Lots Of News Day

The staff of my building just removed the ice buildup outside my apartment windows lest in fall on pedestrians below. I've lived in here for 35 years and this has never been needed before. I also discovered that an unauthorized tech support outfit from a site I don't use has been charging my company $5 plus city and state taxes every month since November. The site, for Yahoo support, is run from the Philippines and seems to be totally fraudulent. If you run into yahoo tech support allegedly out of Virginia, don't let them in. Trying to get the techies themselves to halt demanding payments was impossible. I was asked to tell them all about myself and my business and finally realized that this was simply intimidation.

Again today there is lots of news so I will focus on that. We have 4 reporting companies in our portfolio and one firm reporting important good news.

Business newspaper article

image source

*BP plc was one of the reporting companies. As expected, it reported its first annual loss in a decade because of the virus cutting fuel demand in 2020. Despite the expectation, the share fell 12% in UK trading after the report. It reported EPS of 3¢ while the consensus forecast was for 8¢. It reported sales of $44.7 bn in Q4, which missed the forecast of $46.61 bn by 0.9%. By London's close, BP was at $20.81, down only 6%. Then wiser heads spoke. Now BP is up 1.79% on Wall St.

While obviously, the results were important, I found the commentary on future plans by new CFO Murray Auchincloss to be more interesting and hopeful. He expects BP to pay a resilient dividend in 2021 gaining from deleveraging and divestiture efforts, cutting BP debt to $35 bn and funding share buybacks. He spoke of “reinvent BP” to advance its strategic goals, notably exiting dirty energy.

That means this year capex will be ~$13 bn, including “inorganics” non- oil and gas. $2bn will be invested in low carbon fuel; as much again in “convenience and mobility”, and $5bn in oil and gas refining. This follows cut cash costs in 2020, down 12% from 2019, mostly from layoffs and cost cuts. The headcount drop hit 11% last year and accounted for more than half the planned cuts. The rest will hit this year and next.

BP will provision $1.4 bn for cash outflow for the reinvent program, most of to be taken in the current half fiscal year, to cut cash costs. Mr. Auchicloss expects that pre-tax savings in 2021 will be $2.5 bn lower this year than in 2019, ahead of prior guidance. In 2023-4 the CFO expects another $3-4 bn in pretax saving.

To cut debt BP will do more divestitures like the recent exit from control of Oman block 61. He expects that half the 2025 target of $35 bn will be met in the winter of 2021-2, if oil prices remain at $45-50/bbl and gas prices stay flat.

In the current half oil prices will recover, production will rise, and trading performance normalize, which will mean an increase in net debt to cash flow ratios, but a one off. I note that BP, having opwned down at $20.68, is now ahead of yesterday's close, up 1.78%. The market expects BP will divest more of Russian Arctic driller Rosneft, a very dirty oil producer in which it now owns 20%. Its share bounce came from an outperform and buy ratings by Raymond James and CFRA. The former cut its target price to $27 from $30. The latter has a TP of $25.5 based in part on a strong pound sterling.

Pharmaceuticals

*Japanese Eisai (ESALY) reported on its Q3 earnings today. The results were surprisingly good as despite the pandemic its revenues rose 3% to ¥498.3 bn mainly thanks to Lenvima from Merck being cheaper to produce because of higher demand. R&D spending rose 5% and was at 21.7% of sales, with next generation Alzheimer's treatment the main focus. Because of further reimbursement from partners, the total R&D spend was even higher, at ¥155 bn, or 31.1% of sales. SG&A expenses were up 12% from prior year. But including ¥47 bn from Merck the level was 33%, not as exceptional for a drug firm. Anothe cost was the Dayvigo launch.

Profit was down by about 20% from 2019 because of lower transfers and extraordinary items in 2020, operating proft at ¥57.7 bn. Thanks to a move from the US of paid-in capital ESALY had a tax benefit of ¥15.1 bn last year. Without this the level of profit was only 62% of prior year, and in Q3 was 8.9%, ahead of forecast. Its main boast is that there is no debt and the company operates with net cash but the cash balance was tapped for capex and development. But it still has net cash of over ¥130 bn, about 65% of equity. One result is that it is rated very high at AA-.

For the 9 mos sales were ¥486.1 bn, dragged down by Covid-19, new generic competition for Lyrica, and an end to its Humira domination. However with Lenvima in the USA and China revenues rose with $200 mn from Merck. The total came to ¥498.3 bn, up ¥12.3 bn.

It revised its May forecast for the present FY downward because of covid-19 to ¥647 bn, and cut its fully year sales forecast from ¥158 bn to 145 bn, in part because of Merck postponing its last milestone to FY 2021-2. It now expects gross full year operating profit to be ¥52 bn. Return on equity will be 6% this year but averaging over the last 5 yrs will be in double digits. It will pay a dividend of ¥160, up 115% from prior FY. The main appeal of ESALY is its focus on Alzheimer's disease, a major need for Japan with its aging population. At the Davos gathering its CEO Dr Naito presented a paper about using digital technology to help prevent AD by controlling for sleep, diet, exercise, and prevention, not only in rich Japan but also in poorer countries using public-private partnerships. This resulted in a Davos Alheimer's Collaboration initiative which will be funded by Favi and the coalition for Epidemic Preparedness, bringing together governments, scholars, non-govt entities, and partners. More on Alzheimer's below.

*Glaxo also reported today and crashed 5.5%+ in US trading. The main reason was that it cut its dividend and predicted lower profits, down by mid-to-high single digits, in the current year because of the need to increase research budgets. The aim is to double its “blockbuster” drug sales by 2026, a way off. Its 2020 results were actually decent, with sales up 1% for the full year at £34 bn thanks to pharma sales up 12%. However, vaccine sales dropped last year. Pre-tax profit for the year hit £6.9 bn, up 12%. EPS was a standout, up 23% to 115.5 pence, which GSK attributed to cost controls.

But shareholders focused on the divvie. We will get another 80 pence/sh on more time in 2021. To help it fund the research GSK this year and next will divest its biopharma and consumer (OTC) healthcare arms to save £300 mn in spending. Last year it divested £1.1 bn in assets, so the amount is falling.

GSK stock is now down 5.6% at $35.49. This is overdone but yield seekers are selling. It is working with Curevac on a Covid-19 MRNA jab.

*Danish Novo Nordisk NVO, maker of insulin and weight-loss drugs, reported sales rose 4% in 2020 to the equivalent of $20.54 bn (Danish Kroner 126.9 bn) while profits rose 10% to DKK42.14 bn ($2.6 bn). Even more bullish expectations for 2021 boosted the stock further. It forecast sales would rise 5 to 9% this year (in DKK) while profits at constant exchange rates would grow by 4 to 8%.

*Enlivex opened 20% on its Allocetra data showing good results in phase II trials of patients with severe or critical covid-19. The Israeli small-cap's short trial of 16 patients had no deaths and 14 of them recovered or were discharged by day 28. I reported on this Tuesday but the stock move depended on other voices. Two patients did not do as well and were on respirators on Day 28, but also survived. ENLV is up 12%. It now has to get regulator approval and find a partner like Teva.

*Israeli Teva rose 2.5% to $12.48 after opening still higher. There is no news but this is a hated stock.

Both TEVA bonds, VAE9 and VAD1 are up by double digits, 11.5%, and 40%.

*BiolineRX of Israel is today's champ, up 10.13% to $359.79 after a period low trading. BLRX.

*Spanish Grifols recuperated, rising 2.55% to $18.07 on GRFS's Alzheimer drug performance, also reported yesterday. Listen to me. Don't wait for the band to play.

*Swiss Roche signed a deal on combining its Tecentriq in a clinical trial with Affimed's innate cell engager AFM24 in phase 1-2 trials, RHHBY.

*Beigene is up 2.13%. BGNE is now a double for us. It meets western standards for reporting and dealing with drug discoverers.

*Dr. Reddy's RDY is up 2.82% after an overweight rating from Barclays with a $70 TP, another double. It will launch generic Vigabatrin vs epilepsy in the US, as I wrote Tues. a GABA transaminse inhibitor.

*Abcellera ABCL is up 1.9% as its covid-19 drug Bamianivimab will be developed with Eli Lilly's Vire7831.

*Japanese Takeda TAK rose $9 to $17.50 probably on exchange factors.

*Zymeworks fell modestly today to $37/sh. Canada's ZYME is NYSE listed a liked by Martin Ferera.

*Astra-Zeneca AZN lost 0.35% today from less optimism about its delivery schedule for covid jabs. Its antibody partner Compugen CGEN crashed 1.7% although our gain is 5263% all the same.

Oilpatch

West Texas Intermediate WTI another 2% to $55.91/bbl.

*BP rival Shell also rose today, by 2.7% to $34.8. The duo are both listed in London.

*Hoegh preferreds, HLMP, gained 0.62% on hopes for higher oil prices.

*Canadian Solar, CSIQ, which is Chinese, rose1.21%. It makes solar panels. More Canadians:

*Energy Fuels, UUUU, gained 2.9% at the opening but then fell back. Cameco, CCJ is up 1.1%

*Antofagasta which produces copper, my 2nd favorite metal, is up a bit today. ANFGF is primary listed in London.

*Curacao incorporated Schlumberger Ltd was up 6% on the oil price rise. SLB.

*Algonquin of Canada has hovered up and down today. AQN is a green utility. It has an investment in Harry Geisel's favorite low tax yield play which gained 1.04%. Harry is working on another one.

Tech & Telefonaktiebolaget

*Nokia finally left the doghouse and is up 2.9%. NOK.

*Tencent TCEHY and MongoDB MDB will form a cloud partnership. I have no idea what this means but my son the CFA likes Nongo

*NIO gained 5% to $58.53.

*Vodafone rose 6.9% to $18.75. VOD.

*MCHOYMultichoice, rose 1.2%.

*Ericsson is up 2.5%. It is the source of the 2nd headline because its formal name is Swedish. ERIC.

*BCE which I added to this week is down today by a fraction. It is the Canadian media-telco biggie.

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William K. 1 year ago Member's comment

Quite interesting about BP, and the huge tears because profits are less this year. But since they are still turning a profit I see no big failure. Only greed demands increased profit constantly.

And the CEO pronouncement of greater profits in the future is what CEOs are paid to do. If the CEO announced that profits would steadily decline for the next years they would be out on the street by noon the same day.