Today I am running the rule over three of the Footsie’s recent headline makers.
Box up a beauty
Real estate investment trust Tritax Big Box (LSE: BBOX) made the headlines in Tuesday business with news of another impressive acquisition.
Tritax — which buys and manages big-space locations like warehouses and distribution hubs — has snapped up Argos’s national distribution centre in Burton-upon-Trent for £74.65m, the firm announced today. This follows the £25.2m purchase of Brake Bros’ distribution site in Bristol last week.
Tritax is clearly a firm on the move — the firm recorded a total return of 19.4% in 2015. And the City expects Tritax to keep earnings growth rolling with expansion of 6% and 4% in 2016 and 2017 respectively.
Sure, these projections may create slightly-heady P/E ratings of 20.9 times and 20.1 times. But I believe dividend yields of 4.6% for 2016 and 4.7% for this year comfortably offset these figures.
Sports superstar
Shares in TLA Worldwide (LSE: TLA) have exploded in Tuesday trade, the company recently dealing 40% higher from the last session’s close.
The sports marketing agency made the headlines last week after announcing it had it had reached an agreement with Atlantic Alliance Partnership on a potential takeover by the US firm.
The deal will see the agency’s shareholders receive 10 new Atlantic Alliance Partnership shares for every 111 of TLA Worldwide’s shares. This represents an indicative offer of 65p per share for the British company, still some way above the current share price of 57p.
Of course, there is always a chance that the bottom could fall out of the deal, as is the case with any takeover attempt. But there is still plenty of room for investors to make a handsome profit should the accord come to pass.
Stuck in a hole?
Shares in Sirius Minerals (LSE: SSX) have endured a wild ride in recent weeks. The company more than doubled in value from February’s troughs to a peak of 24p per share less than a month later, although investor optimism has cooled significantly since then.
The potash play finally released the much-awaited definitive feasibility study for its North Yorkshire polyhalite project during mid-March. The release contained both good and bad news — Sirius Minerals estimates that the asset will have a net present value of $27bn when production commences.
But the cost of developing the asset shocked investors, with the digger expecting to fork out $3.56bn to get the project up and running. Sirius Minerals now plans to raise equity and take on debt to move the project along.
Considering the scale of finance the firm needs to develop the mine, as well as the potential for potash prices to keep on struggling, I believe Sirius Minerals is a risk too far at the present time.
