Sunday share tips: Ten Entertainment Group, NCC Group
By Iain Gilbert
Date: Sunday 06 Oct 2019
(Sharecast News) - Ten Entertainment Group, the UK's second-largest ten-pin bowling chain, looks set to benefit from families trying to pry themselves away from screens and bring themselves together more often, according to the Mail on Sunday's Joanne Hart.
In her Midas Share Tips column, Hart said Ten's current share price of £2.41 "should move higher", as chief executive Duncan Garood pursues a strategy expected to deliver consistent growth in sales, profits and dividends.
"According to Garood, customers increasingly appreciate the fact bowling can be played as a family, is a physical, offline activity, encouraging young and old to leave the house - and their screens - for a few hours," said Hart.
However, Hart noted that Brits visit ten-pin bowling centres just 1.4 times a year on average - less often than they go to the cinema.
"For Garood, this spells opportunity."
The firm intends to continue buying independent operations but it also started to build centres from scratch, taking over vacant department stores and refitting them as bowling venues.
Hart also pointed out that Garood was chief executive at Punch Taverns and Bill's Restaurants before joining Ten.
"So he knows a thing or two about eating and drinking," she said.
"He is revamping the group's menu to include more choice, better quality produce and vegan options, as well as local favourites, such as Tennent's lager in Scotland."
Hart also highlighted Ten's deal with Houdini's, the escape room operator, as another potential moneymaker.
Analysts expect turnover to increase 12% in the current trading year to around $85m, with profits up 18% to £16m.
All in all, Hart said: "Downturns come and go and markets rise and fall but ten-pin bowling seems relatively resilient to economic and political cycles."
"Ten Entertainment has delivered consistent underlying growth over the years, the company is well managed and there is a clear strategy for continued expansion. The dividend yield adds to the stock's appeal. At £2.41, the shares are a buy."
After another "run-of-the-mill few weeks in the netherworld of cybercrime", The Telegraph's James Ashton thinks cybersecurity firm NCC is "worth tucking away" after fixing its staffing problems amidst improving sales and margins.
In his Questor column for the Sunday Telegraph, Ashton said now that IT security has gone "from the backroom to the boardroom", it was a healthy market for businesses.
With IT security spending projected to rise at just less than 8% a year until 2022, things like the EU's new GDPR rules, which force companies to better manage consumer data or face harsh fines if they fail to protect against breaches, only make the sector's future prospects more promising.
However, Ashton said investing in cyber saviours can be "as risky as clicking on an attachment in a rogue email", pointing to the story of CrowdStrike, a cyber security firm that soared on its Nasdaq debut in June, but has since seen its stock fall.
While he acknowledged that Manchester-based NCC Group has had "more lows than highs recently", Ashton noted that its shares had clawed back most of their losses since the group's January profit warning.
"It is 20 years since the company was spun out of the state-owned National Computing Centre in a £5m management buyout. Since then it has done well, looking after 15,000 clients from 35 offices around the world, but has never quite lived up to its early promise," he said.
NCC's "assurance" division, which accounts for 85% of sales, has traded strong of late across North America, where sales rose 23% last year, helping offset a decline in Britain as some orders were delayed because of Brexit.
"The biggest concern has been over not technology, but people: NCC warned in January that it had been held back by a shortage of skilled IT workers," said Ashton.
But, at the full-year results in July NCC said the problem had been rectify after adding 11% more staff to its technical delivery team.
NCC's other division, escrow stores "source code" for clients to prevent disruption in case of problems with software suppliers, with the group expecting to find further opportunities for the unit's expansion in the burgeoning IT cloud.
Underlying sales rose 7.6% last year and margins firmed as management got a tighter grip on NCC and Ashton also noted the company's balance sheet was "getting better", with net debt falling to just £20m.
"NCC looks cheap compared with some tech firms as past troubles linger in investors' memories," Ashton said.
"Its shares trade on 16.9 times this year's forecast earnings, when the pack change hands for 20 times and up. But after reassurance in a recent trading update, questions over its continued recovery are dissipating. Worth tucking away."
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