Investment Column: A future winner with a Go-Ahead attitude

For free real time breaking news alerts sent straight to your inbox sign up to our breaking news emails

Sign up to our free breaking news emails

Please enter a valid email address

Please enter a valid email address

SIGN UP

I would like to be emailed about offers, events and updates from The Independent. Read our privacy policy

Our view: Buy

Share price: 1270p (+42p)

It's been a busy few days for Go-Ahead, the transport group that includes six different bus companies and three rail franchises. Yesterday, it announced plans to off-load its loss-making aviation division. Earlier this week, it set the seal on the deal to buy Plymouth CityBus from the local council for £20m.

The group's ground-handling and cargo operations at Heathrow will go to Dnata (part of Dubai's Emirates airline) for £15m; those elsewhere will go to Servisair UK Limited for an unspecified "nominal upfront cash consideration". But once the cost of residual liabilities and future losses are factored in, the transactions are expected to be cash-neutral.

Regardless, the deal is definitely a good move, as the 3.4 per cent bounce in the share price suggests. "Today's news is a clear positive," said analysts at Investec.

Go-Ahead's airside business has been walloped by the harsh recession in the aviation industry this year, posting losses of £5.2m in the year to June as revenues fell by nearly £30m to £167m. But even in the good times there was an argument for selling, because the benefits of diversity were only partially offset the distraction from Go-Ahead's overwhelming focus on buses and trains.

Keith Ludeman, the Go-Ahead chief executive, acknowledged as much yesterday, saying: "We are pleased to be selling these operations to two highly respected companies whose core businesses include aviation ground handling and cargo. The announcement marks another important step in delivering the group's strategy which focuses on growing our core bus and rail operations."

The aviation division will not be closed entirely. Go-Ahead is retaining some legacy contracts at Heathrow that are scheduled to run until 2011, and it is holding on to the Meteor car parking business, but the focus is firmly on public transport. Cue the acquisition of Plymouth CityBus, which has a fleet of more than 170 buses and carries about 14 million passengers every year. Taken together, it is all good progress. And while Go-Ahead may not have the global reach of rivals such as First Group, it has fine prospects. Buy.

Marston's

Our view: Hold

Share price: 92.05p (+2.15p)

The pubs and brewing group Marston's delivered mixed full-year results yesterday. Its star performer was the brewery, with operating profit up by 3.9 per cent, driven by strong sales of premium ales. There was less fizz at its managed pubs arm, and its tenanted and leased business, where underlying operating profits fell by 6.5 per cent and 7 per cent respectively. These contributed to Marston's pre-tax profits falling by 72 per cent to £21.4m over the year.

In reality, there was marked contrast between the two pub divisions. Sales at the managed division's 496 pubs were down by just 0.6 per cent, while those at the leased and tenanted business, which has 1,688 outlets, slumped by 7 per cent, although both have improved over recent weeks. Marston's still has a net debt of £1.1bn and trimmed its dividend for the year to 7.14p a share.

On the upside, it raised £165.6m in a rights issue in July and said it planned to invest the proceeds in building and developing 60 large, food-led managed pubs over the next three years. Its shares look reasonably priced, trading on a 2010 price-earnings ratio of nine. Despite this, we reckon it will take Marston's a long time to turn around and recommend investors treat it with caution. Hold.

Ashtead Group

Our view: Hold

Share price: 70.8p (-0.6p)

Geoff Drabble, the chief executive of the tool and equipment hire group Ashtead, did a sterling job yesterday of arguing why the company has a bright future. He said that, with 80 per cent of its work in the US, President Barack Obama's stimulus plan would bear fruit, and that Ashtead's debt facilities had been refinanced, giving the company "significant optionality going forward" (whatever that means). He also suggested that the tough winter months would probably lead to a number of its competitors going to the wall.

All this is undoubtedly true, but investors also have two reasons for caution. Firstly, yesterday's first-half results cannot mask the fact that Ashtead operates in a tough industry. Pre-tax profits before discounts fell to £20.1m from £76.6m the year before. Secondly, after a revival in the equity markets in recent months, watchers at Panmure Gordon say that the stock is too expensive and punters should flog their shares in the company.

We accept Mr Drabble's arguments, but would also advise caution. While there may be good things to come for the industry next year, markets will continue to be tough and we would also like to see some softening of the share price before parting with our cash. Hold.