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(Sharecast News) - In her Midas Share Tips column for the Mail On Sunday, Joanne Hart discussed Marks & Spencer's alignment with Ocado, where M&S agreed to acquire half the online retailer's UK business for up to £750m.
M&S said back in February that the deal would be largely financed by a £600m rights issue and that this year's dividend would be cut and, on 22 May, both events duly came to pass.
Alongside yet another set of disappointing full-year results, chief executive Steve Rowe unveiled a 26% in the dividend to 13.9p and a one-for-five rights issue at £1.85.
Hart said that meant shareholders were entitled to one new share at £1.85 for every five they hold - and they have until 12 June to decide what to do about it.
"Rights issues are complicated because there are several routes that investors can pursue - each involves different mathematical calculations - and the sums change as the share price moves," said Hart.
First off, shareholders could subscribe for all their rights.
Secondly, they could take up a portion of the rights, purchasing, for example, 50 new shares for every 500, at a price of £92.50.
"This is cheaper than going the whole hog but it means that they will end up owning a smaller proportion of M&S stock after the rights issue than before it," said Hart.
Lastly, they could sell their rights in the stock market. However, nil-paid rights and their value fluctuate in line with M&S' share price.
When the rights issue was launched, M&S stock was trading at £2.71 so the new shares it was offering investors were 31% cheaper than the pre-announcement price.
The discount was designed to entice shareholders to take up their rights and, if the price had remained at £2.71, shareholders would have been able to sell their nil-paid rights for 71.7p each, or £71.70 for every 500 shares they owned.
By last Friday, however, the shares had fallen to £2.25.
"Some decline was to be expected, given that the company is issuing 20 per cent more shares at a cut-price rate. But the extent of the fall suggests the market is in two minds about this rights issue. Equally worrying, the nil-paid rights were changing hands at just 39p by close of play last week," wrote Hart.
All in all, Midas noted that M&S shareholders "have had a rough time", as the company tried time and again to regain its place as the top of British retailing. However, Midas said success had been "elusive".
"M&S loyalists may decide to subscribe for all or some of their rights and hope for the best. Other shareholders may well be better off selling their nil-paid rights and thinking long and hard about whether they want to keep the shares they started off with. There are higher growth and better value retailers on the market," concluded Midas.
Over at the Sunday Times, Rachel Millard turned her attention to The Renewables Infrastructure Group in this week's edition of Inside the City.
Millard discussed the Jadraas wind farm, deep in the forests north of Stockholm, with almost 70 wind turbines producing enough electricity to power up to 114,000 households - one of the many assets TRIG has snapped up.
"TRIG is unshowy but has a good track record: it has posted an 8.3% annualised total return since listing in 2013, and made a profit of £123.2m last year. It has grown steadily and holds 64 assets across the UK, Ireland, Sweden and France," said Millard.
Last year, it generated more than 2,000-gigawatt hours - enough to power more than 500,000 homes and almost one-fifth of the amount of renewable power generated by struggling FTSE 100 giant SSE.
Millard believes the wide base should help TRIG chart a course through "the inevitable seesawing in power prices and regulation" as it tries to "ride the renewable energy boom".
She also noted that diversification at TRIG looked set to continue, with shareholders recently approving plans to allow the company to invest further in offshore wind - a sector which attracted about €65bn worth of investment across Europe in 2018.
"A healthy dividend since 2013 has meant that TRIG has enjoyed strong support. It is targeting a dividend for this year of 6.64p, which would give a yield of 5.6%," said Millard, who also noted that most of the group's earnings came from fixed-price contracts and subsidies, giving it "a degree of certainty".
However, behind the strong outlook, Millard said a "predicament" was lurking.
"The shares are pricy, trading at 126p - a steep premium of about 12.9% to its latest net asset value of 111.6p," she said.
"Buying at a premium is always a tricky judgment as the shares could fall if the assets do not catch up and the market loses confidence."
Millard felt a good strategy could be to wait and see how the firm's assets performed but, on the other hand, the strength of its track record and management weighed in the company's favour for a long-term bet.
"The yield looks good and the premium compares reasonably with that of its peers. On balance, and with caution, buy."
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