Market Prognosis

A concise summary of the major macro events of the past 24 hours, and selected UK company-specific news.

October 11, 2023

Telecom Plus displays staying power

Macro & Overnight

The IMF economic forecasts published yesterday painted a challenging outlook for the UK with more persistent inflation and lower growth than previously forecast. However, it conceded that it had not had time to incorporate the recent ONS changes in calculating its GDP data set while acknowledging that its previous ideas of peak interest rates would likely be reduced.

Oil prices have steadied, but European natural gas prices have spiked on news of more pipeline disturbances in the Baltic, this time involving Finland and Estonia.

Bond yields and the dollar continued to ease off, allowing equities to advance in Asia overnight.

Fed FOMC members continue to dampen fears of rate hikes. The minutes from their last meeting, published later today, will undoubtedly be scrutinised for evidence of whether last month was a dovish or hawkish pause.

The Birkenstock IPO has been priced and is poised to test the waters of the new issue market with a company value of $8.6bn.

In the UK, survey data shows that the UK job market is deteriorating.

UK Company News

Telecom Plus added over 62,500 new households in H1, an annualised growth rate of over 14%. The number of services increased by 170,698 to nearly 3m. It has also updated its supply contract with E.ON, providing greater flexibility and enabling the launch of a broader range of energy products, such as fixed-price deals and time-of-day pricing. However, this adjustment will involve further and, therefore, lower profit growth in 2026. This should deliver higher growth rates into the future, enhancing its ability to compete in a normalised energy market. 

Telecom Plus, which, despite its name, is mainly an energy supplier and trades as Utility Warehouse, roared back to life as the UK’s secondary energy suppliers crashed and burnt in 2021 due to energy shortages that emerged after the post-COVID reopening. Its competitive superpower is the ability to save customers’ costs by delivering bundles of retail services across energy, telecoms, broadband, and insurance via its partner introducer model. While it was inevitable that the surge in growth over the last couple of years would slow as the retail energy market has normalised, the share price decline from £25 to £15 seemed overdone. Today’s update offers something to the bulls and the bears. However, as a hedge against a return of spiralling energy prices, Telecom Plus, with its capital-light and high ROI model, with a yield comfortably over 5%, remains a decent long-term bet.

Prognosticator     

This communication is provided for information purposes only, and is not a solicitation or inducement to buy, sell, subscribe, or underwrite securities or units. Investors should seek advice from an Independent Financial Adviser or regulated stockbroker before making any investment decisions. Progressive Equity Research Ltd (“PERL”) does not make investment recommendations.

Opinions contained in this communication represent those of PERL and/or our affiliates at the time of publication and PERL does not undertake to provide updates to any opinions or views expressed. PERL does not hold any positions in the securities mentioned in this communication, however, PERL’s directors, officers, employees, contractors and affiliates may hold a position,  and/or may perform services or solicit business from, any of the companies or related securities mentioned.

Any prices quoted in our research are as at the previous day’s close.