Thursday tips round-up: HBOS, Serco, Royal & Sun Alliance
As others retreat from the corporate asset market, HBOS may find some bargain "opportunities" and, long term, UK housing remains structurally sound. But the immediate headwinds should be a deterrent. Even on 5.6 times earnings with an 8.3pc yield, best avoided for now, says the Telegraph.
Serco already has 91 per cent of current year revenue under its belt, with 76 per cent for 2009 and 63 per cent for the following year. The shares have remained well up with events, moving in a narrow band over the past year, and although they currently sell on a pricey 21 times current forecasts for 2008 remain attractive. Buy, says the Independent.
Royal & Sun Alliance's defensiveness relative to its peers is already shown in its outperformance against its sector since the onset of the credit crunch. That means that at 142.3p, or less than eight times 2008 earnings, RSA - a low-risk, well-managed insurer with scope for more overseas growth - is a solid hold, says the Times.
The same caveats to buying Kier stock apply as before - it may well get worse before it gets better. However, Kier's diversification remains an advantage and it has less exposure to overbuild of flats than rivals. Buy, says the Telegraph.
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With strong cash generation and net debt of just £14.8 million, Wilmington remains a vigorous acquirer - as shown by yesterday's bolt-on buy of a pension fund data provider. Last year's purchase of Matchett, which provides graduate training for investment banks, appears to be less well-timed, but, given healthy enrolment trends to date, management should be given the benefit of the doubt. At 202¼p, or 13 times annualised holdings, the shares are worth holding, says the Times.
With earnings set to rise 32 per cent this year and direct mail resilient in a downturn, Communisis, at 68½p, or 11 times earnings, has farther to run. Buy, says the Times.
Dunelm proves it is possible to be a retailer in the UK without losing your shirt. The shares have been caught in the retail sell-off over the last year, down 36 per cent, but staged a mild rally yesterday, to sell on a little over 9 times current year forecasts. That looks cheap, says the Independent.
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