Share tips of the week
MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
MoneyWeek's comprehensive guide to the best of this week's share tips from the rest of the UK's financial pages.
Three to buy
Ten Entertainment Group
Good weather and the World Cup should have "sent the performance of [this tenpin bowling operator] rolling into the gutter". Instead Ten Entertainment says it's on track to hit full-year market forecasts. In the first half of the year it posted a 7.7% jump in turnover to £37.8m. It is expanding by adding new venues, currently four sites a year. It's also trading at an undeserved 25% discount to rival Hollywood Bowl. 268p
A cheap valuation, a prospective dividend yield of 4.2%, a strong balance sheet and a potential break-up are reasons to buy this diversified miner. Anglo American has exposure to platinum group metals, iron ore, metallurgical and thermal coal, copper, nickel, and diamonds, as well as operating exposure to South Africa, South America and Australia. The trade war between the US and China is unhelpful, but the mining sector should be attractive longer term. 1,652p
This IT services firm is benefiting as housing associations in the UK streamline operations. It's a one-stop-shop supplier of integrated software products and managed services to the social housing sector, and has many growth opportunities.It currently provides software and services to only 600 of the UK's 1,700 housing associations and there is scope to cross-sell more to existing customers; 60% of them were using only one product last year. Buy in as it attempts to expand overseas. 89p
Three to sell
The footwear retailer has had a rough start on Aim, London's stock exchange for smaller companies. Last month it said that gross margins fell from 45.9% to 45% in the year to the end of February. It has also changed strategy from opening new shops to enlarging existing ones, which will lead to a higher rent bill this year and will reduce profits by around £1.4m. Some brokers have now marked pre-tax profits down by 25%. 64.5p
Since launching in 2012, this alternative online estate agent has expanded across the UK, Australia, the US and Canada, and has reached a market cap of £971m. But it may be moving too fast. Two weeks ago it unveiled a £21.3m operating loss for the year, up from £5.1m. This was partly due to the £42.1m it spent on advertising, but its broker, Peel Hunt, says that its breakeven point won't arrive until 2021. It's also been warned several times over misleading advertisements. 324.5p
Last year's collapse of Monarch Airlines has benefited the owner of tour operator Jet2, which has boosted seat capacity by 45%. But added capacity in a tough European airline sector makes price rises difficult, and average airline ticket yields have fallen 15% to £73.65. Dart's operating profits rose by nearly a third to £131m over the year and management continues to be bullish, but cost pressures and uncertainty over the UK economy make the future unclear. The recent share surge is a chance to disembark. 1,001p
...and the rest
The Daily Telegraph
Car distributor Inchcape has built up solid relationships with numerous car makers, resulting in big barriers to entry for rivals (797p). The 6.7% forward yield of telecommunications group Manx Telecom will tempt income investors, but full-year results were mixed and growth investors "may be better off looking elsewhere". (175.5p)
Sunny weather and the World Cup make it "a canny time" to buy JD Sports Fashion (451.25p). Rolls-Royce has closed the deal on the £500m sale of its commercial marine business to Norway's Kongsberg (994p). Ventilation products supplier Volution is making progress a full-year trading update in August could get the share price moving (201p). Alpha Financial Markets Consulting, whose clients include the world's top asset managers, grew operating profit by 65% to £13.6m in the year to March (250p).
There appears to be value on offer at miner Anglo Pacific. The firm has a forecast dividend yield of 6% and shares trading at seven times forecasts earnings for 2018 (140p). Elecosoft's recent acquisition of Shire Systems extends its software portfolio beyond early-stage applications into the ongoing management of the lifecycle of buildings and facilities (82p).
Market newcomer RA International provides a one-stop shop for organisations working in remote locations, where it is benefiting from loyal customers (69.5p). The recent share dip at fashion retailer Asos presents an opportunity for long-term investors to buy into this "phenomenal success story" (5,750p).
A German view
Everyone loves a bargain, and Ross Stores boasts more than most. America's biggest discount clothing and homeware group, established in 1982, offers 20%-70% off the typical price of popular brands. The firm buys up manufacturers' excess stock at the end of a season, as well as goods from cancelled orders, thus keeping prices low. This has proved a successful formula, with sales up by 100% in the past seven years while profits have tripled, says WirtschaftsWoche. The corporate tax cut will give the bottom line a 20% fillip this year. Ross plans to open around 100 new shops in 2018 as it expands from the coasts to the mid-west a testament to its impressive performance and prospects.
High-street retailer The Works, which collapsed into administration ten years ago, has announced plans to list on the London Stock Exchange. The listing of the firm, which sells discount stationery, arts and crafts products and books, will see the placing of 40.8 million shares at 160p each, implying a valuation of around £100m. Of the cash raised, £28.5m will be used to repay the firm's debts. The Works currently has 447 shops and concessions across the UK as well as an online business. Over the past three years its revenues have risen by 14% to £189m. It opened a net 134 new outlets during the same period and 91% of sales were made in its shops in 2018.