Friday tips round-up: GKN, TUI, Mulberry
GKN's disclosures that powder metallurgy had been hit by higher raw material costs - it is sensitive to metal prices - and by disruption from the completion of restructuring did little to advance its case.
But, combined with accelerating organic growth, GKN is expected to produce earnings growth in the mid-teens next year. It trades at only nine times next year's earnings, a discount to its sector, when it should trade at a premium. Reason enough to hold on for now says the Times.
Current trading is strong at tour group TUI and summer bookings will be boosted by England's eviction from the Euro 2008 football tournament. Consumer spending may slow, but TUI, which is set to join the FTSE 100 next week, is well-placed to ride the turbulence. However, at 273½p, the shares are trading at a full forward multiple of 16 times. There will be better times to buy says the Times.
Oil services group Hunting is facing more calls to restructure and break-up further. It problem is that forecast earnings growth of mid-single digits offers less excitement than the likes of Petrofac or Wood Group, which means that at 14 times next year's earnings, its discount is likely to persist. Pass says the Times.
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Analysts were marking down their profit expectations for Rexam from £255m to £240m to £245m yesterday after it cautious statement, but traders were more cruel, sending the shares down 16% in a move that looks vastly overdone. Rexam remains a well run business in markets that will continue to grow, even if the growth is steady rather than spectacular. After yesterday's falls, the shares trade on 14 times next year's earnings. That is not a demanding rating for what could prove a good defensive play in difficult markets. Hold says the Telegraph.
Spice fixes and maintains the creaking pipelines that transport water, gas and electricity around the country. It also houses a consultancy business that checks utility bills and an energy division that advises large companies on their electricity use. Its success i was in evidence in a 44% rise in interim pre-tax profits to £8.3m. On an earnings multiple of about 18 times next year's earnings, the shares look fairly valued in comparison with the rest of the sector but the growth potential means Spice has more upside than its rivals. Buy says the Telegraph.
There aren't many retailers around that have been able to boast of an 11% increase in like-for-like sales but that was the enviable position Mulberry found itself in yesterday as it happily reported that its latest lines had been well received. Brands like Mulberry are always dependent on its latest eye-wateringly expensive goods being judged approvingly by the fashion press, but as far as the business pages go, the company looks good. Buy says the Telegraph.
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