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Wed, 10 Dec, 2014
When something seems too good to be true, it probably is. Shares of on-line fashion retailer Asos are trading at a price-to-earnings ratio of 54.3 versus a rating of between 30-35 times profits for well-established and successful technology firms such as ARM Holdings. Furthermore, while the company has maintained its growth target for sales next year at between 15% to 20%, that masks what should be an easy fourth quarter due to the fire at its depot at Barnsley this year. Then there is the no small matter of its accounting treatment for the insurance pay-out it received for the above incident. Simply put, it puzzled several analysts. On top of that, one should carefully ponder the implications of the slowdown seen in the firm's international sales. The shares are best avoided, writes The Times's Tempus.
Tue, 09 Dec, 2014
Carillion has been "through the wars" as one analyst recently put it, after de-scaling its British construction business and the odd negative publicity surrounding its relationship with suppliers. However, a recent run of contract wins should put to rest any doubts about the company's work pipeline. The announcement that it has sealed a deal to re-develop the main stand at Anfield, for Liverpool FC's stadium, is simply the most well-known example. Furthermore, should rival Balfour Beatty finally be broken up then it may get a second chance to make off with the rest of that company. Nevertheless, the firm continues to face margins under pressure in Canada, as a result of weakness in the energy services market. The shares are a strong hold but until it gets that second chance the upside is limited, says The Times's Tempus.
Sun, 07 Dec, 2014
Buy shares of Whitbread, Danny Fortson advised in the Sunday Times. The company's shares have hit a record high and have nearly quadrupled in the past five years, the Inside the City tipster said. With the owner of Premier Inn and Costa expected to unveil strong trading on December 11th, now might seem a good time to take profits but Whitbread's success has further to go.
Fri, 05 Dec, 2014
Specialist packaging manufacturer DS Smith has proven adept at growing with its clients, acquiring rivals and moving into new niches and geographies. That has seen the company transformed from a maker of paper into a manufacturer of higher-margin specialist packaging. A case in point is the recent agreement with Mondelez, with whom it has entered into an exclusive five-year contract to provide specialist packaging. So too is the company's ability to adapt to the evolving needs of clients such as Aldi and Lidl. That has allowed the firm to battle against headwinds such as weak consumer spending in the Eurozone or a depreciating single currency.
Thu, 04 Dec, 2014
Analysts are sceptical about Sage's newly arrived chief executive, Stephen Kelly's, strategic plans for the software manufacturer. Nevertheless, the fact remains that Mr.Kelly's track record at his previous outfit, Micro Focus, shows that he is not afraid of 'shaking things up' if necessary. Indeed, he has only been at his new job for a month now. Hence, it should come as little surprise that for now he has opted to simply reaffirm the targets set out by his predecessor. Organic revenues are to grow 6% and operating margins set to hit 28%, both are just slightly above the results achieved by the firm in the year to the end of September.
Tue, 02 Dec, 2014
Iron ore miners may be facing much the same dilemma as OPEC is, when trying to force high-cost producers out of the market. Although plummeting crude prices may force some smaller tight oil producers to stop producing for a time, the well infrastructure and technology, once developed, will remain. Indeed, creditors who take over bust shale operators and wish to maximise their cash recovery may not be dissuaded by the price falls.
Sun, 30 Nov, 2014
Investors should back the judgment of Breon Corcoran, the Chief Executive of Betfair, Matthew Goodman argued in the Sunday Times. In the Inside the City column, Goodman said Corcoran had quietly got Betfair into shape by cutting regulatory risk and imrpoving its website, taking the shares above the £13 float price for the first time in four years. Betfair has £250m of cash but Corcoran is unlikely to announce any largesse at results on December 4th. If a new government tax regime is as harsh as some expect, Betfair could capitalise on an industry clear-out.
Fri, 28 Nov, 2014
After many years, Icelandic packaging manufacturer Promens has been taken over by RPC Group, instead of the other way around, as at one point had seemed possible. The transaction is the British group's fourth this year and values its rival at £307m. The acqusition will be mostly financed through a deeply discounted one-for-three rights issue at 320p.
Thu, 27 Nov, 2014
Thomas Cook reported a pre-tax loss of £114m yesterday, which markets had been expecting to turn into a pre-tax profit of £270m next year. Yet investors were already worried that overcapacity in this sector will hurt the turn-around story. Even if bookings help up prices could suffer. The shock announcement of chief executive Harriet Green's departure will do little to assuage their concerns - quite the opposite. The company was also vague regarding the direction of travel going forward, saying it expected "more measured" growth in profits. On net debt it did a tad better, guiding towards debt between £100m and £150m by the end of September next year.
Wed, 26 Nov, 2014
The latest figures from quoted water utility Severn Trent revealed a company in healthy shape, with pre-tax profits 10% ahead at £155.8m. Critically, it no longer seems to be the case that the company's future dividend growth will be hurt by the looming settlement with its regulator, Ofwat. Indeed, surprisingly the firm believes that it can further slim its workforce without negatively impacting its frontline services. Management has also suggested it can afford to push up water bills by significantly less than inflation over the next regulatory period, spanning the next five years. On top of that, the 5.6% increase in its interim payment was easily covered by earnings.
Fri, 21 Nov, 2014
There are far too many sources of uncertainty around integrated energy company Centrica right now. The company's businesses have been hit by warm weather and declining oil and gas prices. An improvement can be expected next year, but it will be largely offset by a change in the tax regime governing its upstream activities. The firm not only seeks gas in the North Sea, it also provides electricity to its customers and services the boilers.
Thu, 20 Nov, 2014
Change is good, but not quite what UK MPs have in mind. Their vote in favour of ending the so-called 'beer-tie' is a great idea. In effect, it will allow large pub operators to purchase their beer from wherever they like, instead of being forced to buy it from the likes of Enterprise Inns or Punch Taverns from which they let their properties.
Tue, 18 Nov, 2014
Reckitt Benckiser has opted for the simplest of formulas to de-merge Reckitt Benckiser Pharmaceuticals, which is laudable. Investors will get one share in the new Indivior for each Reckitt Benckiser share previously held. Yet that does not necessarily mean that much value will be generated. The company has one product, Suboxone, an opioid addiction treatment, and it hopes to develop other forms of it or even new products. For now, however, profits are on the decline, after having fallen by 13% over the first nine months of the year.
Sun, 16 Nov, 2014
Sell shares of Aggreko, Questor advised in the Sunday Telegraph. The market for its power projects division is uncertain and, with the shares trading at 19 times forecast earnings, Aggreko is priced as a growth company. But the company is not growing and it is not even replacing its old equipment. The dividend yield of 1.8% is not attractive enough to wait for a recovery.
Fri, 14 Nov, 2014
3i seems to have a knack for investing. This is good, given that it is a private equity company. Indeed, the shares performed well throughout the bout of volatility which ensued this past Autumn and are trading well above their net asset value of 358p. The company has reigned in costs to well below the income it earns on management fees and is cutting the number of companies that it is invested in, allowing for greater focus on those that remain. In the first half of this year to the end of September the firm decreased the number of its investments from 81 to 72 and another seven or eight might yet be discarded before year-end. Worth noting, 3i´s chief, Simon Borrows, is not particulalry bullish on European equities. In any case, purchases for its portfolio of high-growth businesses was well-timed. Offering a 3.7% dividend yield and a degree of capital growth, the stock looks like a good investment, "but I would not be rushing to buy at this level, so hold for now," writes The Times´s Tempus.
Thu, 13 Nov, 2014
The fall in shares of outsourcer Capita is an opportunity. While the company did report that its bid pipeline had fallen to £4.1bn from £5.7bn in July, that should already have been known by markets - although the retirement of its finance director is arguably a negative. The likely reason for the drop in the stock is the aftershock of Serco´s 'kitchen-sinking' job on the previous day, which may have led traders to fear that there might be similar negative surprises lurking out there for peers. However, the firm continues to be on track for organic growth of at least 8% for 2014, the same as last year, and cash-flow remains strong. Underlying operating margins are also expected to remain at between 12.5% to 13.5% for the appreciable future. Indeed, the company won its its biggest single contract this year, with O2, which is worth £1.2bn over ten years. On 16 times this year's earnings and offering a yield short of 3% "the fall looks overdone, suggesting a buying opportunity", says The Times´s Tempus.
Wed, 12 Nov, 2014
Shares in Vodafone rose as the company re-assured that its dividend pay-out is safe, no matter how 'wild' such speculation may have been to begin with. After all, this is one of the largest and most reliable payers on the Footsie. Furthermore, the benefits of its investments under its 'Project Spring' are starting to come through.
Tue, 11 Nov, 2014
Take a step back to keep forging ahead, that was yesterday´s message from Serco´s chief, Rupert Soames, as he announced a 1.5bn pound write-off related to a review of goodwill and mispriced contracts. Understandably, given that it wiped 40% off of next year´s consensus forecast for earnings, the shares duly cratered by almost a third.
Mon, 10 Nov, 2014
Regional airline Flybe´s fortunes are looking up as it nears a test on whether the new management is as good at growing the business as it has been in pruning loss-making activities. Its new chief executive Saad Hammad seems to be delivering on his promises after slashing 500 jobs and closing unprofitable routes. He also got out of a supply deal for pricy jets with Embraer and opened up new routes. Significantly, Flybe faces no competition on many of those new routes chosen by the ex-easyJet executive.
Fri, 07 Nov, 2014
Tate & Lyle has had a very difficult year with the two profit warnings. The reasons behind the downgrades are varied, ranging from cold weather in the US to a fire at the Singapore factory where its sweetener Sucralose is manufactured. In aggregate all of those negatives knocked £41m out of the company's profitability. Then there is the plummeting price of Sucralose, even if management seems to expect that it will eventually recover. On the positive side of things, albeit somewhat surprisingly, the firm seems to be pondering a sale or closure of some of its assets in that space.