Newspaper and magazine share tips

By This Is Money
Updated: 10:52 EDT, 7 September 2007

Each day, This is Money compiles a summary of some of the share tips from national newspapers and investing magazines...

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FRIDAY

Investor's Chronicle

Even if it doesn't get taken over, KCOM Group is a much more profitable play than some of its bigger broadband provider rivals. Last month, management said 2007-08 had started well, The share price still reflects caution. Given continuing takeover potential, little trading risk and strong cash flow, it's time to take advantage. Buy.

Winning a couple of key contracts last month is helping Trafficmaster navigate towards smoother profit growth. And, with a growing number of navigation systems being installed in vehicles, the group is in a strong position to continue on its upward trend. True, Trafficmaster has disappointed in the past, and it may not help that the company still does not pay a dividend. Even so, its growth prospects make the shares look worth buying.

CBay Systems is the third-largest medical transcription service provider in the world and is outpacing the $20bn market's 10% growth rate. It floated on Aim in June and there has been little movement since. According to house-broker Jeffries, pre-tax profits should more than double next year. That puts the firm on a hefty 35 times earnings for this year but a more reasonable 18 for next year. Buy.

The Times

The stock market has at least one beneficiary of the summer's heavy rain: Galiform, the FTSE 250 kitchen maker that emerged from the old MFI Furniture. It seems that the wet weather from May to August has prompted jobbing builders to defer the exterior work in favour of inside tasks - such as fitting kitchens. But yesterday's numbers contained much else to impress. A sharp downturn in consumer spending is a genuine concern but Galiform's strong forecast profit growth and attractiveness to rivals should provide a floor at 138p. Hold

Galliford Try is the sort of housebuilding-to-general construction group - with a dash of PFI work - that was declared a dinosaur a decade ago. But yesterday's figures appeared to confirm the strength of its strategy to beef the business up with acquisitions. The shares, off 2¾p at 152¼p, have fallen from 188½p this year amid wider housing fears. But its focus on affordable homes and regeneration positions Galliford well relative to current Government policy, making a current-year earnings multiple of less than 11 look reasonable value. Buy

Umbro, the replica kit maker, revealed UK sales plunged 55% in the first six months of this year, with the bulk of this down to the drop-off in demand for England tops. There is no major international football tournament this year and the national team's chances of taking part in the next one are fading. Umbro always fares badly in non-tournament years. Not all was gloom. Sales in the US are up 155%, with Russia up 50% and China ahead 22%. Yesterday's 13% slide to 120¾p means Umbro now trades at 11.6 times 2008 earnings. That still looks too dear unless Michael Owen starts hitting the back of the net. Avoid

The Daily Telegraph

Aegis makes money by advising advertisers where to spend their budgets. It also has a well-regarded market research arm, Synovate. As companies desperately try to make sense of the web, mobiles and what it all means for how they reach consumers, Aegis is well placed to cash in. Trading on 17 times forecast earnings, falling to 15.4 times for 2008, and yielding 1.7pc, it's easy to see why Vincent Bollore is parked on Aegis' lawn with a near 30% holding and is holding on to his shares. They should have further to go. Buy

Amec has done much to sharpen up its sprawling engineering and logistics empire. A slew of businesses have been jettisoned and Samir Brikho, who took the top job a year ago, is clamping down on costs. Amec shares have already shot up in the past three months and its margins remain very average. Trading at an expensive 20 times future earnings, the improvements at the company are already in the share price. Don't get greedy. Take some profits. Sell

THURSDAY

Shares magazine

Hill & Smith, a leading European manufacturer of motorway crash barriers and galvanised metal products, is a well-run company with lots of organic growth opportunities. It is being re-rated from an engineering stock to a support services company but is still an 'excellent investment' on a p/e ratio of 15.4 this year falling to under 14 for 2008. The shares will 'continue to zoom' but it would be 'overly optimistic to say they will double again over the next two years'. Buy (316p stop loss)

Petra Diamonds, a miner and explorer with assets across Africa, is fast becoming a mid-tier producer. It is the envy of the mining sector with outstanding diamond recoveries, low-risk joint ventires and vast exploration potential. Since first tipped three years ago, the stock price had trebled to 158p by April this year but has since slipped back around 20%, representing a buying opportunity. Buy (102½p stop loss)

The Daily Telegraph

Carillion yesterday revealed a merger with the un-loved Mowlem, which it bought last year for £290m, has produced £26m of cost savings - £10m more than expected. Most of this has come from reducing administration and legal costs, and the company is focused on growing the top line. In the UK, that means competing for £600m worth of lucrative Building Schools for the Future contracts and making a play for the Olympic bonanza. Trading on a price earnings multiple of 13.8 times with a forward 2008 dividend yield of 2.6%, it is not expensive. As it has no exposure to the UK housing market and plenty of work in its £15.8bn pipeline, it should continue to thrive. Buy

Hikma Pharmaceuticals is a rare concoction in the drugs world. Having floated in the UK for £2.90 in 1995 its value has climbed by 50%. The company focuses on providing generic drugs in the Middle East and Africa. The market is attractive because it is fragmented, yet big pharmaceuticals companies are finding it difficult to get a foothold. The company is no longer the bargain it was a few months ago - it trades at more than 20 times future earnings - but it is worth a long-term bet. Buy

The Times

A year after Interserve disclosed the discovery of accounting irregularities at its industrial services division, it is hard not to feel that the company is still in some way being punished for the slip. At 13 times forecast 2007 earnings, the former Tilbury Douglas sits at a discount to the sector. Interserve has an extensive portfolio of equity stakes in PFI projects which is not reflected in its shares and it draws one third of its operating profits from the Middle East, where, thanks to massive infrastructural investment in the Gulf, demand promises to remain strong for three to five years. Buy

Land Securities, Britain's largest property company confirmed yesterday it was 'conducting a review of its business structure'. That means one thing: a break-up into its three constituent parts – London real estate, retail and its Trillium outsourcing unit. The possibility of a shake-up proved enough to keep the shares steady at 1827p amid yesterday's retreat by the FTSE 100. At that price, they sit at a 21% discount to their net asset value of 30 March, but the property market has cooled considerably since then, suggesting that they are at fair value. The likelihood of demerger makes it worth holding on. Hold

Highway Insurance is known for pursuing an adventurous investment strategy. So there was relief yesterday that Highway's first-half figures showed it to have produced decent returns. It was a bright spot that helped to offset weakness in underwriting and broking. Encouragingly, Andrew Gibson, chief executive, echoed other insurers in suggesting that motor insurance premium rates are finally rising after four years in the doldrums. But it is Highway's prospective full-year dividend yield of 7.7% that is the lure. The outlook for investment returns for the remainder of the year remains uncertain but the payout is covered 1.7 times by forecast earnings. Buy

WEDNESDAY

The Daily Telegraph

Premier Foods is hiking the price of bread in response to the soaring price of wheat. While bad news for consumers, it should come as a relief for Premier investors. The ability to pass on costs to consumers is by no means given when faced with the might of the supermarkets. But Premier is negotiating from a strong position. The shares are trading on around 11 times forecast earnings, which is not bad for a company with around £100m of cost savings to come through driving earnings growth of up to 20%. Buy

Tullow Oil has potential that outweighs its current performance. Yesterday's half-year numbers revealed a 62% drop in profits but the shares still rose to a record 549p. Discoveries off the coast of Ghana, and possibly Uganda, may hold more reserves than first thought. Growth prospects mean Tullow will continue to trade on a premium rating, but if past performance is any indication of future prospects then the shares can still hit further high notes. Buy

It's only a few months since Questor last looked at Hays. Then we called it as a Buy. But it hasn't fared well amid market turmoil. It's a stock that bumps along at pace with market sentiment so if you're bearish then this is not one to invest in. But if you believe in the Asian growth story, then Hays is as good a bet as any other. It is also highly cash generative and makes a habit of handing it back to shareholders. On a forward price-earnings ratio of just 14 times to June 2008, and with a healthy 3.4% dividend yield, the shares are worth sticking with. Hold

The Times

The advantage of recruitment consultant Hays is its emphasis on temps. That means its profits are more defensive when the economy slows: operating profits have fallen in only two out of the past 16 years. Yesterday, Hays said that it has seen no evidence of a downturn, with fee growth since the end of June running at the same level as in the second half, but the company's strength as the least cyclical player in a cyclical sector should serve it well. However, with shares in Hays at 13.5 times 2008 earnings, and management change ahead, now is a good time to lock in profits. Sell

If Kazakhmys sits on the lowest rating of the London-listed base metal miners – at just seven times current-year earnings forecasts – that is not just because of its sole dependence on copper until now. What has becalmed Kazakhmys shares over the past 12 months relative to Antofagasta, the FTSE 100's other pure copper play – they have risen 1% and 47% respectively – are concerns over a lack of organic growth. Scepticism over the pace of progress at Aktogay, the copper project whose prospects were trumpeted at float, were well founded. It will not start production until 2009. Until its production prospects are clearer, Kazakhmys can be no more than a hold.

SCi Entertainment has been under the cosh after the computer games developer admitted that it had misjudged the move from the second to third generation of consoles. That led to an £18m charge and a near-halving of the share price as investors concluded that the new mangement was reverting to the dismal habits of the old Eidos. The summer rout in the stock has been harsh. The shares surged 13% yesterday as a bid approach emerged. At 12.4 times forward earnings, the stock is still attractive at 384p, but the risk is high, and previous bids have failed. Buy on weakness.

The Independent

After four years of rising metal prices, matched by rising equity valuations, how much value can be left in the mining sector? Plenty if yesterday's interim results from the copper producer Kazakhmys are any indicator. Since the start of the market correction, shares in Kazakhmys have fallen almost 30%. These results show that the fall is not justified - the stock is approaching bargain-basement value at less than 8 times forecast 2008 earnings. Most of the demand is coming from China and South-east Asia, but even if growth in those economies slows it is unlikely that demand will shrink to the point at which Kazakhmys becomes unattractive. Buy

There is more to the Paddy Power story than a run of bookie-friendly results. The decision to buy Turf TV – which provides pictures from 30 UK courses (including the big guns) and has been snubbed by the major British bookies – offers an important marketing advantage that should see the punters pouring into Powers shops. Power has also found room to return cash to shareholders. The shares' rating of 18 times next year's earnings is pretty demanding, but the company has proved itself able to live up to a lofty valuation in the past. Buy

Playtech, a provider of online gambling software, always looked well equipped to survive almost unscathed the fallout of the US anti-gambling legislation, and so it has. The Israel-based group provides software platforms for all forms of internet gambling. It has little in the way of competition and the online gambling industry, outside of the US, still has excellent growth prospects – and providing the nuts and bolts to make it happen is a good place to be. The shares trade on just over 17 times forecast 2008 earnings, and for investors with a healthy appetite for risk this looks well worth a punt. Buy

Daily Telegraph

Engineering group has forecast a £5m hit from the cost of an investigation into bribery allegations in its 'severe service unit' but cannot yet predict how much will be needed for any possible fines. The news overshadowed an otherwise solid set of first-half results, but it is a brave investor that dives into a company as it grapples with its internal controls. Hold

Fund manager-broker Hargreaves Lansdown listed on the London Stock Exchange at 160p in May. Within a day the price had jumped 31%. Since then, the company has gone from strength to strength and the company expects further growth from tax-wrappers like Sipps as people take more control of their investments. But the shares still look ridiculously expensive on a price/earnings basis with a current ratio of 32 times and a 2008 estimate of 23 times. Any further sell-off in the next few weeks could provide a buying opportunity, but for now, it's a hold.

The US business of market research group Taylor Nelson Sofres is being rebuilt. Meanwhile, first-half organic revenue growth of 5.9% is impressive. The company is stepping up investment in new digital services, TNS's sweetspot. As advertisers grapple with which media to spend their money on to reach audiences, they are increasingly turning to TNS to provide data. With the shares trading at just 15.4 times Numis's forecasts for 2007, they are worth a look. Buy

The Times

When WSP Group floated in September 1987, three weeks before Black Monday, it would have been hard to imagine that the fledgeling civil engineering consultant would one day replace EMI in the FTSE 250. Yet it happened last month. Now at 727p, WSP sits at 18 times 2007 earnings, not demanding given forecast earnings growth of 30% this year and 22% next year, and the company's proven ability to rank alongside Ove Arup as one of the premium names in its sector. Buy

The staple diet of Regus Group is fully serviced offices – 842 of them in 67 countries – leased out on average for a year at a time. Yesterday's numbers showed a business firmly back on track. Yet for investors, the impact of a slowdown in the United States remains the chief concern. So far, there is no sign of a waning of demand, while order book visibility of six months provides a degree of comfort. So, too, does Regus's headroom for dividend increases and further share buybacks. However, at 12 times next year's earnings, the shares are up with events. Avoid