Gamble of the week: Hidden value in support services

Despite having disappointed investors in recent months, this provider of support services offers great value for money, says Phil Oakley.

Early last year, I tipped Carillionas a buy at 315p. Sadly, the shares have fallen 18% since then. I liked the shares for their big dividend yield and thought they were cheap on seven times earnings with a yield of 5.8%. But the market has taken a dim view of the firm's prospects. The shares are now even cheaper. At 260p, they trade on 6.8 times 2013 forecast profits with a prospective dividend yield of 6.5%. So what's in store next?

The bulk of the value in Carillion (LSE: CLLN) rests with its support-services business, where it does a lot of work for the government alongside delivering projects for utilities, offering energy-efficiency services and looking after companies' properties. It also has a decent portfolio of private finance initiative (PFI) investments.

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Phil spent 13 years as an investment analyst for both stockbroking and fund management companies.

 

After graduating with a MSc in International Banking, Economics & Finance from Liverpool Business School in 1996, Phil went to work for BWD Rensburg, a Liverpool based investment manager. In 2001, he joined ABN AMRO as a transport analyst. After a brief spell as a food retail analyst, he spent five years with ABN's very successful UK Smaller Companies team where he covered engineering, transport and support services stocks.

 

In 2007, Phil joined Halbis Capital Management as a European equities analyst. He began writing for MoneyWeek in 2010.