Are Parkwood shares worth holding on to?

published 7 June 2006

Despite having risen more than 25% so far this year, says Dan Coatsworth in Shares magazine, Parkwood Holdings (PKW, 74p) remains good value. Parkwood has four main areas: Glendale provides outsourced maintenance for golf courses and open spaces; Parkwood Leisure manages a range of leisure facilities, such as sports halls and pools; Parkwood PFI undertakes public finance initiatives and public private partnerships with the Government; and Parkwood Healthcare runs nursing and ambulance services in London and the southeast.

The company has been firing on three cylinders. Glendale has just won the group's largest contract, Leisure has increased its order book to £253m from £143m and PFI is in the final stages of bidding "on a large PFI deal with the Ministry of Defence". The only fly in the ointment is the loss-making Healthcare division, which has been given a 12-month deadline to shape up.

Whatever happens to Healthcare, the shares look cheap. Profit forecasts are flat, but that is on account of the structure of PFI projects, which "are modelled for losses in the first few years". Nevertheless, revenues are forecast to increase to £94.5m this year, followed by £99.5m in 2007, with earnings rising from 6.25p to 7.12p per share. Yet the firm is confident it can boost revenues to £100m this year alone. With a market capitalisation of £14.6m, that makes it cheap on both a price-to-sales ratio and a p/e basis. Buy, say Shares, Brewin Dolphin (with a price target of 95p) and

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Peter Temple in the FT. I agree.

Charles has previously written for the MoneyWeek, giving readers his share tips regularly and covering other topics on the side such as stock markets and the economy. He has also written for The Business, Shares, Investors Chronicle and The Evening Standard, and Charles has presented on LBC and been a guest on BBC One and BBC World. Aside from his journalist background, Charles graduated as a chemist from the University of Oxford specialising in ligand gated ion channels.