LONDON (ShareCast) - AIM-listed Zambeef Products is perfectly positioned to benefit from Africa's growing wealth and could double profits this year.Last month, however, it received a nasty surprise when the Zambian tax authorities said it owed the equivalent of £6.7m relating to Zamanita, an edible oils business acquired in 2008. A new government was elected last September and reopened a tax dispute that Zambeef thought had been fully resolved earlier last year. Grogan and Irwin are held in high regard and are vigorously appealing against the tax authorities’ ruling, which most followers believe stems from a misunderstanding of past tax paid. A settlement is highly likely but even under the worst case scenario, Zambeef should not suffer unduly. In fact, the company is flourishing. Profits in the year to September 2012 are expected to almost double to £8.7m, rising a further 36% next year to nearly £12m. A dividend of 0.5p is forecast for this year, rising to 0.58p in 2013. “The shares are 37p, at which level they are undervalued. Africa is going through a period of rapid change and Zambia is at the forefront of that transformation. The shares might wobble while the tax issue is thrashed out, but this stock should make strides over the long term. Buy and be patient,” says the Financial Mail on Sunday´s Midas column.

Electrocomponents issued a reassuring trading update on Friday. Growth in the final quarter of last year was not quite as bad as it could have been. For the full year the electrical product distributor expects sales will grow by 7% to a record £1.2bn. Its international sales should rise by 9% and the UK by 3%. However, the rate of sales growth fell to just 1% in the final quarter of the year – a slowdown from 5% in the previous three months. The group saw strong sales growth in 2010 so comparisons are tough. However, sales are now 15% higher than they were before the financial crisis, which implies the company is grabbing market share. The shares are trading on a March 2012 earnings multiple of 13.2 times, falling to 13 next year. They are supported by their chunky 4.6% yield rising to 4.8% next year. “The rating on the shares is remains hold,” says The Sunday Telegraph´s Questor team.

Compass is the world’s largest catering group, which also offers a range of support services such as facilities management. The business is defensive in turbulent times – and investors have continued to be rewarded since the financial crisis began. Last week’s first-half trading update was positive, but there was a cautious tone. However, Not only is there structural growth in Compass markets, but its model works in new markets, too. Although margins could be flat in the first half of the year, revenue growth is ahead of expectations and the company still expects to make full-year expectations. With the company usually giving conservative guidance, this is good news. The shares fell after the update because of the recent strong run and the fact that some investors were disappointed with the lack of upgrades. However, the business is healthy, growing and well managed. The shares are trading on a September 2012 earnings multiple of 15.3 times, falling to 13.9 next year. The prospective yield is 3.2%, rising to 3.5%. “The shares remain a buy at these levels,” Questor says.


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