Apple suffers ‘major iPhone X leak’

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Today’s edition features:

  • Greene King (GNK.L)

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Markets

Europe
The FTSE-100 finished Friday’s session 0.26% lower at 7,377.60 whilst the FTSE AIM All-Share index was down 0.29% at 1,010.58. In continental Europe, the CAC-40 finished 0.02% lower at 5,113.49 whilst the DAX was up 0.06% at 12,303.98.

Wall Street
In New York on Friday night, the markets were mixed with the Dow Jones closing 0.06% higher at 21,797.79, the S&P-500 ended 0.15% lower at 2,461.43 and the Nasdaq was down 0.59% at 6,360.19.

Asia
In Asian markets this morning, the Nikkei 225 was up 1.36% at 19,536 and the Hang Seng was 0.99% higher at 27,942.

Oil
In early trade today, WTI crude oil was 0.82% higher at $47.87 per barrel and Brent was up 0.46% at $54.03 per barrel.



Headlines

Apple suffers ‘major iPhone X leak’
Details of new iPhones and other forthcoming Apple devices have been revealed via an apparent leak. Two news sites were given access to an as-yet-unreleased version of the iOS operation system. The code refers to an iPhone X in addition to two new iPhone 8 handsets. It also details facial recognition tech that acts both as an ID system and maps users’ expressions onto emojis. One tech writer said it was the biggest leak of its kind to hit the firm. Apple is holding a launch event at its new headquarters on Tuesday. The California-based company takes great efforts to keep its technologies secret until its showcase events, and chief executive Tim Cook spoke in 2012 of the need to “double down” on concealment measures. Some details about the new devices had, however, already been revealed in August, when Apple published some test code for its HomePod speakers. But while that was thought to have been a mistake, it has been claimed that the latest leak was an intentional act of sabotage.

Source: BBC News


Company news

Greene King (GNK.L, 555.50p) – Hold
Greene King, a UK operator of pubs, restaurants and hotels, on Friday provided its trading update for the first 18 weeks ended 3 September 2017. During the period, like-for-like (‘LFL’) sales for Pub Company business (82% of revenue) fell by -1.2%, compared to a market decline of -0.7%. Excluding Fayre & Square, which is being rebranded and converting to other brand, during this financial year, Pub Company’s LFL sales would have been slightly better at down -0.9%. The performance was deteriorated in the last 8 weeks where when the weather worsened. The Group said most of the LFL sales decline had been due to value food, although more recently it witnessed some “softening across other segments”. In terms of costs, the Group said it is on track to deliver cost savings of £45m to partially offset the estimated gross cost inflation of around c.£60m in the FY2018. The Group’s Pub Partners business (9% of revenue), on the other hand, delivered LFL net profit of +1.4% after 16 weeks, with the impact of MRO (Market Rent Only) in line with management’s expectation. In Brewing & Brands business (9% of revenue), own-brewed volume fell by -0.5% against a UK ale market decline of -2.9% and a cask ale market down -7.0%.

Our View: Friday’s trading update was rather a shock. LFL sales of -1.2% were a lot worse than market expectations of flat to +1.0% growth. True enough management had warned that for the near-term it remains cautious regarding the trading environment and expected to find challenges amid weaker consumer confidence and increased costs while its trading environment remained highly competitive. Pre-announcement full year consensus estimates of LFL sales growth of +1.35% will now require the Group to deliver around +2.5% for the remainder of 34 weeks which is looking challenging, if not impossible, given last year’s comparatives and performance to date. Looking ahead, the Group’s guidance for the FY2018 (which was provided with April’s release of the Group’s 2016 preliminaries) was to deliver total capex of between £190m-£225m, interest charges of £135m-£140m with a c.6.3% blended-cash cost of debt. Normalised free cash flow was also expected to be between £60m-£80m per annum. The Pub Company is expected to make around 10 new openings, dispose of 50 to 60, while Pub Partners also disposes of 40-50. As mentioned above, the Group is on track to deliver £45m of cost savings to mitigate some of the c.£60m gross cost inflation expected in the FY2018 due to factors such as energy and wage inflation, higher Business Rates and the Apprenticeship Levy, alongside rising cost of goods. After Friday’s sell-off and downward revised expectations for the two prospective years, the shares are now appear to trade on FY2018E and FY2019E P/E multiples of 8.2x and 8.1x, while offering well covered dividend yields of 5.9% and 6.1%, respectively. Despite the positive medium-term outlook portrayed by industry forecaster, MCA Allegra, by projecting revenue growth for managed pubs and the ‘eating & drinking out’ market at +4.1% and +2.3% CAGR from 2017 to 2020, respectively, the fickle consumer is likely to remain difficult to please when faced with prospective uncertainties arising from a number forthcoming macroeconomic events. While the shares ended a little oversold on Friday, Beaufort has nevertheless decided to downgrade its recommendation to Hold (from Buy) while awaiting some definitive signs of improvement.

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Compiled by:
Barry Gibb, Kazunaga Senga, Sheldon Modeland, Charles Long & Ben Maitland
(t) +44 (0) 207 382 8384
(e) info@beaufortsecurities.com



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Recommendations
During the three months to end-August 2017, the number of stocks on which Beaufort Securities published recommendations was 203, and the recommendations were as follows: Buy – 65; Speculative Buy – 117; Hold – 20; Sell – 1.

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