Thursday tips round-up: Stagecoach, Shaftesbury, Standard Chartered
Stagecoach's confidence is high and it expects to deliver better than expected profits for the full year, despite the burden of record oil prices: it is hedged 86 per cent in the current year, and 95 per cent in the next.
At 244¼p, or 15 times current year earnings, Stagecoach sits at a premium to its sector, and yields less than 2 per cent. But given its record of earnings upgrades, that valuation appears deserved. Hold on says the Times.
Rumours of Chinese stakebuilding in Standard Chartered persist. And yet opportunistic investors may regard the valuation gulf between it and stodgier banks as excessively wide. Standard trades on 19 times 2007 expected earnings and yields little more than 2%. Its bruised home-grown peers are on an altogether less demanding seven times earnings and yield 7%. Take profits in Standard says the Times.
Standard is sitting in a position of strength adds the Telegraph. Some 24% of its balance sheet is liquid and its loan-to-deposit ratio is 90%. Its capital position is strong, with the year-end tier-one ratio expected to be about 9%. Growth and potential resilience are worth paying for if you want to be invested in financials, explaining why it is the only UK bank whose shares have risen this year.
In general, banks are best avoided now, but, although this one offers only a paltry 2.3pc yield, its one of the best places to be in the sector. Buy says the Telegraph.
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Coal miner ATH Resources's core mining operation is benefiting from record production and coal prices. Earnings per share rose 11%, and should grow 14% this year as higher spot prices enable ATH to negotiate better deals with its power generating clients. Wih thregeneratin arm also growing, on 15 times current-year earnings, and yielding 5%, buy says the Times.
There are significant risks ay ATH adds the Telegraph. The company's plans depend on being granted planning permission that is likely, but by no means guaranteed in what is still an unfashionable business. Still, for investors keen on something a little different, the shares trade on an undemanding 13.8 times next year's earnings, yield over 5%and are worth further investigation. Buy.
The restaurants and shops in property group Shaftesbury's niche areas are humming with consumers, seemingly oblivious to the gathering clouds above the economy. The group's tenants say that business is so far undented, according to Mr Lane. But his words failed to revive the stock, which is down 33 per cent to 548p from its 820p peak in March. The fact is that commercial property values in central London have been falling since the autumn and Shaftesbury - at a 15% discount to NAV - is still not as cheap as many of its peers says the FT.
Pakaging group DS Smith is clearly vulnerable to an economic downturn. And there are other clouds on the horizon. Rival Mondi is building more capacity, and a number of private companies are thought to be doing the same. As the market gets flooded with all this new packaging it will get harder for DS to keep hiking its prices. The shares look cheap at just nine times next year's earnings and the stock yields a generous 4.2%. But the future looks uncertain at best. Hold says the Telegraph.
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