Tempus yesterday pointed out that one of his picks for 2013, Lamprell, was up 53 per cent so far and suggested investors might take some profits. A second, Thomas Cook, is up 78 per cent so far, after yesterday's update. For him the best option for nervous investors may be that 78 per cent in five weeks might be regarded as enough. He is not sure, though, that Thomas Cook shares
might not have farther to run, even if some sort of equity issue looks inevitable.
One of the odder facts about Icap, the biggest inter-dealer broker (IDB), is that it regularly forecasts to the market what future profits should look like. But its fortunes wax and wane from month to month, and forward visibility of earnings is non-existent. Hanging over the company is its involvement in the Libor scandal. It is under investigation by the Financial Services Authority, one reason why the ratings agency Moody's recently put the company's debt on review for a possible downgrade. If we have learnt one thing over the past five years, it is that the ratings agencies are always well behind the curve Icap, most expect, will scrape through with a fine of perhaps £30m. Some analysts have wondered, probably wrongly, if the fallout might call into risk the dividend, which at least provides the support of a 6%-plus yield.
Icap offers investors a straight choice. If you are an optimist and think the markets will remain favourable, then the shares, down 4p at 352¾p, are attractive on an earnings multiple of about 10.5. If, like me, you take a more cautious view until Libor is sorted out, then avoid, writes The Times's Tempus.
Given that a fair number of acquisitions, history tells us, destroy shareholder value, Dairy Crest is to be commended for refusing to be too quick to spend the £336m received on the sale of its French subsidiary, St Hubert, in the summer. Analysts expressed some disappointment that the cash would be used for something as mundane as paying off debt. Its s four core brands saw third-quarter sales up 5%, well behind the 11% seen in the first half but impressive enough in these markets, competing with a very strong third quarter last time. Sales should continue to grow at the same rate for the rest of the financial year. The shares, off 14p at 408p, sell on 13 times earnings and yield a healthy 5 %. No reason why they should outperform for now, but a strong hold, Tempus writes.
To the surprise of absolutely no one who has been watching the company, Centrica pulled out of plans to build new nuclear power stations in the UK earlier this week. So what are the options? Centrica's success is based partly on its model of owning energy-producing assets as well as distribution systems. It is likely to continue to invest in UK North Sea oil and gas, but it is also possible that further upstream assets will be bought in the US to complement its Direct Energy business. The balance sheet is strong and cash flow is impressive.
The main danger is regulatory risk to Centrica's British Gas residential distribution business. Labour is calling for the abolition of Ofgem and a new, tougher regulatory regime. However, profit margins for this business are pretty low (in the region of 6%) so, ultimately, Questor thinks the company has little to fear. However, broker Seymour Pierce has calculated that for each percentage point reduction in the profit margin, Centrica's earnings would be hit by 8 percentage points. Trading on a December 2013 earnings multiple of 12.4 and falling to 11.5, the shares are a hold, down from buy, after recent gains, The Telegraph's Questor team says.
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