RSA Insurance bucks declines after well received update but Morrisons leads losersThe UK is following global markets lower, as the country votes in what is proving to be a very close general election.In the wake of Federal Reserve chair Janet Yellen’s comments about equity valuations being “quite high”, the Dow Jones Industrial Average fell 86 points while Asian markets dropped more than 1%. So European markets have started the day sharply lower, not helped by the continuing fall in bond markets. Bond yields have risen as the recent revival in the oil price prompted inflation fears, as well as suffering as the euro strengthens. Meanwhile signs of recovery in the eurozone - despite Greece’s continuing problems - have prompted talk that the European Central Bank might end its bond buying QE programme early, thus removing another prop for bond prices.RSA’s first quarter statement was mixed in our view, with further progress at the strategic level, especially with disposals (Singapore & Hong Kong disposals completed in the quarter). The underlying current year loss ratio has improved but was still behind its own plans and large losses still remaining elevated, with weather losses lower than in the first quarter of 2014. We reiterate our hold recommendation, highlighting the around 33% premium to our 2015 forecast net tangible asset value of 315p and little income attractions in the short to medium term, at possibly around 2% for 2015 (versus 8p). The struggle continues. The Equinix bid looks fully priced and we view there as being only an outside chance of a counterbid from another player or from private equity. Anti-trust concerns are an unknown, considering the strength of a combined Equinix-Telecity player in Europe. The prospect of applying the Equinix cross-connect pricing model to the Telecity estate could exacerbate this. We remain at hold and expect the shares to trade at a modest discount to the 1145p offer price, helped by short interest closing. Continue reading...
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