Wednesday tips round-up: Cadbury Schweppes, Ashtead, Laird
There is much left to do, but yesterday's trading statement from Cadbury Schweppes provided much more good news than bad.
Perhaps the most pressing concern though is that all the good news could be priced into the stock already. The sharp increase in the share price in recent months appears to leave the upside limited in the short to medium term. Hold says the Telegraph.
Laird is now a specialist technology business, which supplies components for mobile phones, computers and flat screen TVs. About 50% of Laird's revenues are made from the mobile phone handset market, and the company's biggest customer is industry leader Nokia. The global market for handsets is expected to grow about 11% next year. With the shares on a 2008 earnings multiple of 12.3, investors could be underestimating the potential value. Buy says the Telegraph.
There may be worse businesses to be in than US construction equipment hire, but it's hard to think of one. Ashtead is making a good fist of it, but conditions have turned against chief executive Geoff Drabble. The group may be prepared for a downturn, but prospects are too closely linked to the US. Trading on eight times this year's forecast earnings, Ashtead is not a risk worth taking. Sell says the Telegraph.
US construction is not dead yet, but it has caused the poor sentiment in Ashtead's share price this year. With high financial and operational gearing, large exposure to US construction and a history of poor performance when the cycle turns, Ashtead trades at a sharp discount to UK and US rivals, with a price/earnings ratio of about 6 times 2008 earnings. Ticking all the wrong boxes makes it a difficult stock to support. The vagaries of sentiment make the timing of a recovery in the share price uncertain but Ashtead is certainly cheap says the FT.
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Whitbread has struck gold with its no-frills, £50-a-night Premier Inn hotels chain. As if to underpin the attractions, an independent report yesterday claimed the budget hotel sector will treble in size over the next 20 years. Despite indigestion in its restaurants, Whitbread remains a solid defensive stock and the shares, down from 1946p in July, look attractive at 1434p, up 10p, where they trade on 17 times forecast earnings for 2008. Buy says the Independent.
Game Group is riding the crest of the current wave of video games console demand, with the resurgence of Japan's Nintendo on the back of the Wii, and the handheld DS Lite machines driving its growth. There was some profit-taking yesterday following a strong run over the past week on the back of the clearance of its Gamestation deal. Game sits on a premium rating for the retail sector but is showing no sign of slowing down. Buy says the Independent.
Early evidence suggests the merger between MyTravel and Thomas Cook is going as planned. The group, Thomas Cook, delivered an unexpected surprise forecasting that full-year operating profits would come in at around £266m up 26%, and well above forecasts. The company appears optimistic about next summer's bookings although a winter squeeze on consumer budgets could change the picture. Hold says the Independent.
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