Investment Column: The odds continue to favour William Hill

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William Hill

Our view: buy

Share price: 218.7p (+1.5p)

Pay levels are declining in real terms just about everywhere except, of course, in the boardroom, where you'd think we were in the middle of an economic boom.

The latest executive to hit the jackpot – an appropriate term given he runs a bookie's – is Ralph Topping from William Hill, who has just been handed £1.2m to stay put until 2013, together with a £100,000 boost to his basic. His "bonus opportunity" will fall a bit, but the company could easily be seen to be thumbing its nose at shareholders, 40 per cent of whom voted against the remuneration report at the last annual general meeting.

The shares today are still a way off where they were when Mr Topping took the reins in 2008, but they have been showing signs of recovery. So has the company, which was looking wobbly before he took charge (the appointment process was anything but smooth). Mr Topping has righted the ship and proved he can take tough decisions such as shutting unprofitable shops.

To justify that eye-popping salary, he has to show that he can keep growing the business in a tough economic climate. The cards are favourable – flat racing got a big boost from the hype surrounding Carlton House's Derby bid, even if the Queen's horse was ultimately beaten by the French genius Andre Fabre. There are the European football championships next year – although it would help the Scottish Mr Topping's bottom line were England to shake off their torpor and qualify. And then there's the Olympics.

Competition is tough, but William Hill should have the muscle to prevail. And international markets are liberalising, albeit slowly.

At 9.5 times forecast full-year earnings for 2011, the stock is cheaper than rival Ladbrokes at 10.3 times but yields less at 4.2 per cent against 5.3 per cent for Ladbrokes. Still, more than 4 per cent is well worth having. Of course, Mr Topping needs to deliver to justify the package he has been handed. Shareholders should therefore put him under the whip. As buyers, we would be among them.

Advanced Computer Software

Our view: buy

Share price: 35.5p (+0.25p)

Like Ronseal, UK-listed Advanced Computer Software does what it says on the tin. It provides software and IT services, specialising in the healthcare and business sectors

ACS's core operation is "patient management software"; basically kit and support for out-of-hospital applications, including urgent and unplanned care, district nursing, hospices and care homes. It also provides back office systems for NHS trusts and local authorities.

The company posted its numbers for the year to February yesterday. They showed revenues tripling to £95.4m, reflecting the acquisition of COA Solutions a year earlier, with pre-tax profits up from £6.8m to £21m. Singer Capital Markets said the results were "robust ... reflecting good execution in a tough climate".

The management pointed to "excellent revenue visibility" with future contracted revenues of £78m in the pipeline. Its chief executive Vin Murria said the COA acquisition had "transformed the group in terms of both scale and addressable markets, providing a robust platform for future expansion".

Singer has the stock on 8.3 times on the estimates for 2012, a substantial discount to its rivals. What with the strength of yesterday's results and the management's bullish outlook, the stock should provide upside gains.

City of London Investment

Our view: buy

Share price: 425p (-1.5p)

It has hardly been plain sailing for City of London Investment Group since it left AIM last October to secure a full listing, but despite dropping as low as 335.75p in March the stock has since added roughly 25 per cent.

Its recent strength would seem to explain the slight move back last night following a mainly positive update. The group said funds under management had risen nearly 18 per cent to £3.54bn over the past 12 months, and predicted its full-year pre-tax profit would end up increasing by more than a quarter.

The fund manager also gave the latest on attempts to diversify into natural resources and developed market closed-end funds, reporting "significant progress", which looks promising. With the update giving little cause for worry, we would add to our holding.