Thursday tips round-up: Tesco, Compass, Tullow Oil
Tesco's rapid overseas expansion continued yesterday with a near-£1bn deal to buy 36 former Carrefour stores in South Korea from discount retailer Homever. On a forward price earnings ratio of 15 times, Tesco looks cheap - particularly given that unlike its rivals it is no longer reliant on the fragile UK consumer. Buy, says the Telegraph.
While Compass is exposed to food inflationary pressures, it has done a good job so far of mitigating that problem. The group is a defensive stock and if its plans for the future work out, investors will be laughing. Buy, writes the Independent.
What a week it has been for Tullow Oil. Last Wednesday investors were popping the champagne corks as the shares rocketed by 24 per cent after the group announced a major new find off the Ghanaian coast. With a plethora of announcements to come during the rest of the year, investors can be fairly confident to hear some good news. If it is as good as last week's, today's buyers will be quids in. Buy, says the Independent.
At 561½p, or an average sector rating of 11 times current-year earnings, and with investor sentiment impaired, FirstGroup can be no more than a hold, according to the Times.
Earnings per share rose by 16 per cent, and Land Securities full-year dividend is up 21 per cent. At £14.67, the shares are at a 25 per cent discount to net asset value, reflecting fears of more writedowns. But with a solid 4.4 per cent yield and steady rental income underpinning cashflow, the shares are a hold, says the Times.
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Dimension Data's emerging markets exposure means that, at 52p, or 17 times 2008 earnings, it trades at nearly twice the rating of its peers - steep, given that reselling remains 60 per cent of sales. On the assumption that its two biggest markets, financials and telecoms, must slow, there should be no rush to buy back in. Avoid, writes the Times.
The Independent says that investors should be wary of too getting carried away by a good set of figures. Hold.
Diploma's margins and cash flows have been so strong that, alongside a good set of results, the company was able to increase the dividend by 35pc - moving from a position where it is 2.5 times covered to 2 times. Given this and the strong outlook, the 11 times multiple on which the shares trade looks undemanding. With more acquisitions to come, the shares are a buy, says the Telegraph.
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