Musings from the trading floor (Another Short Edition)
Names in play this week: £PHP, £AGR, £SAE, £HEIT
Equities: UKX +1.52%, Eurostoxx +2.22%, ASX: +1.37%, SPX: +5.27%
Credit: IG, 3bps tighter, XO 16bps tighter
Interest Rates: 1Yr 1bps higher , 10Yr 1bps higher
Geo-Macro Mania
US: Tariffs coming soon, or just another u-turn.. Not seeing a rush of deals here..and a very very late in the day, Moody’s downgraded US Govt debt from AAA to Aa1
One Line Opinions.. *RM Funds holds positions in the securities discussed*
This week has been full of punchy headlines, but the PHP/AGR saga deserves a closer look. Late Friday, PHP: LN submitted a revised offer for Assura (AGR: LN), placing the ball firmly in KKR and Stonepeak’s court. I’m no longer in Assura but remain a holder of PHP. While the offer is well-structured and highlights the merits of public market ownership, it’s worth pausing on the fundamentals. Assura has been quietly shifting into the private healthcare space, an arena dominated by private equity and lower-rated credit. Meanwhile, growth in core NHS GP practices has been in steady decline (source: UCL) between 2013 and 2023, the number of practices (8,044 to 6,419) fell by 20% even as patient lists ballooned.
Where new developments are happening, it’s in multi-disciplinary centres, which both PHP and Assura have and continue to pursue - but future growth (outside of the NHS-led GP practices) likely means contracting with weaker counterparties. As a PHP shareholder, I’m cautious. The deal brings scale, improves liquidity, and might draw passive flows, but it also introduces significantly more risk. PHP used to be a straightforward defensive name: rents, yields, and inflation. If this deal goes through, the next decade could look very different.
Small Cap, Big Ambitions?
Simec Atlantis Energy (SAE: LN) grabbed my attention this week after announcing a joint venture with Econergy International (ECNR: IT) to develop a 250MW, 1.25GWh (5-hour duration) battery storage project, dubbed "AW2." It’s a substantial project, far larger than SAE’s current market cap could support; though still early-stage, with planning permission at least 12 months away. That said, in a market where names like Drax (DRX: LN) and Foresight Group (FSG: LN) are actively bidding for HEIT: LN BESS energy assets, it's one worth keeping an eye on.
GDP-Linked Transport Infrastructure
Mobico’s (MCG: LN) disappointing US disposal—executed at a weak price with negligible impact on deleveraging—underscores the group’s structural challenges. Despite solid headline cash flow and liquidity, underperformance in Germany and the UK remains unresolved, and operational momentum is lacking. The group’s hybrid notes yield over 11% after losing Moody’s equity credit, and senior bonds continue to trade below par, reflecting market scepticism. We remain underweight GDP-linked transport assets more broadly, as we are not yet convinced by the strength or resilience of domestic economic demand. For now, Mobico’s equity offers little to get excited about (down 65% YTD), while its bonds continue to price in prolonged uncertainty.
Dubai Residential REIT *NOT A TRADE RECOMMENDATION*
The Dubai Residential REIT IPO opened for subscription this week, with sources suggesting the book was covered within minutes. While scale-back risk may limit allocations, the REIT would otherwise be a strong candidate for inclusion in our listed real asset strategies. The portfolio comprises 35,000 residential units across the emirate, spanning premium, affordable, and corporate housing segments. Dubai’s residential market has experienced significant price appreciation over the past three to four years, initially spurred by visa reforms and further accelerated by pandemic-driven migration and geopolitical dislocation. With government plans to double the population over the next decade and regulated rents providing a degree of stability - the long-term demand outlook remains compelling.
A relaxing weekend ahead of London biz next week!
I’ve been revisiting many of the opened bags of beans this week, so no new reviews!
Espressos Consumed SB: 1566
P.