LONDON (ShareCast) - Catering group Compass had a barnstorming third quarter, underscoring its defensive credentials in turbulent times. There was even an acceleration in organic growth to please investors, with like-for-like sales rising 5.7 per cent compared with 5 per cent in the first half of the year. Analysts had been expecting a fall to about 4.8 per cent. America and emerging markets grew strongly, with several large new contracts starting up. Although no figures were released in Thursday’s trading update, Compass said its operating profit margin was slightly above the same period last year. The group’s balance sheet remains strong and the company’s buy-back continues. In the period, Compass bought back 40m shares with a value of £256m. Food price inflation is back with us but Questor is relatively unconcerned, the group has shown over the past few years that it can manage price spikes by changing its menus. The shares were last tipped as a buy on April 1 at 655p and, trading on a December 2012 earnings multiple of 15.6, falling to 14.3, the rating remains buy, says The Sunday Telegraph´s Questor team.
The Financial Times´s David Schwartz has just bought shares in XP Power, a designer and manufacturer of power converters. These are devices that allow electronic equipment to operate efficiently. XP Power shares were in the 1,600-2,000p range during the first half of 2011; but investors ran for cover after the level of new orders began to slip in mid-year. The slowdown eventually caused lower profits in the first half of 2012. But the company’s order rate is now spiking higher. So Schwartz expects second-half results to be much higher than last year’s figures. Even better, XP Power is quite optimistic about its future. It recently launched 10 product lines. It brags about its strong design win record in the current year. The share of revenues derived from products manufactured internally is rising. These are more profitable than those manufactured externally. Its new factory in Vietnam has just come on stream, which will also help to increase margins. The dividend has just increased and now approaches 5%. “I was impressed by the 8% gain last Monday when first-half results were released. Recall that the FTSE 100 fell 118 points on the day. I expect substantial gains in the weeks ahead," he writes.
Far too many small mining companies make excessive promises and fail to deliver on them. Central Asia Metals is different. Less than two years after coming to the market, the group has built a copper processing plant for less money than anticipated and has begun producing top quality copper. At 89p, the shares are undervalued and should increase significantly in the next year. Not only is Central Asia’s copper purer than many other mines are capable of producing because of the nature of its ore, the cost of production is also among the lowest in the industry. This is because the company does not have to do any digging for its copper – it simply extracts it from the rock lying above ground. It expects to produce 5,000 tons of copper in 2012, rising to 10,000 tons next year. Using cash generated from early production, the company´s chief executive, Nick Clarke, hopes to build a second processing plant over the next couple of years, which would double annual production to 20,000 tons from 2015. In 2013, as its copper production increases, sales are forecast almost to double to $83m and profits are expected to soar to $39m. Kazakhstan seems a long way away and some investors may be worried about political risks. But a number of major British and American businesses are in the country, including most of the big oil, gas and mining groups. Clarke has been there since 1994, he has developed a strong local network and he has a history of delivering for shareholders. Analysts believe the shares should more than double from 89p as production at Kounrad, its copper mine in Kazhakstan, increases. Furthermore, if the Mongolian site of Alag Bayan –one of three in that country- comes up trumps, the stock will be worth considerably more. The shares are a buy, says The Financial Mail on Sunday´s Midas column.
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