Mining sector star of next week with Greatland Gold publishing key study, Rio Tinto updating on ESG

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It’s set to be a busy corporate calendar in the mining sector next week, with investors eyeing the all-important Greatland Gold’s pre-feasibility study for its Havieron project, as well as a trading update from Rio Tinto.


Retailers are staying in fashion as ASOS and Dunelm are also chiming in, alongside delivery king Domino’s, boozer chain Marston’s, housebuilders Vistry and Barratt Developments and bus group National Express.


Macro matters


Macroeconomic data abounds in the coming week, with UK figures including the NIESR GDP estimate on Monday, BRC retail sales early on Tuesday, ahead of a labour market update, with the official GDP print and associated industrial and trade numbers on Wednesday.


Around the world, US and China inflation figures are likely to be the bigger topic, amid the ongoing concerns over how the global economy is coping with the ongoing fallout from the pandemic, with supply chain disruption and looming central bank tightening.


US price data will be released on Wednesday, with August’s CPI 5.2% higher than the year before, though the Federal Reserve’s preferred measure is the Personal Consumption Expenditures index, which was last seen rising at its fastest rate of increase in 30 years.


Both measures are well ahead of the US central bank’s 2% inflation target, leading Fed chair Jerome Powell to acknowledge that inflation is running hotter for longer than he anticipated, though the Fed’s position is that this is “largely reflecting transitory factors”.


However, as many economists note, energy prices are threatening to extend how long inflation lingers and presenting central banks with the conundrum of abandoning their inflation targets to help economies cope with the pandemic recovery, or try to curb inflation and risk snuffing out the recovery.


Markets first assumption about higher inflation is that it will be met with higher interest rates, says market analysts Marshall Gittler at BDSwiss, but when higher inflation is being caused by supply bottlenecks a hike in interest rates “won’t suddenly create more gas wells nor container ships nor semiconductors”.


“The bottom line is, we will have to wait to see how central banks respond to this unusual round of higher inflation driven by supply issues. It could well be that they stick to their ‘transitory’ view, although the Bank of England is already beginning to waver… If they do stick to their ‘transitory’ thesis, then we could see real rates fall and some currencies weaken – notably the dollar.”


Greatland Gold to shine on


Tuesday sees one of the most keenly awaited events for years in the junior gold mining sector.


Aussie giant Newcrest will publish its pre-feasibility study for the Havieron project in Paterson, WA.


Greatland Gold PLC (AIM:GGP, OTC:GRLGF) originally discovered the project but has taken a back seat while Newcrest does the heavy exploration lifting in return for a stake that can rise to 70% once the programme completes.


Speculation has been rife for some time that if the numbers are good, Newcrest might go the whole hog and buy Greatland lock, stock and barrel.


The PFS, which will contain some key financial projections, should give a decent steer on whether that is likely.


In the meantime, Greatland shares have already risen more than 30% in two days on news of the 12 October PFS publication date.


Havieron’s current resource is 52mln tonnes hosting 4.2mln ounces on a gold-equivalent basis, but some brokers expect this to be materially expanded on Tuesday.


Entain multitudes or maybe a non-event


Ladbrokes and Sportingbet owner Entain PLC (LSE:ENT)’s third-quarter trading update comes as the board continues to mull a GBP15bn takeover offer from US-based DraftKings on 22 September.


A major reason that directors are likely to be taking so long considering the bid is that the FTSE 100’s business in the US is tightly tied up with partner MGM Resorts, which has stated that “any transaction whereby Entain or its affiliates would own a competing business in the US would require MGM’s consent”.


What’s more, Entain is likely to still harbour significant growth ambitions in the US and around the world, with some investors and commentators calling for the group, which has proved its expertise in the online gaming market over several years, to look the Draftking gift horse in the mouth and continue on its own path – or at least see if it can wrangle a better deal from MGM.


The third-quarter results “could prove a bit of a non-event” if there is no progress on the deal, says analyst Nick Hyett at Hargreaves Lansdown.


The MGM joint venture reported net gaming revenues of US$357mln in the first six months of the year and all being well should do even better in the second.


Signs of strong progress would not only be welcome for investors but “might convince management to turn down the offer on the grounds that it undervalues the business”, Hyett said.


Is Britain’s house price boom over?


It’s lasted about half a century so it is unlikely that Barratt Developments PLC (LSE:BDEV) will declare an end to the happy times for housebuilders at its annual general meeting on Wednesday.


The government’s free gift to an industry rolling in cash, i.e. the stamp duty cut, only ended at the beginning of the month but as house buyers have been able to see that coming some way off, Barratt might have some meaningful data on how the housing market has been doing in the second half of 2021.


Chief executive officer David Thomas might also have some comments to make about raw material prices and supply chain constraints.


“Barratt’s revenue was slightly above pre-pandemic levels at the full year, thanks to a higher number of completions and rising property prices. Despite this, operating profits were still 10% lower than before the crisis, reflecting legacy property costs and coronavirus loan repayments. These problems should be temporary though, and we could find out if these unhelpful trends have started to unwind in next week’s trading statement,” said Laura Hoy, an equity analyst at Hargreaves Lansdown.


“We’ll be looking for comment on inflation as well–management has previously called it out as a headwind, but it was more than offset by the rising house prices. Now that the post-pandemic rush has started to subside, house prices could start to plateau. We’d like management’s take on whether inflation is expected to affect this year’s results. The other figure to keep an eye on is forward sales. Comparisons are getting more difficult as demand over the past year has been unprecedented. With that in mind, even a slim margin of growth would be impressive,” she added.


UBS noted that Barratt only recently updated the market so it is unlikely to make any change to guidance but the Swiss bank will be looking for reassurance that the housebuilder is on track to meet guidance for 17,000 -17,250 completions in 2021.


Marston’s investors to finally raise a glass


Marston’s PLC (AIM:MARS) is due to update investors on Wednesday. The market may raise a glass to summer trading, when the lifting of COVID-19 restrictions helped a rebound in the hospitality sector.


The publican saw sales dropping 8% over the 10 weeks to 24 July, so we shall see whether the most recent performance has managed to offset the poor results earlier this year.


Analysts at house broker Peel Hunt reckon they will upgrade their forecasts, however this uptick may just be in the short term as next year’s results are likely going to be affected by river and fuel shortages in the wider economy.


“We believe our assumption that net debt falls by only GBP20m in the second half of 2021 is cautious given the cash flow benefits of the VAT cut and no dividend currently being in place. Any extra debt reduction should flow through and create equity value,” they noted.


Nice outfit, ASOS


ASOS PLC (AIM:ASC), the fast-fashion group, releases full-year results on Thursday and shareholders will be hoping they trigger a share price revival for what is no longer AIM’s largest company by market value after the shares roughly halved over the last year.


The current consensus estimate is for year-on-year sales growth of 21% to around GBP3.9bn. Pre-tax profit is tipped to rise 35% to GBP192mln.


AJ Bell, the investment platform operator, reckons analysts will be looking for more detail on active customer numbers, site visits and sell-through conversion.


“A year ago, ASOS had 23.4mln active customers and that figure had risen to 26.1mln by the end of June, according to the third-quarter update. Meanwhile 2.7bn site visits turned into 80.2mln orders for a 3.0% conversion rate in the year to August 2020.


“The retail gross margin fell to 45.9% last year, a drop of 1.5 percentage points, and slipped again to 45% in the first half. That third-quarter statement flagged cost pressures although an increase in sales of occasion wear may have offered some margin support as people started to go out again as pubs, clubs and restaurants began to open more fully.


“Finally, they [analysts] will look at the balance sheet. ASOS had GBP92mln of net cash at the end of its first half, a big drop from the year-end thanks mainly to the GBP265mln acquisition of the TopShop, TopMan and Miss Selfridge brands from the fallen Arcadia Group. Capital investment for the year is expected to be GBP160 million as the firm continues to spend on warehouse capacity and its platform,” AJ Bell concluded.


Delivery for Domino’s investors


Domino’s Pizza Group plc is expected to deliver some solid quarterly numbers on Thursday, as the UK’s appetite for takeaways hasn’t been placated yet.


Trading has been helped by the restart of televised sports, a recovery in collection sales, better customer relationship management and better technology infrastructure.


Analysts at Peel Hunt expect the group to have opened five new stores in the third quarter, while franchisees should have continued to generate record levels of profit due to the VAT cut.


Consensus is placing GBP550mln full-year sales, up from last year’s GBP505mln, with adjusted profit before tax rising to GBP113mln from GBP101mln.


Dunelm still comfortably ahead of peers


Another big name dropping a trading statement on Thursday will be Dunelm plc, which has been going from strength to strength in the past year as it kept outperforming the UK homewares market.


House broker Peel Hunt forecast an 8% growth in first-quarter sales and 11.5% for the full financial year.


“Despite the comparatives, Dunelm is still delivering growth across both channels [in store and digital], with no sign of any slowdown in momentum or trends,” analysts said.


“Our sense is the media discussion on supply chain issues will actually drive customers to bring forward buying activity ahead of Christmas. Dunelm is not immune to the current supply chain disruption, but has good availability of stocks, with increased freight costs built into our forecasts.”


Will Hays follow the positive recruitment trend?


Hays PLC (LSE:HAS)’s trading statement should be a cheery affair if recent updates from fellow recruiters are a guide.


Staff shortages abound everywhere, but critically for Hays especially prevalent in white-collar, managerial, IT and banking and finance positions.


Getting the staff to fill the jobs available is likely to be an issue, but that’s Hays’ skillset so the trading news should be good.


Rival Robert Walters (LSE:RWA) upped its profits forecasts last week saying “”Significant wage inflation has emerged particularly for the most sought after skill-sets. In short, the jobs market is hot.”


Similar comments from Hays would not be a surprise, especially to analysts at Barclays who bumped up their profit numbers in September by 10% on the back of the high demand for digital and IT roles across multiple sectors.


Rises in net fee per head plus cost savings have improved margins creating a strong tailwind, said the bank, which it sees ultimately being reflected in payouts to shareholders.


“We set a price target of 195p for Hays (circa 20% implied upside), and see further upside to around 250p if management can reiterate their pre-pandemic growth ambitions, implying earnings over 25% ahead of our outer year estimates.”


National Express buses in


Mergers will no doubt be at the centre of attention for investors when the bus company updates the market on Thursday, following last month’s report that it is negotiating an all-share deal with Stagecoach Group PLC (LSE:SGC) – though the availability of drivers, the cost of fuel and whether or not customers want to travel will all very much be issues on the agenda too.


In September, the two companies announced the potential deal which would see National Express plc shareholders with 75% of the enlarged company.


Both companies have been badly affected by the pandemic with the UK government now effectively running the rail and bus networks again and paying fees to operators such as National Express and Stagecoach to operate the services. In a statement, National Express said the merger would result in cost savings of about GBP35mln a year through synergies such as it using Stagecoach’s depots to run its coach services.


In the wake of the news the Unite union warned National Express that it faces a battle to implement any cost cuts if its takeover bid for rival Stagecoach is successful.


ESG in focus for Rio Tinto


Commodity price inflation, energy costs and environmental matters are very likely to be items of the agenda when the miner releases a trading announcement on Thursday.


The update comes after members of the International Council on Mining and Metals, which includes Rio Tinto PLC (LSE:RIO), pledged to reach net-zero emissions by 2050, even though some of them are raking in billions from coal production.


The current commitment is for Scope 1 and 2 greenhouse gas, with Scope 3 plans to be announced by 2023 at the latest.


Institutions like JP Morgan, meanwhile, eye big-time dividends.


In the summer, analysts at the American bank said they expected Rio Tinto and rival BHP Group PLC (LSE:BHP) to pay out more than US$100bn in combined dividends over the next three years.


Rio has already paid out some US$9.1mln of interim dividends, and over the period 2021-23, JPM expects payout will rise to a cumulative US$52bn, which equates to a third of its market value currently and is comparable to total returns over the entire last decade.


Significant announcements expected for the week ending 15 October:


Monday 11 October:


Trading announcements: Greatland Gold plc, Vistry plc, XP Power plc


Tuesday 12 October:


Finals: DX PLC, Maestrano Group PLC (AIM:MNO), YouGov plc


Trading announcements: Entain plc


Economic data: UK retail sales, UK unemployment rate


Wednesday 13 October:


Finals: Applied Graphene Materials PLC (AIM:AGM, OTCQB:APGMF)


Interims: Angling Direct PLC (AIM:ANG), Sanderson Design Group PLC


Trading announcements: Barratt Developments plc, PageGroup (LSE:PAGE) plc, Marstons plc


Economic data: UK manufacturing/industrial production, UK GDP, UK balance of trade, US mortgage applications, US consumer price index, US crude oil inventories, FOMC minutes


Thursday 14 October:


Finals: ASOS PLC


Trading announcements: Ashmore plc, Domino’s Pizza (NYSE:DPZ) Group PLC, Dunelm plc, Hays plc, National Express plc, Norcros PLC (LSE:NXR), Rank Group (LSE:RNK) plc, Rathbone Brothers PLC (LSE:RAT), Rio Tinto plc


FTSE 100 ex-dividends to knock 1.56 points off the index: WPP PLC (LSE:WPP), Spirax-Sarco Engineering (LSE:SPX) plc, Tesco PLC (LSE:TSCO)


Economic data: US initial jobless claims


Friday 15 October:


Interims: Mediclinic plc


Trading announcements: Hargreaves Landsown plc, Jupiter Fund Management PLC (LSE:JUP)


Economic data: US retail sales

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