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26 April 2017 · 1 min read

Market Commentary - Housing, Infrastructure, Construction and Services 26th April 2017

Forterra announced that the Lonestar shares had been placed a few days ago and today Ibstock has announced that the remaining private equity holdings in its shares have been placed. CRH has updated the market ahead of its AGM today. We are visiting the Stewart Milne modular housing factory this morning.

Forterra announced that the Lonestar shares had been placed a few days ago and today Ibstock has announced that the remaining private equity holdings in its shares have been placed. So both companies now have 100% free float which will make price moves a little more representative of the underlying performances. Forterra closed last night at 219p, its highest level since flotation now that the “overhang” is gone and the Ibstock shares were placed at 215p. The initial indication for Ibstock was that only 50m shares might be placed but this morning it was announced that all 101.6m shares held by Diamond SARL have been placed, such was the level of demand.

CRH has updated the market ahead of its AGM today. L4L sales rose 3% in the first quarter to end March and EBITDA is said to be ahead of last year. The company starts by telling us that the weather has been favourable generally, an important factor to bear in mind in this sector, especially so in some of CRH’s product areas. Sales in the US were in line with last year in L4L terms, against tough comparators but 6% growth in Europe provided a boost. The main point we note in the CRH update is the positive remarks about trading in Europe which is picking up quite strongly, an important read across to other stocks. The only black spot for CRH appears to be the Philippines were sales fell 12% L4L, due it is said to unfavourable weather and highly competitive market conditions. We look at CRH only for read across.

We are visiting the Stewart Milne modular housing factory this morning and will report any relevant news on that tomorrow. Some significant investment is taking place in modular housing at present which will have an impact in several different ways, not just in terms of build processes but also for supply chains and routes to market for materials.

Morgan Sindell rose 3.6% yesterday to 1117p, its highest level since late 2007, on 341,311 shares traded, a large volume in this stock. It has more to gain than many rivals from getting margins back to industry norm levels, a journey it has started and will continue. The route to EPS well above 100p in 2018 is clear from what we can see given progress to date and the markets in which it operates. It successfully exited its troubled projects some time ago and the level of risk management now applied is high. Carillion received favourable broker comment and rose 2.8% to 222.4p. The level of shorting of the stock has fallen in recent weeks and now stands at near 21% versus 24%, according to Castellain Capital’s data. That is still a high level but the direction is much improved. There is no silver bullet that will improve the balance sheet but we suspect the new FD is looking at options, other than raising new equity. The EPS level has been static at around 35p for a few years; forecast indicate that some growth is possible in the next 2/3 years but the real boost to the price will come from balance sheet improvements.

Grafton was the back marker yesterday but we suspect that was just a bit of profit taking after the recent good performance, it fell 1.2% to 755p. The same can be said for other fallers such as Serco, down 0.9% and G4S down 0.8%.

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