Sunday newspaper share tips
Each week, we round up the main sha
Round-up: Sunday newspaper share tips
For the Mail on Sunday's sha
FT Weekend Sha
Aga Rangemaster is feeling the heat. The cast-iron cooker maker, whose products feature in Britain's upmarket country kitchens and are adored by celebrity chefs, has issued a stark profits warning.
In a trading update on Tuesday, the company reported its order intake for September was 15% below last year's level and 5% below the previous summer period.
The company's market cap has now lost close to £450m since peaking last July, and the announcement on Tuesday pushed the shares to their lowest in more than 20 years.
Higher energy bills and a desire for stoves with programmable functions have led some customers to purchase wood-burning cookers and more modern versions of its range.
But the future is not bright. Sales are closely tied to housing transactions and these are virtually frozen. With recession fears gaining traction, and consumer spending in decline, £7,000 stoves will not appear on many shopping lists.
Like many caught in the market carnage, Logica's metrics suggest it is very cheap. A 45% share price drop in the last four weeks has left shares in the IT services group at their lowest level in more than 20 years.
They trade on a price-earnings ratio of 6.4 times and their dividend yield of 8.7% is rare for a technology stock. But Logica is a large company with a good brand and long contracts.
Offshoring is likely to still be in demand as companies cut costs. Rival Cap Gemini said earlier this month that third-quarter figures would be in line with expectations and bookings continued at the same pace. Nevertheless, if an economic slowdown comes and profits are hit by weaker demand, Logica faces serious challenges.
It will have to spend to reconfigure the business further to compete with US and Indian rivals. The group's current net debt is £565m and while it remains well within its covenants, extra spending will reduce its headroom further.
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Sunday Telegraph
Prudential went some way to calming concerns about insurers this week when it revealed its capital surplus stands at £1.2bn, although this is down from £1.4bn at the interim stage. The dividend looks safe and a 15% growth rate in third quarter sales to £2.3bn was in line with expectations.
But the performance of its Asian business will have been disappointing for some investors, especially as it is seen as its key area for growth. There is speculation that a Middle Eastern or Chinese sovereign wealth fund could take up to a 20% stake in Prudential to help it acquire the Asian assets of troubled insurer AIG.
If that happens takeover rumours for Prudential will once again gather pace. Although times are uncertain, Prudential has tumbled by more than 50% so far this year despite performing largely in line with expectations. Analysts are extremely bullish about the company, with a string of buy notes out on the shares and price targets as high as £11. Buy.
Telecity, which houses the servers that enable retailers, banks and media outlets to offer online services, has good earnings visibility. The cost of setting up these centres makes the barriers to entry extremely high, and once it has won new business, the clients tend to stay with them. In the current climate more and more companies who have previously established their own centres out of capital expenditure, are looking to outsource.
The recent trading statement prompted a host of upgrades - in some cases the second this year - as the company said demand remained robust and pricing was strong. It leaves the stock trading on around 19 times 2009 earnings, falling to around 10 times those of 2010. This looks reasonable value for a company that, while not without its risks, looks pretty defensive in uncertain times. Buy.
Specialist provider of image analysis OMG issued a trading statement last week saying trading in the second half had been strong with turnover expected to beat expectations. Pre-tax profits, however, are forecast to be similar to those reported last year, thanks to higher than expected capex. This sent the shares lower, but highlights the company's determination to grow and diversify.
OMG is branching out into the interpretation of aerial data and other images for the defence industry and road survey technology that can help councils maintain their infrastructure. These provide good opportunities for growth. The company has suffered from the market's avoidance of small caps, but there is significant value there. Buy.
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