Friday tips round-up: Bellway, PZ Cussons, Premier Farnell
It is worth considering just how cheap housebuilder Bellway's shares are - the current price puts the stock on just 6.4 times forecast 2008 earnings, with a prospective 2008 yield of 5.2%.
The stock hasn't been that cheap since the height of the dot.com boom, and barring a disastrous recession now could be the right time to tuck some Bellway away for a rainy day. It looks like the market has overreacted - buy says the Independent.
Soap maker PZ Cussons has strong positions in several markets, and demand for its products in several key emerging markets - it does nearly 70% of its business in Nigeria, Indonesia and India - puts the company in a strong position. However, the stock trades on a fairly pricey 18.5 times forecast 2008 earnings, and although its defensive qualities and lack of sellers should support the valuation, the upside could be limited from here. Hold says the Independent.
Trading on below eight times forecast 2008 earnings, Christmas hamper supplier Park Group offers good value and defensive earnings. That might sound counter-intuitive if we head into a recession, but we consumers do want more certainty about being able to have a merry Christmas, making saving schemes attractive. Buy says the Independent.
Distributor Premier Farnell's sales grew in every territory in the third quarter - with the exception of the UK, where flat revenues indicated that Premier is taking share in a falling market - and helped pre-tax profits to come in at the top end of the forecast range. However, the prospect of cutbacks in its clients' R&D expenditure, and the concern that much of the operational efficiencies from the new strategy have already been wrought, mean that, at 144¾p, they are still not obviously cheap. Avoid says the Times.
Premier Farnell's yield of 6.4% - with the payout guaranteed for two further years - is not unattractive and yesterday's results show that with new management over-delivering on its promises. The recent sell-off has been overdone. Buy says the Telegraph.
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Legacy software specialist Micro Focus draws 10% of sales from financial services and 42% from North America, raising fears that computer upgrades may fall under the category of discretionary expenditure. That may prove too gloomy, but adverse sentiment and the overhang created by Golden Gate's residual 35% stake instill caution. Avoid says the Times.
Another day, another retail profit warning. Alexon yesterday highlighted the problems retailers face going into what looks like being a less than festive season. In the spring, hopes were pinned on the expansion of Bay Trading, which pushed the shares to a midsummer peak of more than 252p. The 30p pay-out is slim consolation for the share price fall since then. On the company's tentative forecast, the current year p/e might look low, at about 6.5, but it will take some time before hope triumphs again says the FT.
Stockbroker Numis managed to build up pre-tax profits by 9% to £39m on revenues up 19% at £86m. Assets grew by 16% to £109m and it has £78m cash on its books. In response, the company upped its dividend by 40%. The shares are trading on about eight times next year's earnings, which looks good value considering the quality of the broker. Mid-cap brokers undoubtedly face a tough period ahead, but Numis is strong enough to weather the storm. Buy on the dip, for the time being hold says the Telegraph.
Redhall's allure is its exposure to three burgeoning niches: nuclear maintenance (it is a contractor at Sellafield and Aldermaston); specialist manufacturing, where it makes safety equipment such as bespoke blast doors for petrochemical plants and oil rigs; and engineering services. The task now is for Redhall to deliver more of the earnings-boosting bolt-on deals that should make that 21 times look too low. On the assumption that it can, buy on weakness says the Times.
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