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Today ’s Newsflow Equity Research 19 Jul 2021 08:33 BST Upcoming Events Select headline to navigate to article

easyJet Q321 results tomorrow – 1st of the majors to Company Events report 20-Jul easyJet; Q321 Trading Update 21-Jul ; Q421 Trading Update Sumo Group Tencent make all-cash offer 22-Jul Amigo Holdings; Q421 Results Breedon Group; Q221 Results Angel disposal at “substantial premium” ; Q321 Trading Statement to book value Howden Joinery; Q221 Results 23-Jul Land Securities Group; FY Dividend Payment Date Economic View Freedom Day? Really? 26-Jul Cranswick; Q1 trading update Packaging Corp. of America; Q221 Results Ryanair; Q122 Results

Economic Events 22-Jul PPI Jun21 Wholesale Price Index Jun21

United Kingdom 23-Jul Retail Sales Jun21

United States

Europe

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easyJet Q321 results tomorrow – 1st of the majors to report

We expect easyJet to report a pre-tax loss of £252m for the three months ending June, Recommendation: Buy based on the guidance for 4.3m seats, equivalent to 15% of Q319’s level. On a forecast of Closing Price: £8.24 70% load factor, we expect passenger numbers of just over 3m, as compared to the 1.2m carried in Q2. Total revenues per seat is expected to be £49.70, down 6% yoy and down Mark Simpson +353-1-641 0478 19% on Q319 levels, with revenues of £215m. [email protected]

As with recent quarter, the market will quickly look past the historic headlines and look for

guidance on forward bookings and end quarter liquidity. Given the expectations that traffic will pick up through the current summer peak quarter, presales and working capital movements should be a net positive in terms of cash. We expect Q421 pax at 19m (Q419 28m) and total revenues of £1.07bn, with a pre-sale inflow of between £300-400m and a net lift to cash resources of ~£200m, taking this to £2.54bn. With operating cash burn at ~£35m a week, concerns over short-term financing needs are misplaced.

Sentiment remains hit by the constant changes in travel policies, with the arbitrary requirement for 10-day isolation for double-vaccinated returnees to the UK from France a case in point.

However, strong demand for travel is evident, with our forecast of 83m pax next year and 100m in FY24 the reason we believe easyJet will deliver record profits in the latter year. This underpins our NPV of £13.90/share in 12mths time (£12.09/sh today at 1.5x WACC).

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Sumo Group Tencent make all-cash offer

SUMO group has announced that it has received an offer of 513p a share in cash valuing the Recommendation: Buy group at GBP 919m from Tencent. The SUMO management team intend to recommend that Closing Price: £3.58 shareholders approve the deal citing Tencent's broad video gaming ecosystem, proven industry experience and strategic resources. The deal already carries support from Patrick O'Donnell +353-1-641 6013 shareholders including Perwyn, Darren Mills (1.9%) and Steven Webb 0.2%. Tencent added [email protected] a 10% stake in SUMO back in November 2019, and at the time SUMO saw opportunities to work together on co-development opportunities.

This offer looks very compelling on any metric (50x FY20, 38X FY21, 31x FY22 This document is intended for the sole use of Goodbody Stockbrokers and its affiliates EV/EBITDA or c 9x FY21 Revenue) and is c 14% ahead of our PT. Therefore, we see shareholders as likely to accept the offer with strong price traction this morning. SUMO has grown quickly in the last 12 months through the acquisition of Pipeworks, and recently set up a new studio in North America through the Pipework's platform. Whilst one angle of interest for Tencent is SUMOs growing catalogue of owned IP, and the establishment of an internal publishing unit to better monetize it, it could also be a strategic developer of new games IP for Tencent, through its 14 development studios globally.

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Derwent London Angel disposal at “substantial premium” to book value

Derwent London (DLN:LN) announced this morning that it has exchanged contracts to sell its Recommendation: Hold 126,200 sq.ft freehold interest in Angel Square, Islington to Tishman Speyer. Closing Price: £34.63

DLN acquired the freehold from Germany’s Berlinovo Immobilien for £75m before costs in Q4 Colm Lauder +353-1-641 6042 2014. It consisted of three multi-let connected buildings around a central courtyard. It was [email protected] acquired with an initial income of £2.4m per annum, but following a swift re-letting in March 2015, it was fully let at total rent of £4.7m per annum.

The disposal price of £86.5m, net of costs, represents a substantial premium to December 2020 book value and its acquisition price. The property produced a total rent of £5m per annum as of December 2020, however the leases have expired, and the property will be unoccupied following the sale.

The is yet another disposal for the London office specialist as it takes advantage of the increasingly strong London investment market with the intention of reinvesting proceeds on higher returning opportunities.

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Economic View Freedom Day? Really?

Governments around Europe have followed different paths since the pandemic began but it is Dermot O’Leary hard not to think that the ending of legal limits on social contacts in the UK today represents +353-1-641 9167 [email protected] the biggest gamble yet given the surge in cases of the Delta variant over recent weeks. Ireland, on the other hand, continues to follow the cautious route, reopening non-essential international travel for the first time in 16 months via the EU COVID passport system and about to give the go-ahead to indoor hospitality for the fully vaccinated population from next Monday.

Far from being “Freedom Day”, 1.7m people in England, including the Prime Minister and the Chancellor of the Exchequer will be isolation today, with the so-called “Pingdemic” of being classified as a “close contact” threatening to impact on the ability of many workers to physically travel to work today. While it may have seemed a good idea at the time to give the public a date in which life would return to some sort of normality given the success of the rollout of the vaccination programme in the UK, the virus has once again surprised, making that path to normality a little bumpier over the coming weeks and months.

We have been critical of the ultra-cautious approach that Ireland has taken to the management of risks around the pandemic but have our concerns about the headlong approach that is now being followed in the UK. Ireland will be closely watching the trajectory of cases and hospitalisations in the UK over the coming weeks as a real-life experiment on the effects of full reopening plays out.

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