Sunday share tips: Treatt, Gambling firms
By Alexander Bueso
Date: Sunday 12 Apr 2020
(Sharecast News) - The Mail on Sunday's Midas column believes Treatt has all the right ingredients to shareholders clean up.
Based in Bury St Edmunds, Suffolk, the firm manufacturers natural ingredients and flavourings that go into everything from beer and spirits, through to crisps and other snacks - as well as soaps, hand cleansers and general cleaning products.
Critcally, over the past eight years, with Daemon Reeves at the helm, the company went from simply trading natural extracts and ingredients to becoming a key supplier for many multinationals.
Now, with the lockdown, consumer habits are increasingly shifting in its favour, as shown in its results for the six months to 31 March, which revealed "strong" demand, both for the ingredients of cleaning products as well as for drinks, alcoholic or otherwise.
Demand is also very strong in the States, with Treatt in a good spot to take advantage of the situation after having recently doubled capacity.
Management also took timely action to continue trading despite the pandemic.
Delays in moving into a new state-of-the-art facility in the UK in 2020 will also come in handy, helping the company husband cash.
Before the Covid-19 outbreak, analysts were eyeing a 4.5% dividend increase for 2020 to 5.75p per share, followed by another increase to 6.1p in 2021.
"There can be no guarantees about either payment," but the firm's track record stretches back several decades and the fact that almost all staff have shares in the firm means they are committed.
"Looking ahead, there is room for optimism. Reeve's strategy is bearing fruit, Treatt's ingredients are in demand and the company is financially secure. A strong hold for existing shareholders and an attractive punt for new investors too."
Shares of gambling companies may be worth a punt, said the Sunday Times's Sabah Meddings.
In her 'Inside the City' column, Meddings conceded the risk for the sector from a potential further tightening of regulation which might extend as far a ?2 cap on online slot machines.
Analysts from Regulus had estimated a ?480m impact on gambling firms' sales, she said.
Their peers at Goldman Sachs meanwhile said that would wipe 16% off William Hill's earnings while Flutter and Stars would sustain a hit of 6-7%.
Despite that, and notwithstandiing a recent bounce in their shares, the possibility of behind-closed-doors sports from April and a shift to online mean there may still be bargains to be had Britain's betting, the tipster said.
To take note of, recently unveiled cost-cutting measures mean that the monthly hit to GVC would be half what had originally been anticipated.
And the government's furlough scheme meant that William Hill, the most exposed to the shutdown in retail, could probably endure a year virus-related "disruption".
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