Tuesday tips round-up: Balfour Beatty, IG Group, Forth Ports
Balfour Beatty's Metronet write-offs will largely be offset by the sale of its stake in Devonport Royal Dockyard and around £40m of tax credits. Brokers, meanwhile, expect profits of £195m for 2007, rising to £214m this year, putting the shares on around 11.5 times earnings.
This represents an attractive buying opportunity for a group with huge UK and international exposure. Balfour has been unaffected by the shake-out which has seen some of its competitors lose between 20 and 40 per cent of their value. Buy says the Independent.
The FT adds that the numbers are impressive but at a p/e ratio of 12.5 times estimated 2008 earnings, Balfour is expensive relative to its historical value and its peers in the construction sector.
Premier Oil shares have driven back through the level last achieved in 2006. Investors again piled in last November on talk that Santos, the Australian oil group, was interested. The high price of oil will continue to drive prices of companies sitting on proven reserves and promising exploration prospects. Buy says the Independent.
Profits at five-a-side organiser Goals Soccer Centres are forecast to rise from £7m in 2007 to £9.5m in the current year where the shares still trade on a demanding 20 times earnings. High enough says the Independent.
Winners from the credit crunch can be quite hard to come by. IG Group, the spread-betting firm that specialises in gambling linked to the financial markets, appears to be one of them. IG yesterday announced a 63% increase in first-half profits to £48.2m pre-tax, and increased the interim dividend by 50%. Yesterday's weakness does not seem merited. Buy says the Telegraph.
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Shares in Forth surged yesterday 152p to £20.90, valuing the equity at about £950m, or 12 times forecast headline earnings for next year. ABP, P&O and PD Ports all sold on multiples of between 14.5 and 15.5 times expected earnings. With Forth offering a dividend yield of over 2%, business growth on the horizon and a likely bid battle, there are still gains to be had for buyers says the Times.
New 20% owner Babcock, already Europe's third largest ports operator, may see Forth as a break-up target. Other infrastructure funds and ports operators will now be looking at Forth. The shares, yielding just 2.5%, are not cheap. But a bid or break-up will ignite them. Buy says the Telegraph.
Mail order group N Brown is benefiting both from existing customers shopping more frequently and spending more and a successful marketing campaign to pull in new customers - sales from whom were up 30% over the second half. On 12 times current-year earnings, falling to ten times for the 12 months to February 28, 2009, N Brown is reasonably priced given forecast earnings growth of 10%. Hold on says the Times.
N Brown looks relatively cheap: it trades on a price earnings ratio of 10pc, a discount to its peers, and it has a healthy dividend yield of 4.8pc. Its outlook is good. Buy says the Telegraph.
SDL provides providing language translation software to multinationals. The company's allure is a dominant position in a consolidating market, which, due to international trade and internet usage, should carry on growing in double digits. At 13 times 2008 earnings, SDL looks cheap, but with directors having sold £5.8m of stock at 385p in September, only months after a fundraising at 355p, sentiment may remain against it. Avoid says the Times.
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