Newspaper and magazine share tips

By This Is Money
Updated: 07:33 EDT, 29 October 2010

Each day we round up share tips from national newspapers and investment magazines. For the Mail on Sunday's stock picks, read the Midas column.

Round up: We round up the latest share tips from national newspapers and investment magazines

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FRIDAY

Investors Chronicle

Life has not been the same for pubs operator Mitchells & Butlers (M&B) since Bahamas-based billionaire Joe Lewis bought a 23% stake two years ago. Mr Lewis's arrival triggered a boardroom battle and ultimately a purge of M&B's bosses. M&B will be focusing on brands that are further up-market than the ones it has sold. In a trading update for the 51 weeks to September 18, M&B said its like-for-like sales were up 2%. Operating profit margins for 2009-2010 are expected to be about 1.2% points higher at 16.5%. Buy.

Shares in propellants and flares maker Chemring have been a success in the past five years. But now Chemring's defence markets are in flux as 2014 will see the start of a withdrawal from Afghanistan and a drawdown of Nato's troop commitment. Selling on a forward PE ratio of 12 with a dividend yield of just 1.8%, Chemring's shares look overvalued compared with shares in other defence contractors, where the average earning multiple is more like eight times and there is generally more yield on offer. Sell.

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The Independent

Chemicals company Croda International, supplies materials for a range of industries from skin care to pesticides, car maintenance to technology for the oil and gas industries. These days, the company is even more diversified and is doing a roaring trade. It avoided the worst of the credit crunch and in the nine months to the end of September, lifted profits 87%. The dividend is strong, raised 50% at the interims to 9.75p and the stock trades on an estimated price of 13.5 times full-year 2011 earnings, which looks justified. Buy.

If it is hard to predict when the wind blows, it is equally hard to predict when the wind turbine market will recover, as Hansen Transmissions is finding out. The Belgium-based wind turbine gearbox maker warned last week that it is cutting its revenue forecasts for the year, knocking 14.5% off its share price. Hansen's shares have lost the best part of 70% over the past 12 months. Even the €75m (£65m) sale of its industrial gearbox unit to Japan's Sumitomo Heavy Industries will not help in the short term. Sell.

The Daily Telegraph

Oil giant Royal Dutch Shell might just manage to pull off its ambitious plans: their quarterly output rose 5% as yesterday's third-quarter numbers reveal. The shares were upgraded to a buy on March 17 this year at £18.565 and are up 6% compared with the FTSE 100 up less than 1%. They are trading on a December 2010 earnings multiple of 10.2 times falling to just 8.4 next year. Shares in Shell remain a buy for income seekers, with a prospective yield of 5.4%.

Yesterday saw another set of excellent numbers from chemicals group Croda. Sales rose 18.6% to £255.3m, with sales volumes up 12.1%. In the year to date, pre-tax profit from Croda's continuing operations is up 87.6% at £143.7m. With the current full-year payment expected to come in at about 35p, this works out as a yield of almost 9% based on the entry price. The shares are worth holding on to, but upside is likely to be more limited from here. Hold.

The Times

Pharmaceutical group AstraZeneca is approaching its own cliff faster than most rivals, analysts believe. The company disagrees but its response has been hatchet overheads, with $212m (£133m) in restructuring charges taken in the third quarter and $777m in the past nine months. The group's guidance suggests revenues, currently $32bn a year, will remain in a range of $28bn to $34bn by 2014. This is a very wide spread indicating the uncertainties just four years out. The group has managed to be the best-performing stock in the sector by shovelling out $4.66bn to shareholders. But longer-term prospects are more uncertain. Avoid

While Canada and Asia are doing better at earnings, Britain and continental Europe remain severely depressed and are hampering DTZ Holdings' financial performance. The property services company is taking longer to complete transactions; some profit will be pushed back into the next financial year, which starts May 1, and will leave the current financial year with a small loss. The shares entered the year above 80p and have since halved. There seems no reason for them to rise in the short term. Avoid

THURSDAY

Shares Magazine

Exploration group Horizonte Minerals should prove in February 2011 that its Araguaia project is amongst the top tier nickel deposits in Brazil. The company struck a deal in August to buy Araguaia from Canadian zinc producer Teck Resources as it is adjacent to its 20m tonne Lontra project and the two assets can be combined. Also in the first half of 2011, Horizonte will start drilling on gold properties including the highly-prospective Falcoa deposit under joint venture with AngloGold Ashanti. Buy.

Shares in engineer Hill & Smith have fallen 14% year-to-date amid fears of government spending cuts. The £234m market cap could still feel a medium-term impact from the spending cuts. However, alongside its interims from August 9, the FTSE SmallCap constituent noted improvements in the order books at infrastructure projects following a poor start to 2010. In addition to this recovery potential, the group offers the attraction of a 4.4% yield, covered more than three times by earnings. Buy.

The Times

At the beginning of the year Carpetright was hoping for a revival in the housing market after the previous year had seen some ups for the company. But this September the British Retail Consortium reported very weak sales for furniture and carpets. Yesterday Carpetright admitted nothing is going to happen until the economy improves. At the lower end of profits forecasts, the dividend is not too well covered. Sell.

Electronics and technology company Laird has seen revenues up 16% across the group, excluding the activities being close. Margins were approaching 10%, against 6.7% in the first half. Risks remain. The business is tied to the fortunes of the mobile phone producers Nokia, Motorola and Sony Ericson, which have had difficulty making much headway in the smartphone market. The shares have bounced significantly since the summer but sell on less than 11 times' next year's earnings. Hold.

The Daily Telegraph

Yesterday's third-quarter results from British American Tobacco came in below market expectations, as volumes fell by 1% to 526bn sticks. Volumes rose in Asia – but fell everywhere else. The shares are trading on a December 2010 earnings multiple of 13.8 times, falling to 12.6 next year. The current yield is 4.7%. The shares were first recommended as an income play on February 26 this year at £21.79, and they are now 10% ahead compared with the FTSE 100, which is up 6%. Hold.

Braemar Shipping Services posted a solid set of numbers earlier this week. However, there is one major issue that means that – even if trade returns to pre-crisis levels – margins will not be as strong for some time. The issue is a hangover from the boom times in 2007 and 2008. A vast number of new ships were ordered by the companies as they wanted to take advantage of the high freight rates. Many orders for ships were postponed – but a substantial amount of new capacity is coming into the market. The shares are likely to be volatile, but the 4.7% yield – which is twice covered by earnings – should support the price. Hold.

WEDNESDAY

The Independent

It is full steam ahead for Braemar Shipping Services. Not only is the group buoyed by the wider recovery in the shipping markets, it is also receiving an extra lift from a robust business model that saw the shipbroking division turn out a 31% profit increase. Yesterday the group's half-year results showed revenues up by 18% to £68m, pushing pre-tax profits up by 3%. A secure balance sheet larded with £15m in cash and no debt also plays in the group's favour. Buy.

Business software group Microgen is developing into a material software platform. Analysts are noting that the company is attracting new clients with its Aptitude software, used for high-volume transaction processes. In August the company completed a £6.2m share buy-back and yesterday's third-quarter figures revealed Microgen's strong balance sheet with £19m in cash. But there remains the risk of a faster-than-expected slowdown in financial systems. Their stock, trading on a price-earning ratio of 15.4, is starting to look pricey. Hold.

The Daily Telegraph

Veterinary products group Dechra Pharmaceuticals has made a strategic move towards gaining market share in the US by acquiring the US group DermaPet. Not only does it bring significant new products into the company, but it shores up the group's US sales team as well. With 75m dogs, 82m cats and 10m horses, the US has a significantly larger companion animal market than the UK, with 8m dogs, 8.4m cats and 1m horses. To fund the purchase Dechra has agreed a new £78m four-year bank facility which will replace its existing facilities. The shares were first recommended on October 25 last year at 427.9p and they are now up 23% compared with the market up 8%. Buy.

It's been a great year for Cineworld so far. Yesterday, the country's second-largest cinema chain said that in the 42 weeks to October 21, revenues had risen by 8.5%. The company's investment in 3D screens is paying off, as is the resurgence of advertising. Its share of the UK box office also rose in the year to date to 24.5% from 23.8% in 2009. The shares are trading on a December 2010 earnings multiple of 12.4, falling to 11.2 next year. The yield is a very healthy 5% – and investors who bought in on the original tip at 120p on March 15 last year should have locked in a super yield of more than 8%. Buy.

The Times

Reckitt Benckiser wants to increase its menagerie of 'super-brands', healthcare and cleaning products from 17 to 19 with the purchase of SSL International, owner of the Durex and Scholl brands. Goldman Sachs expects synergies of £100m over the next two years through greater Durex sales in India, Russia, the US and China. The SSL purchase was expensive, but it has left Reckitt with plenty of firepower for further deals. Hold.

Spread Co is offering Pace shares, the maker of television set-top boxes, for a price of 213.25-213.5p. Spread-betters were buying Pace's share price of 213.5p ahead of its interim management statement tomorrow. They were backing Pace to deliver sufficiently robust news on sales to sustain the 17% rise by the shares since the start of this month.

TUESDAY

The Independent

The sparkle came off jewellery maker and designer Abbeycrest's shares a few years ago. But yesterday, after having traded as a penny share for more than a year, the company reported 5% uplift in revenues to £18.8m over the six months to August 31. It also touted a 14% reduction in net debt to just £7m. Abbeycrest will be keeping its fingers crossed over the crucial Christmas trading period, but we are more concerned about the anaemic trading conditions awaiting the jewellery maker next year. Hold.

Impax Asset Management Group is on the forefront of companies springing up to make money out of the environmental drive. Assets under management have risen 45% to £1.8bn for the year ending September 30. With its focus on the environmental sector, Impax is in the money not only internally but also externally. It is favourably affected by wider factors such as legislation, including the Renewable Energy Directive, and the $500bn worldwide stimulus money earmarked for the green sector. Buy.

Daily Telegraph

An early shift to digital has left education book publisher Pearson ahead of the game. It now refers to itself as a 'global learning technology and services company'. The US market accounted for 43% of total group sales in the first half. Emerging markets are another area which Pearson is targeting, with its international education business, now accounting for 22% of total revenues. Considering the economic environment, Pearson is well-positioned - but not immune to economic risks. The shares are up 45% since they were tipped March 3. Hold.

The maker of supermarket own-label household goods McBride continues to be concerned about raw material price increases. The company had previously outlined steps to mitigate cost pressures, but there is usually a three to six-month delay on recovering material cost inflation. Meanwhile McBride's raw material concerns have taken the froth out of its share price performance – with the shares falling 19% this year. However, long-term potential for geographic and product expansion means that if you have already bought in, McBride is worth holding on to. Hold.

The Times

The exploration company Xcite Energy found more oil than expected in a well in the Bentley field in the North Sea. The company's shares jumped 32.5p, almost 23%, to 174.5p. Dougie Youngson, analyst at Arbuthnot Securities, its broker, has set a target price for shares at 247p. Buy.

International valve maker IMI is purchasing the £120m German firm Zimmerman & Jansen. It looks like an attractive deal and, despite Z&J margins last year which were below 12% compared to IMI's 19.8%, the business looks set to grow under new ownership. It is the sort of deal that companies such as IMI, which has cash in the bank and longer-term debt, should be doing at this stage in the economic cycle. There are still uncertainties for IMI, tied to the uncertain world economy. Hold.