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
Bank of Georgia
Most European banks trade on steep discounts to the market thanks to low interest rates and low confidence. But UK-listed Bank of Georgia “does not fit the mould”. The former Soviet state boasts strong trade links with the EU and relatively low corruption levels, while annual GDP growth is running above 4.5%. The bank is well-capitalised and pays a 5% forward dividend yield. Investors looking for earnings growth and willing to stomach the geopolitical risks of investing in the Caucasus may find value here. 1,474p
Best-known as the UK publisher of the Harry Potter series, the boy wizard remains “by far the firm’s biggest money-spinner”. Yet Bloomsbury has wisely invested that bounty in expanding abroad and acquiring imprints, many of them academic. Investments in digital resources should now begin to diversify revenue streams away from tales of enchantment and towards university and college libraries. On about 15 times adjusted earnings the shares appear reasonably priced. Buy. 259p
Once synonymous with consumer brands such as Listerine mouthwash and Trident chewing gum, Pfizer has spent the last two decades shedding those businesses to become a pure pharmaceutical play. The shares have performed poorly this year but Pfizer now trades on a discount to peers and good drugs-trial news could turn a “dowdy old drugmaker into a red-hot stock”. An attractive opportunity. $37.74
Three to sell
The Sunday Times
This subprime lender has run out of friends. The shares have crashed from 275p this summer to just 60p now. The firm, whose loans carry a typical interest rate of almost 50%, is suffering from a deteriorating economic outlook and a looming regulatory crackdown. The collapse of Wonga last year and a profit warning from Non-Standard Finance suggest that this is an industry facing headwinds. Even on a price/earnings ratio of just three, the shares are not worth the risk. Avoid. 60.2p
Exposed to areas such as nanotechnology, fibre-optic testing, advanced materials and LED design, this portfolio of niche science-based investments is a high-quality business. Record half-year results in September set “new high bars” for a host of financial records and sparked an extraordinary rally, with the shares up almost 80% since April. Yet with the stock now trading on 24.3 times next year’s earnings this is not the value story it once was. Long-term investors may wish to hold on, but the huge rally makes this a prudent time to bank some profits. 5,050p
First-half results suggest that all is not well at this luxury handbag maker. Mulberry is trying to dodge trouble in the British retail market by expanding internationally – yet the UK still makes up 65% of sales, and protests in Hong Kong add another headache. Luxury brands typically maintain high margins in the face of cost competition, but Mulberry’s margins have “gone from small to negative”. Sell. 272p
…and the rest
The Daily Telegraph
Construction material specialist Breedon Aggregates stands to gain from a government spending splurge whoever wins the election. On a price/earnings ratio of 12 the shares “could reward patient support” (59.75p). The City is taking a more favourable view of pub stocks and JD Wetherspoon remains competitive. Yet the shares are the most expensive in the sector and the valuation has yet to take slower growth prospects into account. “Hold” (1,515p).
Anaemic house price growth in London and the South East is a problem for housebuilder Crest Nicholson and a cut to profit guidance may not be the end of the bad news. Sell (368p).
Pub and hotels group Fuller, Smith & Turner’s sale of its beer business to Japan’s Asahi has run into complications but don’t be put off. The deal makes strategic sense and the firm is “well positioned for further growth” (1,020p). Accelerating royalty income and better commercialisation of the Warhammer brand means that fantasy retailer Games Workshop should “earn a lot more money”. Buy (5,730p).
On 8.9 times forecast earnings, Superdry is worth a “speculative gamble” for those who think that founder Julian Dunkerton can turn around the troubled branded clothing business (458.5p). A first earnings downgrade at posh tonics and mixers maker Fevertree Drinks has not taken the “fizz” out of the shares. A maturing British market meant that growth was bound to slow, but there are still opportunities overseas and the firm boasts a proven record. Buy (2,004p). Wealth manager Rathbone Brothers is performing well, but the shares are fully priced. Avoid (2,135p).
A German view
The global construction industry looks set for a boost over the next few years as more and more governments attempt to bolster growth with infrastructure projects, says Wirtschaftswoche. That bodes well for Wienerberger. The 200-year-old Austrian company is the world’s largest brickmaker and a major supplier of piping and concrete paving. It is heading for its best year on record, with sales rising by 6% to €2.7bn in the first nine months of 2019 and net income jumping by 64% to €206m. A cost-cutting programme targeting energy savings and more efficient delivery management has given earnings an additional fillip. The stock looks reasonably valued on 13 times 2019 earnings.
South Korean drug company SK Biopharmaceuticals is expected to raise over $850m through its initial public offering (IPO), says Song Jung-a in the Financial Times. This would constitute the largest flotation in Korea since mobile-gaming company Netmarble’s $2.3bn listing in May 2017. The US Food and Drug Administration recently approved SK’s new anti-epilepsy drug, which “bodes well”, according to an investment banker close to the deal. Analysts expect the listing to breathe new life into the country’s IPO market, which has had a lacklustre 2019 – the total value of IPOs has dropped to $3bn so far this year, compared with $6.8bn in 2017.