Newspaper and magazine share tips
Each week we round up share tips from national newspapers and investment magazines. For the Mail on Sunday's stock picks, read the Midas column.
Moving up: Mulberry's revenues are up 14%
FRIDAY
The Daily Telegraph
Transport investor Go-Ahead's shares are down from around £25 to £14.50. But chief executive Keith Ludeman reckons the rocketing price of petrol and growing road congestion are pushing more punters on to public transport. Over the past 12 months, Go-Ahead has underperformed the transport sector by almost 14%. But on a forward multiple of 10 times, yielding 4.6%, stay aboard for recovery. Buy.
Luxury retailer Mulberry isn't feeling the effects of the economic downturn, with revenues up 14%. Although some of the five US stores are loss-making, management is confident they will be better-performing within two years and the number of UK, European and Asian stores is growing. Since we last tipped for Mulberry, the shares have admittedly come off somewhat with a retail downturn. However, Mulberry is still outperforming so we recommend investors hold on. Hold.
The Times
Last month Cadbury reported that first-half revenue growth would be higher than the 4% to 6% forecast. Trading in the Americas was 'excellent', it is taking market share in Britain and sales in emerging markets are rising. After a $23bn merger of Mars and Wrigley, rumours abound that Cadbury might merge with Hershey and failing that, Kraft. But the share price is assuming a takeover that may not emerge. There is also a risk that raw material price rises, will outstrip expectations in the second half of this year. Hold.
Accsys Techologies, owns the rights to provide a non-toxic substitute for scarce and expensive hardwoods. Shares have fallen one third since last year's equity fundraising because its technology is still at an early stage of commercialisation. But results show Accsys is making steady progress by securing licences in China and the Middle East. However, their principal end-market – construction – is faltering and there will be better times to buy. Hold.
Shares in Norcros (owner of Triton showers and Johnson tiles) have fallen 67% to a new low. The company left the stock market with £12m of net debt, but now has £47m. Their prospects have fallen sharply since last summer, and are getting still worse as they begin to feel the slowdown in housing transactions. At 25½p, a 13% dividend yield is the sole attraction. But that is insufficient reason to buy. Pass.
Investors' Chronicle
BTG is focusing on spending half its £57m cash pile to boost its pipeline of drugs. They are acquiring licences to drugs in late-stage clinical trials. A deal or two could fix BTG's reliance on the success of varicose-veins treatment, Varisolve, although an BTG say this particular market is worth at least $500m. New drugs, a strong balance sheet and positive free cash flow put BTG in a good position. Investors are in a position to benefit. Buy.
Tesco has regularly gained market share from its competitors over the past decade but last week's sales figures were at the lower end of the most bullish analysts' expectations. Latest market data suggests Tesco is losing out to Morrison, Aldi and Lidl, which could result in a price war. Sales abroad are also slowing up and for investors seeking income, Tesco's bonds may be a better proposition, as they provide higher yields than shares without the equity risks. Sell.
THURSDAY
Daily Telegraph
Sainsbury's is now the UK's third largest supermarket chain but yesterday's trading statement suggested chief executive Justin King's successful tilt may have run its course. Sales growth of 3.4% for the first quarter was at the lower end of expectations. Futu
Software giant, Misys, revealed yesterday that 2007-08 operating profit rose about 36%. It was a decent performance and the first revenue growth for several years, following the turnaround strategy announced by new management in March 2007. A rather complex merger with Allscripts will help raise group revenue growth from 7% to 9% next year but this means the company trades at a premium. Hold.
The Times
Changing fortunes: Woolworths reported yesterday of a worsening in gross margins
Woolworths reported yesterday of a worsening in gross margins, the sale of a package of stores and the departure of its chief executive. The sale of four London stores to Waitrose for £25.5m is encouraging because it opens the door to other disposals and will help to ease Woolworths' £124m debt burden (which is bigger than its stock market value). But too many pressures mean the shares are no longer a bargain. Avoid.
CareTech, the provider of residential care for people with learning disabilities, raised £30m at 420p yesterday. In the three years since flotation, operating profits rose from £2.4m to a forecast £17.1m – and shares have more than doubled. Steadily rising fees, a shortfall in provision and tighter regulations – which are prompting smaller operators to sell up – should continue to underpin growth. CareTech has farther to go. Buy.
Shares Magazine
Even with a £20.2m debt position, Redstone, the independent provider of IT and communications services, still has the capability to pull in big contracts this year. A new strategy in autumn 2005, which brought about five acquisitions, an extensive cost cutting programme and investment in sales and management, have broadened the company's service and dragged it into profit. A strong cash flow means Redstone is already paying off its existing debts. Buy.
Qinetiq has now nearly transformed from a UK government-based military research entity to an ambitious commercial company with a robust growth strategy. It is well placed to grow faster than many of its defence peers as it specialises in high-tech solutions to tricky military and security problems. The US operation has sales topping £1bn and organic profit growth of 18%. Growth is expected to accelerate and the order book is up 11% at 5.7bn. Buy.
WEDNESDAY
Daily Telegraph
Troubled life assurer Friends Provident is rumoured to be selling financial advisory arm Pantheon, which could start a new chapter for the company despite the credit crunch. Friends is attempting to grow internationally where bigger margins are available and is focusing on profitable business in the UK. But shares have been punished severely in recent months, and now is not necessarily the moment to start buying. Avoid.
Underlying business in Cambridge-based company, Domino Pri
The Times
Logistics group Wincanton saw a 20% fall in shares after it announced a potential £229m offer for TDG. After the offer was scrapped, shares recovered nearly 4%. Shareholders were unsettled as Wincanton has £105m of debt and a merger would prove risky. This month's full-year figures caused modest downgrades to forecasts, but scope for raising margins at its Trans-European unit and security from cost-plus contracts persists. At 313½p, or 11 times 2008 earnings and yielding 5%. Buy.
TUESDAY
The Times
Shares in specialist credit fund manager, BlueBay Asset Management may have halved on the year but their European corporate debt fund was up 8%. They are reducing management and performance fees, in exchange for investors being locked in until next July, and continue to pull in the cash as net inflows in the past five months stands at $3.5bn. Even so, at 283p, or 18 times forward earnings the shares, which suffer from illiquidity, are too dear. Pass.
As yesterday's full-year numbers show, Majestic faces pressures over the squeeze on consumers. Higher wine duty of £1.72 a bottle post-Budget, vigorous promotions by supermarkets, poor harvests and a stronger euro together mean that prices are likely to increase. But Majestic has a loyal customer base, a sound balance sheet and low operational gearing. However, 217p, or 12 times this year's earnings, still feels steep. Avoid.
Daily Telegraph
Drax, operator of the largest coal-fired power station in Western Europe, has been one of the major beneficiaries of the recent energy price surge. Last year the shares were at 625p but since then they have staged something of a resurgence, and stood last week at 786p.With few experts predicting falls in electricity prices, the company looks set to retain its top-flight status for some time to come and so the shares are now worth tucking away. Buy.
Domino's is confident this year will play out well. They say that poorer consumers are continuing to buy at the value end of the range in much the same way as before the downturn. In the past, the sharp price rises in raw materials have hit Domino's hard but they now appear to be managing better, with increases passed on to franchisees and customers. Although the shares are no bargain, the company's re-entry into the FTSE 250 should offer support. Hold.
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