Newspaper and magazine share tips

By This Is Money
Updated: 12:05 EDT, 5 September 2008

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.

Punch Taverns: With more downgrades likely, Questor thinks investors should drink up and sell

FRIDAY

The Times

Although June's full-year figures from Imagination Technologies showed a strong pickup in licensing sales, weaker than expected royalty income removed some of the shine. The shares, at 33 times this year's earnings, on Landsbanki forecasts, falling to 14 times next, are not obviously cheap. This suggests that, at 70¾p, it is better to wait for November's first-half figures for a clearer view. Avoid.

McBride, Europe's biggest supplier of own-label household and personal care products, revealed yesterday that headline sales were down 2%, once the effect of currency and acquisitions had been stripped out. Pretax profits, down 34% to £21m, should recover as McBride recoups its costs. However, net debt of £103m, a flat full-year dividend of 5.6p and a current-year earnings multiple of 11 times offer little attraction at 102p. Avoid.

The Daily Telegraph

SQS tests kit for a third of the FTSE 100 and has Volkswagen and Boots among its clients. The German-headquartered and London-listed company announced a 22% increase in organic profits, while a jump in 45% jump in pre-tax profits came as a result of cost savings. The shares have had a decent run ahead of the results but on around eight times earnings are not overly expensive. Buy.

Today Churchill Mining is set to announce that resources have already topped 1.4bn tonnes, and with just 20% of the target area drilled. It means Churchill, which owns 75% of the project, may not just be sitting on a good asset, but on a world-class one. With respected institutions on board, the company could well be poised for great things. Buy.

Investors Chronicle

G4S, the security services business formerly known as Group 4 Securicor, recent growth hasn't just been down to acquisitions, it generates 23% of its sales in what it calls 'new markets. Its shares, trading on a price earnings ratio below 12 times Cazenove's Securitas, look like a good defensive bet in an uncertain world. Buy.

The 49% growth in revenue and 58% growth in earnings per share announced last week by Petrofac in its first-half for 2008 highlight the continuing strong demand for the group's oil and gas plant engineering and operations systems. The shares, which are rated at about 10 times 2009's forecast earnings, are below average for shares in an oil-services company.

THURSDAY

Shares Magazine

Goals Soccer Centres, which operates five-a-side football pitches, saw pre-tax profits for the first six months increase by 20% to £3.7m. However, its aggressive expansion plan is running out of steam as its earnings growth slows down and a move overseas will take time to develop. Stockbroker Altium has downgraded its pre-tax profit forecast by 5.4% to £8.7 million for 2008. Sell.

National Grid, the operator of electricity and gas distribution networks into the UK and the US, has visibility of earnings for the next five years and, as profit warnings pick up, investors will begin to value this visibility more highly.

The Times

Spice, the result of a management buyout from Yorkshire Electricity, is now valued at £320m, the utility services specialist stands a strong chance of securing promotion to the FTSE 250 in next week's quarterly reshuffle. With promise of continued strong earnings growth – 14% this year and 12% next – that makes this at 534½p, or 14 times 2009 earnings, a share to own. Buy.

June's full-year figures from DS Smith revealed operating profits from the paper and packaging company were up 54%, to £120m, on sales up 11%, to £2bn. At 129½p, down 6½p, a secure prospective dividend yield of 7% is the greatest attraction, However, that income, and a multiple of eight times earnings, is not sufficiently persuasive for a company whose profits are heading backwards. Avoid.

The Daily Telegraph

Heritage Oil yesterday confirmed that test results from its Kingfisher 2 well in Uganda showed it could be on to a significant discovery of oil in the region. Oil and gas explorers always carry with them a degree of risk, but Heritage now bears less than most. With more positive newsflow likely to underpin the shares in the months to come, the shares are well worth buying.

Punch Taverns insisted yesterday that it is generating strong cash flows and had no need for short-term funding, it is still facing continued pressure from the off-trade, which is grabbing an ever bigger share of the market. But after falling more than 12% yesterday, is the stock a buying opportunity? With more downgrades likely, Questor thinks investors should drink up and sell.

WEDNESDAY

The Times

Yesterday's full-year results revealed Mattioli Woods (MW) that revenues were up 20% and earnings per share were ahead 16%. It claims that tougher times prompt its clients – whose average Sipp value is £550,000 – to pay more attention to their pension arrangements. However, it is hard to see how revenues from the property syndicates it arranges can do anything but fall in the current year. The liquidity of the shares and potential short-term pressures on Sipps suggest there will be better times to put MW in your pension. Avoid.

Smallbone, a company reliant on selling £40,000 luxury kitchens, remains upbeat despite of the current economic climate. The problem comes when looking at 2009. Yesterday Landsbanki trimmed its profit forecasts for next year from £4m to £2.6m. The lower forecast means that the shares, at 81p, are trading at eight times next year's earnings, a discount to the retail sector average. Investors may want to await full-year figures before buying in. Hold.

The Daily Telegraph

aga 159p +3 Questor says Hold Eaga, which administers the Government's existing Warm Front Scheme and also insalls heading systems and insulations, has sought to leverage its expertise, diversifying into the provision of water services and winning contracts to help deliver the digital switchover scheme for the BBC. Eaga's share price, has risen from under 100p to around 160p over the past three months. At those levels the stock trades on 12.4 times forecast 2009 earnings, which isnot overly demanding. Hold.

Smallbone yesterday reported that earnings rose 40% and margins were up 45%, showing that Smallbone has not been tempted into price-cutting. The company has strong growth prospects and on seven times 2009 earnings it is worth a closer look. Buy.

TUESDAY

The Times

Shares in Goals Soccer Centres, the five-a-side football operator, fell nearly 8% as yesterday's first-half results prompted next year's profit forecasts to be nudged modestly lower. Having risen by an annual average 8% since floating four years ago, sales were 4% in the first half. Goals also faces higher energy bills – which explains why it raised prices by 3%. However, given strong cash generation and solid asset backing, 222p, or 13 times the 2009 earnings, it remains a buy.

The Qatar Investment Authority (QIA) does not have the best track record as a backer of Britain's blue chips, but as an investor in AIM, the Gulf sovereign wealth fund has fared somewhat better. Yesterday's maiden annual figures show Epicure Qatar Equity Opportunities (EQEO) – the London-listed fund into which QIA has sunk $25m (£13.8m) – to be doing just fine. With the Qatari stock market trading at 12 times 2009 earnings, despite forecast 30% growth, EQEO's 11% discount to NAV at 111p seems mean. Hold on for more.

The Daily Telegraph

Headlam, the floorcovering distributor, posted a decent set of interim results yesterday but it was the accompanying profits warning for the full year that hammered the stock. Highlighting the difficult market conditions, the group said it would now be a challenge to meet its objectives for the year. Given that, it is hard to see why Headlam should trade on more than eight times forecast earnings, even before likely downgrades that broker Kaupthing suggested could be in the order of 10%. Sell.

Goals Soccer Centres operates 29 five-a-side pitches across the UK and yesterday it posted a 20% increase in interim pre-tax profits. The stock should be more highly rated than it currently is, especially after yesterday's dip, which provides a good entry point. Buy.