Sunday share tips: Halfords, Base Resources, IP Group
By Digital Look
Date: Sunday 11 Nov 2018
(Sharecast News) - A round-up of share tips in the Sunday newspapers, including Halfords in the Sunday Times, Base Resources in the Mail on Sunday IP Group in the Sunday Telegraph.
Halfords shares are worth avoiding, said the Sunday Times' Inside the City column, having already fallen almost a quarter since May's 52-week peak. In the past week the company warned that, while good weather in the summer months gave an extra boost to sales, it did not stop profits from skidding down 23% to £28.2m, as costs rose 8%.
In September, Halfords' new boss Graham Stapleton announced he would overhaul the business, with a fuel injection of £60m a year as it shifts towards becoming a dedicated services-led company. The investments will be made in stores and auto-centres, meaning profits will not return to growth until 2012.
Analysts at Stifel have warned that the move away from camping equipment will cut spring and summer trade and put Halfords at risk of become overly reliant on seasonal trade in autumn and winter. Mild weather in coming weeks might not be the best news for the car parts and bicycle retailer as it looks to hit full-year guidance of broadly matching last year's profits of £71.6m, which depends on "average winter weather".
Base Resources was a 'buy' for Midas in the Mail on Sunday. The company mines rutile and ilmenite, which are used to make titanium dioxide, a key ingredient for sunscreen, paints, paper, plastics and rubber, coated fabrics and textiles, floor coverings, cosmetics, toothpaste, soap and catalysts. The titanium dioxide market is valued at above £10bn and growing 5% a year.
Base Resources operates the Kwale mine in Kenya, which also produces another industrial mineral, zircon, and for the year to next June is expected to deliver around 90,000 tons of rutile, 430,000 tons of ilmenite and 35,000 tons of zircon, with an average price of just over $350 (£270) per ton. While the cost of production is just $100 per ton, there is some investor concern that this mine has a limited life span as it is due to run out of steam in the mid to late-2020s. A new mining project was acquired in Madagascar last year, forecast to deliver 800,000 tons of ilmenite and 75,000 tons of rutile and zircon per year for several decades. The company hopes to start mining by the end of 2021, using a combination of cash from Kwale and bank debt.
Investors also have concerns about funding the Madagascar mine and about how profitable it will be. Within the next six months or so, Base should update the market about Kwale's life expectancy and the dynamics around the Madagascar project. "The information is widely expected to be positive," the column said.
IP Group was also given an 'avoid' branding by Questor in the Sunday Telegraph. IP, which looks to use its strong connections with universities to win the rights to academic breakthroughs and turn them into profitable firms, has "flattered to deceive" for much of its 18-years. The worry is that the FTSE 250 outfit, which said the fair value of its portfolio was £1.16bn at the end of June, "should be doing better than it has done".
Having floated on AIM in October 2003 under the moniker of IP2IPO with long-term partnerships with the University of Oxford's chemistry department, the University of Southampton, King's College London and the University of York. Shares in the company, after falling to post crisis lows have risen sevenfold to peaks above 220p in 2015, but have steadily halved since to stand at 113p last week, despite holdings in 155 companies across the biotech, virtual reality, artificial intelligence, fintech and energy sectors.
Questor said it "can only be investor disinterest or disbelief that those links will add up to much that has depressed its stock market value".
Please note: Digital Look/Sharecast/WebFG provides a round-up of news, tips and information that is impacting share prices and the market. Digital Look/Sharecast/WebFG cannot take any responsibility for information provided by third parties. This is for your general information only and not intended to be relied upon by users in making an investment decision or any other decision. Please obtain a copy of the relevant publication and carry out your own research before considering acting on any of this information.
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