Sunday newspaper share tips
Each week we round up share tips from the Sunday newspapers.
Guide: Our round-up of Sunday newspaper share tips
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Midas: Financial Mail
Topps Tiles
Topps Tiles, Britain's largest tile and wooden floor specialist, was founded in 1963, but the company really began to grow when Barry Bester and Stuart Williams bought the business in 1995.
They floated it two years later and there are now 316 stores in the UK and a further 18 in the Netherlands. Bester and Williams remain chairman and president respectively with 22% of the shares, and Williams's son Matt is chief executive.
The group has been hit by the economic downturn. Results for the year to the end of September will be released later this month and the company has already said that sales from existing stores fell 13.5% during the year.
Profits are expected to fall by about 55% from £29.5m in 2008 to about £13.5m this time.
Most retailers have suffered in the economic environment, but Topps has done as much if not more than most to put its house in order. The workforce has been cut by 8% and costs have come down by about £9m.
Topps shares were worth 300p in 2007. Now they are 82.25p. Brokers do not expect a dividend this year, but with so much stock in the hands of the two founding shareholders the company is likely to resume paying dividends as soon as practically possible. Topps is lean, well run and in a long-term growth sector. Buy and hold.
H&T
It has been a good recession for H&T, the UK's leading pawnbroker chain. It has opened 57 of these 'Gold Bars' since the start of the year and plans to open 20 more by the end of the year.
Midas recommended H&T in September last year, when the shares were 179p. They have since risen 60% to 287.5p and many brokers believe there is plenty more mileage in the stock. The core business is flourishing, too. For investors who bought in 2008 and want to realise profits, I would have said there is no harm in selling half to three quarters of their holding and taking the gain. But following our report of merger talks it may be worth holding more of the stock.
Sunday Telegraph
Autonomy
IT firm Autonomy (£13.43) appeared to silence its critics at the third-quarter results, when it announced a cash conversion rate - calculated as Q3 operating cash flow over Q3 earnings - of 131%.
What Autonomy failed to flag was that it had not yet paid for 44m US dollars (£27m) of products and services, which were accounted for as a cost in the quarter. This obviously flatters the cash conversion rate as the cost is counted against earnings while cash flow remains unaffected.
If that one-off boost to cash flow had not occurred, Autonomy's cash conversion rate would be closer to 73%. That is roughly in line with its cash conversion for the past couple of years and should ring alarm bells for investors.
If a company is consistently not converting a quarter of its profits into cash, those profits arguably cannot be described as profits.
Autonomy says its debtors are rising as a result of its spectacular growth, with a subsequent impact on cash conversion. The length of time Autonomy's customers are taking to pay for its products also appears to be increasing.
The shares have had an extraordinary run, rising by more than 900% over the past five years. They have slipped back recently from a high of more than £16 in September as the company has entered a rather public debate on the issues detailed above.
Autonomy may well buy another company this quarter or next, giving the shares another short-term boost, but that will not be proof of any long-term, sustainable growth. Sell.
Sunday Times
BT
Standby for good news at BT when the telecoms company issues half-year results on 12 November. All eyes will be on its Global Services (GS) arm where profit warnings got its boss Ian Livingston into a mess. Slowly former finance director, Hanif Lalani, is getting to grips with it. More than 7,000 jobs have been stripped out during 2009 and contracts are being re-negotiated. Bernstein Research analysts have set a fair value price of 150p (presently 131.3p) it thinks BT could achieve in the next six to 12 months, which looks a little conservative.
Unilever
Unilever chief, Paul Polman, will offer more evidence this week that he has brought some sparkle back to the firm, with third quarter earnings figures, which should show it is still piling on the volume, despite the tail-end of the global recession. Underlying sales are expected to rise by 3%.
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