These Firms You've Barely Heard of Could Win Big After Brexit
These Firms You've Barely Heard of Could Win Big After Brexit
(Bloomberg) -- Two companies based in English towns a long way from the U.K.’s political center could be among those whose stocks benefit most after Brexit, according to HSBC Holdings Plc.
Midwich Group Plc, an audio visual firm based in Diss, eastern England, and vehicle rental company Northgate Plc, located in the northern town of Darlington, are among four U.K. midcap stocks that analysts at the bank say could see most upside from reduced uncertainty.
HSBC says greater clarity on the U.K.’s future could release pent-up demand from clients of Midwich, whose services include projectors, digital signage and professional audio, according to its website. Meanwhile, Northgate management has flagged Brexit uncertainty as weighing on a number of its sectors, including construction and retail.
HSBC analysts led by Matthew Lloyd also highlight London I.T. services firm FDM Group Holdings Plc and FTSE 100 home-builder Taylor Wimpey Plc as potential key beneficiaries.
Even a no-deal scenario could result in a “relatively benign Brexit” that still benefits the stocks, so long as it’s accompanied by stimulus from the Bank of England, Lloyd said by phone. Clients have started to request lists of stocks with U.K. exposure that could see a boost after the Oct. 31 Brexit deadline, he said.
The picks were contained in a more than 500-page report on U.K. midcaps published Wednesday, in which the bank screened for stocks with more than 50% domestic revenue exposure that have underperformed the FTSE 250 and are trading at a discount to pre-referendum multiples. Among qualifiers that HSBC rates buy are Wm Morrison Supermarkets Plc, Direct Line Insurance Group Plc and wealth manager St. James’s Place Plc.
With Brexit negotiations at an impasse and currency-market movements suggesting investors expect a further extension to the deadline, the bank’s predictions may have to wait. HSBC economists assume the U.K. will avoid a no-deal outcome on Oct. 31 by either signing a deal or agreeing to more time.
Were there to be a further delay, domestic-facing Royal Bank of Scotland Group Plc may be among large caps to benefit, Investec Plc’s Ian Gordon said in a note on Wednesday.
To contact the reporter on this story: Joe Easton in London at jeaston7@bloomberg.net
To contact the editors responsible for this story: Beth Mellor at bmellor@bloomberg.net, Paul Jarvis
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