Tuesday tips round-up: St Modwen, RWS, Smiths Group
St Modwen's core attraction is its ownership of 5,500 acres of developable land, which, given their spread between industrial, retail and residential schemes, and the company's long-term track record, suggest that its target of doubling net asset value every five years remains feasible. Hold says the Times.
St Modwen has excellent management and a good "hopper" of development land it can work on to produce value. On the down side, residual development land values - the bedrock of St Modwen's business model - are being hit not just by falls in the value of commercial property, but also by inflation in construction costs. St Modwen's shares are still trading at a premium to their net asset value. Avoid says the Telegraph.
Medium-term prospects are linked into the housing market, therefore, where builders have so far been hungry for new sites. The company has been one of the best-performing real estate stocks this year, but 2008 will be testing for St Modwen if house values weaken significantly, adds the FT.
AIM-listed RWS is a translator of patents and, with Germany comprising its biggest market, it draws 60% of its sales in euros. With the requirement to protect intellectual property close to recession-proof and RWS boasting £19 million of cash, the shares at 339p, or 12 times 2009 earnings, are inexpensive. Buy says the Times.
The price to be achieved from splitting and selling Smiths Group's three divisions - Medical, Speciality Engineering, Detection - has been variously put at between £5bn and more than £6bn. Compare this with Smiths' £3.7bn market size, and that's a lot of value that could be unlocked from a company that has been a perennial underperformer. It will not be until the interims in March that a clearer picture will emerge of what the pans are for the business. Until then, avoid says the Telegraph.
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Axeing the dividend will save International Greetings around £3m but current year profits will still fall from £18m last year to £3m. For 2009, estimates of £12m have been slashed to £6m. The shares fell 25% before recovering on hopes there will be a bid. You would be crackers to buy says the Independent. Avoid.
Fidessa is a world leader in developing equity trading systems for institutional stockbroking. With the shares down a quarter over the past three months, the stock market has already priced in a downturn. However, at nearly 19 times current-year earnings, Fidessa can be no more than a hold says the Times.
Patsystems' main business is providing software which enables trading of derivatives. There has been rising demand for its key product, the Pro Mark trading screen, from large brokers. The number of installations is expected to nearly double to 700 in 2008, when profits are expected to grow to £3.8m, putting the shares on a multiple of 13. Bid talk surrounding the group persists. On trading grounds, they seem fairly priced for now says the Independent.
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