The Mail on Sunday's Midas column said Royal Mail could prove a good investment when it is floated on the stock market if management is prepared to be tough. Unlike with some previous UK privatisations, Royal Mail Chief Executive Moya Greene is suited to the move into the commercial world. If she can cope with the decline in traditional mail, stand up to trade unions, improve efficiency and compete in the parcel sector, the shares
should do well. Investors need to consider how the sector is doing, whether the company is floating at the right point in the economic cycle and whether the company has problems like union unrest or a pension deficit.
Avoid Debenhams, the Sunday Times's Danny Fortson said. The Inside the City columnist. Chief Executive Michael Sharp has taken a bet on the future of the high street by opening 90 new stores in five years. He is also upgrading clothing lines and is about to unveil the first collection by Savile Row tailor Patrick Grant to add some refinement to a range that does not stand out. With the shares trading at half their 2006 IPO price of 200p and with profits expected to be flat for the year, Fortson said he would pass.
BG Group is a solid long-term bet but its premium rating makes it a hold now, the Telegraph's Questor column said. It announced on September 9th that political upheaval would hit an offshore gas project in its key Egyptian market and that a Norwegian project would have delays. With investment in Australia rising, free cashflow is turning negative and debt is set to rise. BG trades on a higher multiple than oil and gas peers because it has a record of growth but the valuation looks steep at the moment, Questor said.
One of two big barriers to a takeover of Gulf Keystone was removed when a UK court rejected a claim by Rex Wempen that he was owed 30% of the company's reservoir in Kurdistan, Danny Fortson said in the Sunday Times. Shaikan is a massive project that would normally be developed by an oil giant. With the legal cloud removed, the main obstacle to a takeover is Chief Executive Todd Kozel's big demands but with new non-executive directors installed at shareholders' request, Gulf Keystone is in an interesting position, Fortson said.
The Telegraph made Talk Talk its mid-cap share tip of the week. Old Mutual fund manager Stephen Message told the paper he liked Talk Talk because customers stay with it despite its reputation for poor service. The shares yield a dividend of about 5% and there is room for growth from improving cash flows from better customer service and tight cost control, Message said. The company has enjoyed strong growth at its broadband-based telephone service.
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