The United Kingdom is currently undergoing the toughest divorce negotiation with the European Unions. The current Prime Minister, Theresa May, is feeling the pressure from the EU board as well as her own political party. Ever since the Brexit, the value of the British Pounds have dropped significantly and also cause the rise of inflation. Basic food shopping and home expenditure have risen significantly and Christmas 2017 may be the most expensive Christmas ever in the history of the United Kingdom.
The overall FTSE 100 index has risen from 6000 to beyond 7200 points. This is mainly due to the recovery of oil and other commodities shares which suffered the Chinese financial crisis back in 2015/16. Some examples are:- Shell, BP, Glencore, Anglo American, Fresnillo, BHP and many more.
If looked deeply, there is currently a slow-death correction with the long dividend growth reputable large-cap companies like BT, WPP, GSK, Imperial Brands, United Utilities and many more. With the current bull run in India, China, Japan and the US; it is very difficult to convince any investor to invest in this current excellent value shares. Basically, money is better invested elsewhere.
There are still very deep value stocks in the excellent long term play potential smaller caps FTSE and UK market which MooMooCoo would like to recommend.
1. Evolution of Food Shopping.
The first recommendation is Ocado Group PLC [OCDO] and currently valued at 360Gbx. In the last 4 days, Ocado soared 47% simply due to a signed contract with large French grocery chain Casino to provide the latest robotic warehouse to improve its logistics.
Ocado shares have been dropped from 320Gbx to 240Gbx in the last three months due to poor EPS target simply because the company have been investing in their warehouse and upgrading the robotic technology.
Ocado is not your typical supermarket. Ocado is purely online and delivers food shopping within one hour in the larger areas of London at three different temperature to ensure food are freshly arriving at your kitchen step. Ocado warehouse is fully automated from end to end with about 35km of conveyer belt moving continuously around the clock 24/7. The difference between Ocado and Amazon warehouse; Ocado delivers fresh food but Amazon delivers non-live materials. With Amazon buying up Wholefood in the US, there is plenty of speculation that Amazon might compete or buy up Ocado to capture the EU market.
Ocado’s current share value is at PE of over 150 which is very high in the English economy. This is the future value of the company which investors are already heavily invested. Casino joint venture with Ocado is only the beginning and forsee Ocado spreading its wings internationally. This share will be volatile in the months to come, but please remember the fundamental values of this unique and futuristic company.
2. Modernising the Airport Restaurant.
The second recommendation classed themselves as Food Travel Expert from the United Kingdom called SSP Group PLC (SSPG.L). They are currently priced at 649Gbx. The company operates food and beverages outlets in travel locations such as airports and train station. They serve from bespoke type restaurants or franchise brands such as Yo Shushi, Marks & Spencer to Burger King.
SSP Group plc have the presence in international airports from Los Angelas, Hong Kong, Philippines, UK and growing its portfolio worldwide. The reason why SPPG is the economic moat and destined for future success is that they have experience with security screening of the business, people and procedures for airport level security requirements. It is so much easier for airports to hire SSP Group PLC if they need a franchise set up at their airport rather than going directly to the franchise with no experience in international security whatsoever.
SSP group may have hinted a lower like-for-like revenue growth next to the year 2018 due to general economic uncertainty. For a long-term play, SSP Group provides returns on growth dividends and also potential share growth as the business presence progress. Look out for an SSP Group restaurant, shop or fast food joint the next time you travel!.
3. Plastic in all shape and sizes.
RPC Group may not be your regular household name but they have most likely designed and produces 75% of all the household bottle and packaging in your home (if you live in the UK). Their key business is the engineering design of the bottles and packaging tot he customer requirement with the element of environmental friendliness to further reduce pollution.
The company have been striving for the past few years with multiple buys out and take over of their rivals with the cash flow income to ensure growth is consistently on the cards. The company is also keen on dividend growth payout. It’s not easy to grow and pay growing dividends which raises eyebrows from institutional investors. Sitting at 924Gbx and PE ratio of under 14, RPC group is generating a good net income currently. With all the mergers and take over settling down, its only matter of time before the company grows bigger.
As a personal investor, I think this is a good growing dividend share in your portfolio. It’s nice to own GSK, RB, Unilever and National Grid, however, i think they are severely over-bought. RPC group stands to have more room to grow compared to the big blue-chip companies.