Daily Stock Market Report (Mon 23 Dec 2024) - DLG/AV, BOO/FRAS, SEE, QUIZ

Good morning! News flow remains very limited and so I will attempt to wrap up this report quickly, as I did on Friday!

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11am: as there is no other earth-shattering news today, I'll wrap this up here. The daily report will be published tomorrow, but not by me, so let me take this opportunity to wish you all a very pleasant Christmas break. All the best!

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Explanatory notes

A quick reminder that we don’t recommend any shares. We aim to review trading updates & results of the day and offer our opinions on them as possible candidates for further research if they interest you. Our opinions will sometimes turn out to be right, and sometimes wrong, because it's anybody's guess what direction market sentiment will take & nobody can predict the future with certainty. We are analysing the company fundamentals, not trying to predict market sentiment.

We stick to companies that have issued news on the day. We usually avoid the smallest, and most speculative companies, although if something is newsworthy and interesting, we'll try to comment on it. Please bear in mind the "list of companies reporting" is precisely that - it's not a to do list. We have a particular emphasis on under/over expectations updates, and we follow the "most viewed" list of readers, so if you're collectively interested in a company, we'll try to cover it. Add your own comments if you see something interesting, and feel free to discuss anything shares-related in the comments.

A key assumption is that readers DYOR (do your own research), and make your own investment decisions. Reader comments are welcomed - please be civil, rational, and include the company name/ticker, otherwise people won't necessarily know what company you are referring to, if they are using unthreaded viewing of comments.

What does our colour-coding mean? Will it guarantee instant, easy riches? Sadly not! Share prices move up or down for many reasons, and can often detach from the company fundamentals. So we're not making any predictions about what share prices will do.

Green (thumbs up) - means in our opinion, a company is well-financed (so low risk of dilution/insolvency), is trading well, and has a reasonably good outlook, with the shares reasonably priced. And/or it's such deep value that we see a good chance of a turnaround, and think that the share price might have overshot on the downside.

Amber - means we don't have a strong view either way, and can see some positives, and some negatives. Often companies like this are good, but expensive.

Red (thumbs down) - means we see significant, or serious problems, so anyone looking at the share needs to be aware of the high risk. Sometimes risky shares can produce high returns, if they survive/recover. So again, we're not saying the share price will necessarily under-perform, we're just flagging the high risk.

Others: PINK = takeover approach, BLACK = profit warning, GREY = possible de-listing. Links:

Daily Stock Market Report: records from 5/11/2024 (format: Google Sheet). Updated to 19/12/2024.

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Companies Reporting

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Direct Line Insurance (LON:DLG)

Up 3% to 251p (£3.2bn) - Offer for Direct Line Insurance Group - Graham - PINK

Aviva (LON:AV.) and Direct Line have firmed up their preliminary agreement in time for Christmas. Today we have the formal announcement of an offer worth 275p, nearly half of which is in cash and the rest comes in the form of Aviva shares. The proposal is at an enormous 73% premium to the undisturbed price at which DLG shares were trading before we learned that Aviva was interested.

An interesting context for the deal is that Aviva’s former CEO of UK & Ireland General Insurance, Adam Winslow, left Aviva to become the new DLG CEO this year.

Before long he had stolen two of his former Aviva colleagues to become DLG’s new CFO and Chief Risk Officer.

Media reports suggest that Mr. Winslow privately attempted to persuade DLG investors to give him more time to turn things around, rather than accepting Aviva's bid. We noted earlier this month that the recommendation from DLG to accept Aviva’s offer seemed to come only after shareholders were consulted on their views.

The reunion of former colleagues who jumped ship may be slightly awkward but I doubt that DLG shareholders will be worrying too much about that.

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Boohoo (LON:BOO)

Unch. at 33p (£462m) - Frasers notes outcome of boohoo shareholder vote / Sale of London Office - Graham - RED

The Boohoo board won the contest at the general meeting held on Friday, as both Mike Ashley and his insolvency expert failed to win board seats. It wasn’t particularly close in the end as nearly 64% of votes went against Ashley & co. Ashley went into the event facing some tough obstacles including rejection by both the existing Boohoo board and the main proxy advisory services.

Today, Frasers (LON:FRAS) says that it “respects the views of the independent shareholders”, but that it will take up Boohoo’s invitation to propose another Board candidate. So the drama will continue. But I think Boohoo’s position on this is reasonable - as Frasers is their largest shareholder (25%), they are right to offer Frasers one board seat. But I don’t think they should feel under any obligation to accept Mike Ashley as the candidate.

Remember that Frasers officially operates under the claim that Ashley “has no day-to-day involvement or responsibility for the strategic direction of the Group or any Board matters”. If that was believable and true, then why should he represent Frasers on the Boohoo board?

In other news, Boohoo has sold its office in Soho for £49.5m. This lets it pay down its term loan in full and leaves it with a £125m RCF which it says “is sufficient for its needs going forward”. After this latest action to address the company’s net debt, I’m open to the possibility that I may need to upgrade this one to AMBER/RED - but not yet.

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Seeing Machines (LON:SEE)

Up 8% to 4.8p (£204m) - £26.2m strategic investment from Mitsubishi - Graham - AMBER

I was a sceptical voice on this one for a long time, and I think it was the right call as the company has remained loss-making, its share count is up, and the share price has made little long-term progress.

Today, it has announced a collaboration with Mitsubishi Electric Mobility, a subsidiary of Mitsubishi Electric, to “pursue joint growth opportunities” in driver and occupant monitoring systems (DMS/OMS). As part of the agreement, Mitsubishi invests £26m in SEE at a price of 4.09p.

SEE touts this price as being “at a premium of 12% to the 30-day VWAP” (volume weighted average price) but I think they should also have conceded that it’s an 8% discount to Friday’s close. There’s no mention of that anywhere in the RNS. It means dilution of 15% for existing shareholders.

I continue to view this as a “jam-tomorrow” share and I dislike how it communicates with investors. For example, take its full-year results announcement to the stock exchange this year. Instead of giving this a normal title such as “Final Results”, like every other company, the RNS was titled “Global regulatory momentum drives revenue growth”. Revenues did indeed grow by 17%, but the EBITDA loss nearly doubled.

Paul was AMBER/GREEN on this and the tie-up with Mitsubishi does add credibility to the story, so I’m not going to follow my instincts and take this all the way down to a negative stance straight away. Neutral for now.