Top UK Stocks to Watch: Firstgroup sells US bus operations for £3.3 billion

Firstgroup shares rise because it sells First Student and First Transit, Fidelity Special Values thinks UK equities are ‘attractively valued’, GSK secures US approval for a potentially transformative antineoplastic , and LondonMetric sells an M&S Foodhall and Wickes store.
Top News: Firstgroup to reward shareholders because it refocuses on UK
Firstgroup has agreed to sell First Student and First Transit for a complete of £3.3 billion, which can be wont to pay down debt, plug the pension gap and reward shareholders.

The sale is being made to EQT Infrastructure and can generate initial proceeds of £2.19 billion after the 2 unit’s liabilities and debt are taken under consideration . It forms a part of its strategy to exit its North American operations to specialise in the united kingdom , with the 2 businesses being put up for auction a year ago.

First Student operates over 40,000 yellow school buses across the US while First Transit carries over 350 million passengers a year across its public transportation network annually .

Firstgroup said it intends to use £1.34 billion of the proceeds to scale back debt, including the repayment of £300 million worth of UK government support received during the pandemic. Another £336 million are going to be paid into its UK pension schemes. £100 million are going to be retained to offer the firm financial flexibility.

The remaining £365 million are going to be returned to shareholders at some point this year. this may equate to a return of around 30 pence per share but Firstgroup remains deciding exactly the way to return the cash – whether it’s through a special payout, buyback or other mechanism.

Notably, Firstgroup hopes to form further returns to shareholders going forward. Greyhound, another US division, still remains non-core and will generate further cash and a £170 million earnout attached to the primary Transit sale could also help fund payouts. Firstgroup is additionally hoping a robust recovery in UK travel can help cash generation recover.

The First Student and First Transit businesses generated £3.10 billion within the year to the top of March 2021 and Ebitda of £186.7 million. it’s assets worth a complete of £3.72 billion.

The sale will leave Firstgroup focused on its UK bus and rail operations but the corporate said it’s going to consider expanding into new transport markets or geographies over time. For now, the main target are going to be on strengthening First Bus and First Rail and ensuring they’re well placed to capitalise as travel resumes.

First Bus is hoping passenger numbers can recover to 80% to 90% of pre-pandemic levels during the primary year after social distancing measures on conveyance are removed and make an operating margin of around 10%. First Rail is well positioned to recover and represents low-risk in terms of both revenue and profits because of its contracted positions.

Firstgroup said it intends to start out paying ordinary dividends again within the 2023 fiscal year .

In terms of current trading, Firstgroup said it expects operating profit in 2021 to be before previous expectations because of its strong control over costs and an improvement in trading.

‘Since the group’s last update in December 2020, the proportion of First Student’s bus fleet operating either full service or on a hybrid basis has increased, to 95% within the second week of April, and First Transit’s service levels have remained broadly stable. Greyhound volumes have improved modestly and therefore the division is now operating just over half its pre-pandemic mileage. Passenger volumes in First Bus and First Rail have also increased as UK lockdown restrictions have began to ease,’ it said.

Where next for the Firstgroup share price?
First Group has been trending higher since early November. The share price had slipped through the lower band of the ascending channel and had fallen through its 50 EMA, finding support on the 100 EMA at 80.00.

Today’s jump higher has taken the share price to a fresh post pandemic high of 101. it’s pushed back over the 50 EMA and into the ascending channel where the lower band now acts as support.

The RSI is supportive of further gains because it is in bullish territory but not yet overbought. Immediate support are often seen at 101 today’s high. Beyond here 110 a swing high March 11 could offer resistance.

On the downside support are often seen at 95 today’s low. A move below this level could negate the near term uptrend. Beyond here the lower band of the ascending channel at 93 could offer support before the 50 EMA at 87.5. Fidelity Special Values thinks UK equities ‘attractively valued’
Fidelity Special Values said it significantly outperformed its benchmark during the six months to the top of February because of strong performances from its investments within the likes of Halfords and Aviva, allowing it to boost its interim payout.

The company said it delivered a net asset total return of 24.3% and a share price total return of 36.5% within the period – well before the 12% return booked by the FTSE All-Share Index. Fidelity said this was because of strong performances from holdings in Halfords, Aviva, Mitie, AIB Group and M&C Saatchi.

The company’s portfolio manager Alex Wright said UK equities, particularly value stocks, ‘remain attractively valued during a global context’.

‘While we’ve began to see a rotation into value in late 2020, and more recently as investors contemplate the implications of an economic recovery supported by unprecedented fiscal and monetary stimulus, the dispersion in returns between growth and value stocks since the 2008-2009 global financial crisis remains unprecedented. This leads us to believe that, should investors shift their focus, the degree of outperformance might be very substantial, given how bifurcated the market continues to be,’ said Fidelity.

The company raised its interim dividend by 3.3% to 2.17 pence from 2.10 pence the year before.

Fidelity Special Values shares were trading 0.4% lower I nearly trade at 281.0.

GlaxoSmithKline secures US approval for JEMPERLI
GlaxoSmithKline said it’s been awarded accelerated approval from the US Food & Drug Administration for JEMPERLI to be employed by women with cancer.

JEMPERLI, also referred to as dostarlimab, may be a programmed death receptor-1 blocking antibody and is meant to be wont to treat adult patients with mismatch repair-deficient recurrent of advanced endometrial carcinoma .

The approval has been supported the results from the continued GARNET trial, which is evaluating the ‘largest dataset so far evaluating an anti-PD-1 antibody as monotherapy treatment in women with endometrial cancer’.

‘Unfortunately, as many as 60,000 women are diagnosed with endometrial carcinoma within the US annually and these women currently have limited treatment options if their disease progresses on or after first-line therapy. Today’s approval of dostarlimab by the FDA has the potential to rework the treatment landscape for these women and demonstrates our continued commitment to helping patients with gynaecologic cancers,’ said GSK’s president of R&D, Hal Burton.

GSK shares were trading flat in early trade at 1346.0.

LondonMetric Property sells M&S food hall and Wickes store
LondonMetric Property has decided to sell two long income assets, an M&S Foodhall and a Wickes store, for £11.1 million. Combined, the sale represents a blended net interest yield of 6% and therefore the price sits 7% above the last reported value .

The 15,000 square-foot M&S Foodhall has been sold to an unnamed private overseas investor for £6.2 million during a deal that ought to be completed before the top of the year. The 34,000 square-foot Wickes store will usher in £4.9 million and will be sold by the top of August.

‘These disposals reflect the growing demand permanently quality long income land , that we still receive attractive approaches,’ said chief executive Andrew Jones. ‘We constantly look to re-balance our portfolio and can recycle the sale proceeds into opportunities in strong geographies that provide certainty of income and income growth.’

LondonMetric shares were down 0.1% in early trade at 226.9.