Just when you thought that all of the bad news was out of the way at BG Group along came last week's truly shocking profit warning. No wonder then that Tuesday's quarterly and full-year numbers contained little in the way of negative surprises. Yet the company faces a long road ahead in trying to regain the trust of the market. Nevertheless, the main pillar of the investment case for investing in the company was left unscathed. The outfit has passed its peak phase of investments and will be able to increase its pay-outs to shareholders.
Volumes next year will benefit from increased flows out of Brazil and Australia, with its Queensland LNG operation on track to begin production in the fourth quarter. The rate at which BG is replacing its reserves was also ahead of depletions last year, while US gas operations are being scaled back until prices improve. In parallel, the company is simplifying its operations by selling non-core assets. Furthermore, its interests in the huge Santos field off Brazil remain largely untapped. The shares
currently yield a bare 1.7% but The Times´ Tempus column said it would be a buyer at this level, finding it very hard to believe that they could fall much further. Whether the shares will recover the 13 pounds at which they traded at the start of the year is another matter, it added.
TalkTalk delivered a solid set of third-quarter results but the current valuation of the shares and the odd analyst's reservations suggest there isn't a great deal to go for right now, says The Times' Tempus. The company managed to grow its revenues during the period by 5.1% in year-on-year terms, well ahead of the first half´s 1.8% gain, albeit with a little help form inflation. Hence management´s confidence in its ability to hit its targets for 3%-plus growth for the financial year. As well, its longer-term targets, including earnings margins of 25% by 2017, are achievable.
However, its 'churn rate', which measures how many people are going in and out of its servives, peaked in the second quarter on increased competition from BT and Sky in sports. It only fell slightly in the third quarter. More positively, its TV offering continued to make progress, adding 175,000 new customers. On the other hand, the actual number of new broadband customers only increased by 7,000, once account is taken of the 103,000 who arrived with the Post Office when it switched form BT. Rounding everything out, the shares are already trading at 18 times next year's earnings.
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