Newspaper and magazine share tips

By This Is Money
Updated: 07:15 EDT, 12 November 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

You can also sign up for This is Money's exclusive share tips.

FRIDAY

The Independent

BT may be capable of truly hideous customer service but financially things are looking chipper. Yesterday, the company issued its second-quarter results and upgraded guidance for the rest of the year. Revenues fell 3% to £4.98bn but adjusted pre tax profits were up by 13% at £496m. Barclays Capital puts the valuation on 7.7 times 2011 forecast earnings, while the prospective dividend yield is a healthy 4.9%, compared with 10.4 times and 6.8% for the sector. It's a hard company to love and comes with any number of health warnings, but even after their good run and a hit to revenue from government cuts, we think there's more to come. Buy

The Restaurant Group (TRG), which operates the Frankie and Benny's, Garfunkel and Chiquito eatery chains, yesterday delivered a tasty set of results for the 45 weeks to 7 November, touting its 'resilient' performance, despite a 'tough economic backdrop'. While TRG dished up a 0.25% rise in like for like sales in restaurants over the period, that growth has heated up to about 1.1% over the past ten weeks. As a result, they trade on 13.2 times 2011 forecast earnings, which we think is fair enough on valuation grounds. Our main concern remains the unmistakable fact that UK consumers have less money to spend next year on dining out. Hold

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The Times

Balfour Beatty's purchase of the consulting engineer Parsons Brinckerhoff a year ago was a $600m gamble on a company 55% reliant on the US economy, at a time when that economy seemed in even worse shape than it is today. The alternative view is that, if president Obama's only way out is increased public sector spending, then the bet may not have been a bad one. What the deal did was to reduce the groups share of revenues from the UK from 60% to about half, of which two fifths comes from the government. The groups shares, trading on about eight times next years earnings and yielding a prospective 4.6% suggest that the group is still being rated as a builder, heavily reliant on the UK public sector, and therefore look distinctively cheap. Hold

Here is an interesting statistic. There are more private jets parked at Teterboro outside New York than any airport in China at any given time. The US has about 70% of the worlds executive jet fleets, and logs about 90% of all flying hours on such jets. China has 176 airports and much of its airspace controlled by the military. This explains why BAA Aviation has such difficulty replicating its US success in growth economies elsewhere. The shares change hands on about ten times next years earnings. No reason to chase: up with the events, though a hold for future economic growth. Hold

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The Daily Telegraph

Most of the recent attention in the mining sector has been focused on BHP Billiton. After the Canadian government rejected its bid for PotashCorp, the shares were sent to an all time high on hopes of a buy back. However, earlier this week Citigroup raised the prospect of a cash return at Rio Tinto as well. Rio is the most exposed mining group or iron ore, so it has been generating a lot of cash of the year as prices jumped. Citigroup has argued that Rio could undertake a £6.2bn buy back next year – and still have funds for its ambitious investment programme. The shares have risen 30% since May 4, when they were tipped as a buy at £33.79, compared with a market up 7%. Buy

Oil and mining services group AMEC gave a positive update yesterday, in which it confirmed that trading was at the top end of expectations. Amec said its order book stood at £3.1bn and was expecting a margin of about 9%. The company also has cash balances of £680m< which it will use to make strategic acquisitions as part of its transition from a construction group to a value added service business. The shares were first recommended at 531½ p on January 8th last year and they are up 107% compared with a market up 29%. The shares remain a buy, as the groups strategy is paying off and it has the firepower to make important purchases. Buy

Investors Chronicle

Has TalkTalk got the WalkWalk to match? Investors get the chance to judge on Tuesday when the company unveils its first half year figures since it was spun out of Carphone Warehouse. But we reckon the number will leave them disappointed. The problem is that the UK's broadband market is relatively mature and increasingly commoditised. We rated the shares as good value back in May, but the broadband wars have got bloodier since then. A prospective 4.1% dividend yield offers some support to the share price, but a PE ratio of 11 times is hardly cheap. For TalkTalk's shares to command a similar rating, their price would need to be 110p. That level would reflect TalkTalk's strong cash flows but increasingly competitive market. Sell

As recently as August, Turkmenistan focused Dragon Oil aimed to boost its production by 10% this year. It has now pared that target back to 5% as unresolved infrastructure bottle necks continue to constrain output. Dragon's principal asset is the Cheleken contract area in the eastern Caspian Sea, which the company operates under a production sharing agreement with the Turkmen government signed in 1999. Despite recent production disappointments, Dragon is still targeting production growth of 10-15% during 2010 to 2012. However, even achieving that would hardly represent spectacular progress. Without such upward momentum, the share price looks especially vulnerable to news of further operational disappointments or big picture worries about the oil price. Sell

THURSDAY

The Times

Great Portland Estates may get its bread and butter from the more stable West End market, but the interest seems to be in its flagship City site, 100 Bishopsgate Tower. This is one of a clutch of developments that will alter the skyline and prospects for the city property market, so the fascination is understandable. The company raised £166m in a rights issue in mid – 2009 and has since spent about twice this. Demand for London Property remains firm, driven by overseas buyers and the resilience of financial services and tourism. Great Portland shares are on an 11% premium to net assets. Hold.

The succession plan at Fenner looks rather like one of the conveyor belts the company makes. Its chairman Colin Cooke is retiring at 70, Mark Abrahams, the chief executive, takes over and his place is taken by Nick Hobson, who runs one of the two divisions. This feeds the voracious Chinese market and others in the Asia pacific region. Underlying pre-tax profits came in at 49% ahead at £46.3m. Fenner agreed to spend an eventual £40m, adding to its Australian conveyor belt business this month. This column has backed the shares since April 2009, when they were just 80p, at 281.5 - or almost 13 times next years earnings. There seems no reason to get out now. Hold.

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The Daily Telegraph

This weeks interim numbers from Vodafone were excellent – but more important for the company's future was its change in strategy. The world's largest mobile phone group will focus its efforts on Europe, India and Africa. To underscore this point, the group also revealed that it planned to sell its interest in Japanese wireless operator Softbank for £3.1bn. Over the last few months the shares have started to perform. The shares are trading on a March 2011 earnings multiple of 10.9 times, falling to 10.5 in 2012, and remain a buy for the dividend – but growth prospects are now attached too. Buy.

Insurance group RSA confirmed in its third quarter results that all is on track. Although trading at a higher rating than some other insurance groups, the dividend yield – at 6.7% is still very attractive for income seekers. The group also confirmed that it expected to have a combined operating ration of 95% for the full year – in line with previous guidance. RSA's shares are trading on a December 2010 earnings multiple of 9.3 times, falling to 8.5 next year. Buy for the income.

The Independent

At the beginning of June, with Prudential in turmoil over its disastrous failed bid for AIA, we decided it was time to sell its shares, with their value at 541.5p. Since then they have recovered strongly, and yesterday the company produced a credible set of numbers. New business profit at £1,345bn was a touch better than expected. Business is going well, but can they be trusted to do the right things to keep it on an even keel? We're not sure. Valuations wise Panmure Gordon's notes that Prudential shares are trading at close to the company's expected 2010 embedded value of 637p. That gives Pru no credit for any future growth. So you could contrast a case for the shares being undervalued. We're inclined to just keep a watching brief for now. Avoid.

Little to complain about in Great Portland's half yearly update yesterday. The Valuation of its portfolio rose by a healthy 7.3% to £1.4bn, over coming the recent pull back in the commercial property recovery. Letting activity is also holding up, 'with solid rental value growth.' The shares may appear a tad pricey, trading as they do on a 10.5% premium to September 2010 net asset values, but this is a strong company exposed to the strong part of the market. Buy.

WEDNESDAY

The Independent

Schroders exceeded City expectations with its nine-month trading statement. The asset management company saw pre-tax profits leap to £282.7m, up from £79.9m over the same period last year. 15 months ago, we advised punters to buy when shares stood at 996.5p. Shares in Schroders sit at a ten-year high but we think instability in the market will mean the fund manager is unlikely to repeat such a performance. So, despite healthy earnings and the upheaval at rival Gartmore, we recommend to take profits.

Polo Resources, the natural resources investment company with an eye on undervalued companies and projects, posted full-year results yesterday. Its net asset value per share at the beginning of the week topped 6.86p. Polo's shares hover around the 5p mark, which suggest that the AIM-listed company is undervalued and has the ability to grow. Polo has a 27.6% stake in Caledon Resources, a coal miner operator, which was snapped up for £252m by a Chinese asset management firm. As a result, the deal would push Polo's NAV to 7.22 per share and leave the company with 5.44p per share in cash. This would increase the difference between value of assets and share price making for a strong incentive to buy.

The Times

In the backdrop of the Strategic Defence and Security Review, Babcock, has published its interim results. Pre-tax profits hit just below industry expectations at £90.9m, a rise of 27%. The engineering support services group will look to capitalise on government cancellations of army training deals with QinetiQ. It might also stand to gain from refits of surface fleet with BAE Systems. Babcock has a diverse portfolio ranging from security to energy. Two years from now the company will look to streamline its operations concentrating on its core areas of defence and marine while also focusing on training engineers. Patience is needed before Babcock's plans bear fruit. Hold.

An aggressive hedge to sell larger amounts of its output has paid off for Drax, Britain's biggest coal-fired power station. The power company entered 2010 with 90 per cent of its output pre-sold. Drax will pay out about half of earning in dividends. Analysts predict an earnings per share of about 61p, placing the shares on about six times' earnings. An odd stock, and only for those wanting a punt on future energy prices.

The Telegraph

In today's Daily Telegraph, share tips come from a Morgan Stanley report on European companies that will reap rewards in China.

The Chinese asset management sector is going from strength to strength and Schroders, which already has interests with the China Bank if Communications, could see its share of profits triple by 2016.

Morgan Stanley predicts 25% of earnings from Intercontinental Hotels will come from China in the next five years. The broker says that Chinese travellers will be essential to the group's future success as they are keen on branded hotels.

UBM, a global media and exhibitions company, derives most of its business in China from trade exhibitions. Operations in China make up 12% of revenues and 17% of earnings.

Rolls-Royce's activity in China stretches back 45 years. The car and civil aerospace manufacturer has produced more than 500 aircraft engines for Chinese airlines.

Aberdeen Asset Management's operations in the Asia Pacific have produced strong returns for the company. The region accounts for 35% of equity assets and about 25% of fixed-income assets, the broker estimates.

Upmarket fashion retailer, Burberry, will look to double its footprint in China to 100 stores, after acquiring licenses for its Chinese retail operations. China will generate sales of £70m in 2011 with like-for-like growth of about 10%, according to Morgan Stanley.

AstraZeneca has a leading presence in the Chinese pharmaceutical market, topping £495m in sales in 2009. This accounted for 25% of total group sales. Morgan Stanley forecasts future growth investments here.

TUESDAY

The Independent

Inmarsat's shares hit an 11-month low last month after the US hedge fund Harbinger, sold almost half of its 28% stake in the satellite communications group. Although the stock has strengthened by 12% since, it is still below the levels seen in summer. Yesterday's third quarter results showed better than expected earnings as growth in aeronautical services, and an uptick in maritime services, boosted the bottom line. Its growth potential merits a premium. Buy.

When the Indy's Investment Column looked at Bovis in May, it felt it could be worth a tentative punt. It was trading at an enormous discount to net asset value and showed signs of pulling itself together after a big loss in 2008 (a £4.8m annual profit for 2009 was at the top of forecasts). The problem is sentiment, which is worsening daily. The feared 'double dip' in property is already well underway and the FSA watcdog plans to stop millions of people from getting mortgages. It will get worse before it gets better. Sell for now, but look again in the New Year.

The Daily Telegraph

Strong sales growth at ASOS, the online clothing retailer, appears to be continuing unabated. Yesterday the company said sales have risen by 50% over the past 6 months to September 30. This was on top of sales growth of 35% over its full year to March. The company's share price has also shot up recently. Last night it closed at £12.35. However the City is torn between ASOS's potential. One half rate ASOS as a 'hold', whilst the other half thinks ASOS has the potential to grow even bigger giving the company a 'buy' rating. We wonder how long ASOS's stunning sales growth can continue, so however stunning the sales are, hold.

The austerity axe is likely swing both ways with outsourcers. In the short term they will be pressed to deliver savings - and these savings will eat into profits. G4S is a cheap way to play the growing outsourcing trend, not just here but around the world. The company, which began life in Copenhagen in 1901, now operates in 120 countries. The shares are currently trading on a price to earnings ration of about 12.4, falling to 11.5 next year and currently yield 3%. The dividend in 7.67%. G4S is a defensive stock likely to look good in better time as well as the bad. Buy.

The Times

When we last met Bovis Homes, the company was worrying that a dip in homes sales in the summer was not merely the normal seasonal trend but something more sinister, a second – or would that make it a third? – dip in the housing market. Now, with the Comprehensive Spending Review out of the way and the autumn selling season in full swing, it seems that the concerns were overdone. It has a 35% discount on net assets, while its strong market position is also attractive. But further progress, given the constraints on the sector as a whole, looks limited. Hold.

Nick Buckles, the chief executive of G4S is struggling to understand how anyone can hope to make money on the contract for 'escorting people detained by the UK border Agency,' which is government-speak for deportation. G4S was releasing a trading statement showing organic growth up by 2.1% in the first nine months of 2010 – implying an improvement on perhaps 2.7% in the third quarter. The company's rate of acquisitions has slowed, but it has a strong cash flow and enough firepower to add further bolt-ons. Hold.