicle now? We would have thought the reveal would have been closer to start of production.”


Sellside stories

● Berenberg downgraded Greencore cut to “hold” and cut Bakkavor to “sell” in a food manufacturer sector review. Its target prices were 210p and 105p respectively.

“Both Greencore and Bakkavor operate in markets that have been outpacing the wider UK food market. However, with political and economic uncertainties continuing to weigh on consumer confidence, shoppers are at present reverting to more cautious spending patterns. Furthermore, raw material and labour cost inflation headwinds appear to have accelerated, putting pressure on margins.”


Sandwich and salad maker Greencore should be better placed than Bakkavor to cope with the challenges, given its higher levels of free cash flow and return on capital, said Berenberg. But the broker argued that a consolidating customer base was negotiating aggressively on price and low UK consumer confidence had been affecting volumes since September.

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Berenberg said it preferred butcher Cranswick, reiterated by its “buy” rating “due to its significant expansion opportunity in the poultry sector”.

● RBC downgraded Cairn Energy to “sector perform” from “outperform” with a 225p target.

The “hot money” has moved on as delays to an Indian ruling on Cairn’s long-running $1.4bn arbitration case have deferred the chance of a quick 160p per-share payout, said RBC. With few compelling near-term catalysts, Cairn was likely to track the oil price, it said.

● Citigroup downgraded Wirecard to “sell” from hold” with a €100 target price. It cited the Financial Times reports into suspected accounting irregularities at the German payments group’s Asia-Pacific division and a subsequent investigation by Singapore prosecutors. “The nature of the allegations, the complexity of the case and the reported scope of the investigation suggest that these allegations will likely take longer to resolve than what the market is currently pricing in,” Citi told clients.

“Our caution regarding Wirecard to date has been based on financial disclosure and risks inherent in the business model. Given the various developments since the beginning of the year, our view has turned more cautious as we believe the market is now mispricing the risks associated with a prolonged period of uncertainty around the recent allegations made against the company in the press.”


● In brief: B&M European reinstated “overweight” at Barclays; Britvic cut to “neutral” at Citigroup; Cerved raised to “buy” at HSBC; GEA Group upgraded to “overweight” at Barclays; Galenica raised to “buy” at Kepler Cheuvreux; Merck KGaA cut to “neutral” at UBS; RTL downgraded to “neutral” at Exane BNP Paribas; RTL upgraded to “hold” at Deutsche Bank; Raiffeisen raised to “equal-weight” at Morgan Stanley; Salmar downgraded to “hold” at Berenberg; Salzgitter downgraded to “reduce” at Kepler Cheuvreux; Siltronic rated new “sell” at UBS.

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