There is a bubble in initial public offerings (IPOs) that will cause awful losses for investors, the Sunday Telegraph's Questor column said. Royal Mail, with its monopoly on mail and parcel delivery and prime London property holdings, was the exception to an IPO boom that has seen companies such as Just Eat, AO World and Boohoo.com valued at 100 to 200 times profits. Investors should ask if owners are investing for growth or cashing in and whether the business has a dominant market position or protected technology. Ignore most IPOs and the shares
will probably be cheaper six months later.
Shares in McBride, which makes own-brand household cleaning products for supermarkets, look cheap but the company needs to tell investors how it will adjust to a market that has fundamentally changed, Danny Fortson argued in his Sunday Times column, Inside the City. Despite the economic recovery, people are buying fewer cleaning products and supermarkets are squeezing suppliers hard. Chief Executive Chris Bull will set out his strategy in June and needs to reassure investors there are no more profit warnings on the horizon. Panmure Gordon thinks McBride will have to freeze its dividend. "Buy at your peril," Fortson concluded.
Buy shares of Lifeline Scientific, Midas said in the Mail on Sunday. The company has developed a machine that improves the transportation of kidneys for transplant so that they arrive in better condition. Hospitals save up to £30,000 per transplant because there are fewer complications and more kidneys from older and less healthy patients can be used. The company is expected to report sales up at least 10% to $33.2m when it reports annual results in May. Profits will be about $1m because Lifeline has been investing. The shares should rise as use of Lifeline's product increases, while the need for kidney transplants is growing.
Mothercare cannot rely on customer loyalty and there is little to attract them to the mother and baby chain instead of supermarkets or online operators, Danny Fortson said in the Sunday Times. That is a problem, he said in his Inside the City column. Mark Newton-Jones is standing in as Chief Executive after Simon Calver left in February and the company is seeking a new boss. Fortson asks whether Mothercare's time may simply have passed. The company publishes a trading update April 10th.
Stick with shares of Regenersis, the Mail on Sunday's Midas column advised in an update on the electronics repair company. The shares have increased almost fivefold since Midas tipped them in October 2011. A new European law that will fine companies which fail to safeguard customer data will provide a new avenue for growth after Regenersis agreed to buy Blancco, a Finnish company that erases data from computers and phones. Analysts predict a 13% rise in profit for the year to June 30th and the dividend is forecast to increase from last year's 2.5p to 4p this year and 5p the year after.