Two to buy
Games Workshop
(The Daily Telegraph) This maker and retailer of Warhammer fantasy figurines is a class act. Its return on capital, a key gauge of profitability, is over 100%. Physical products account for 90% of sales, but a new tie-up with video-game maker Frontier Developments could provide a big boost to profits. The possibility of a Marvel comic book based on the Warhammer franchise looks promising too. A price/earnings (p/e) ratio of 30 is “attractive” for a fast grower. 6,000p
Croda International
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(Investors Chronicle) This chemicals group looks “well placed to make it through the coronavirus crisis”. It has access to cash, margins are holding firm and free cash flow has risen steadily of late. Its personal care division should benefit longer term from “ageing and vanity”. The life sciences division, with customers in the pharmaceuticals, food and crop sciences sectors, looks strong. The p/e of 24 is “a fair reflection” of Croda’s quality. 4,854p
Two to sell
Metro Bank
(Investors Chronicle) Shares in Metro Bank have slumped from 4,000p to under 100p in two years, but it’s still not a bargain. Lower interest rates are bad news. Its funding is skewed towards current accounts and the deposit base “has shown itself to be flighty in times of stress”.It hardly helps that the bank’s strategy “rests on an expensive branch-led model of growth”. And with the economy tanking, loans losses will rise. Sell. (90p)
Premier OIl
(The Times) The crash in the oil price has left Premier “over a barrel”. Early this year the North Sea-focused producer announced $871m of acquisitions to bolster cash flow and lower debt. The plan was based on raising $500m of equity. It all seemed fine with oil at $60 a barrel, but now it costs $30. Premier is cutting spending and renegotiating prices with sellers. It may breach quarterly debt covenants as earnings dwindle. The outlook is “hugely uncertain”. Avoid. (27p)
...and the rest
The Sunday Telegraph
The respiratory virus Covid-19 will put plenty of people off smoking. Even so, hold Imperial Brands, which is “a past master at eking out profits” from those who stick to the habit (1,628p).
Investors Chronicle
Meat packer Hilton Food Group will see disruption to its supply chains and people may well cut down on the amount of red meat they eat. Yet the varied range, business growth and “decent” forward dividend yield of 2.3% make it a buy (1,190p). Marketing company S4 Capital is in bullish spirits and “should be able to deliver”. Buy (204p).
Shares
Online supermarket Ocado “continues to confound its sceptics”, but future growth is priced in. Hold (1,900p). Social-housing investor Civitas Social Housing is trading at a slight discount to its net asset value (NAV). It’s a “buy for income seekers” (104p).
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