Three to buy
(Investors’ Chronicle) Video-game developer Team17 benefited from the “twin effects” of lockdown and major console launches in 2020. Profits surged by over a third to £30m. The company’s own game launches generated around a fifth of its sales, while it also bodes well that the group has now completed the £12m acquisition of one of its partners. With at least 11 new titles in the pipeline for this year, Team17 should be able to build on last year’s growth. 755p
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(The Mail on Sunday) The prime minister’s pledge to spend £100bn on infrastructure in the next five years, along with similar initiatives worldwide, bodes well for global infrastructure businesses such as BBGI. It specialises in “essential assets” such as roads, hospitals and fire stations. The average contract is over 20 years long, guaranteeing long-term earnings. But the group is highly selective, only pursuing projects that conform to strict financial, operational and environmental criteria. The company has delivered consistent dividend and share-price growth since it floated in 2011. The stock is ideal for investors after “low-risk shares in an uncertain world”. 166p
(Shares) Luxury-goods group Burberry has announced that trading in the fourth quarter of the year to 27 March has exceeded expectations. The gradual reopening of the economy will boost fourth-quarter retail sales by around 30% year-on-year – impressive considering “free-spending Asian customers visiting other countries”, one of its key demographics, have yet to come back due to travel restrictions. The recovery has further to go. 2,129p
Three to sell
(Investors’ Chronicle) Last year was “dire” for Rolls-Royce. The aircraft-engine maker plunged to a £4bn pre-tax loss from a £583m profit the year before. Engine deliveries halved in 2020 as Boeing and Airbus cut production and are expected to remain low for the next few years. The group’s £1.4bn of net cash disappeared in 2020 and net debt will hit £4bn this year. Restructuring the aerospace business will be too little too late to compensate for a long downturn. 114p
(The Daily Telegraph) Brevan Howard, which manages BH Global, gave the latter’s board an “extraordinary ultimatum” in February, threatening to quit unless fees were doubled. With no sign of Brevan backing down, BH Global has offered investors an exit at 98% of net asset value (NAV) should the firm agree to the manager’s demands. Investors should take the board up on that offer and sell the shares. “Investors are already paying enough for Brevan Howard’s management.” 1,900p
(Forbes) IBM’s stock has dropped by a fifth in ten years compared with a 450% rise in the Nasdaq index. Sales have declined by 3% a year. IBM is “on the wrong side of the future of business strategy”, attempting to sell each customer “a combination of hardware, software, consulting and the ability to finance it all”. But clients’ needs have moved past that as technologies such as cloud storage are introduced. Until IBM comes up with products customers value more highly than those of faster-moving start-ups, it will not be a good investment. $129
...and the rest
GlaxoSmithKline is splitting its consumer brands from its pharmaceuticals. That should allow the drugs division to concentrate on research and development. But the company will have to “prove its pipeline can sustain a chunky dividend once it can no longer rely on toothpaste sales”. Hold (1, 298).
IT services provider Computacenter’s results were “surprisingly robust” given falling demand from industrial customers: public-sector clients picked up the slack. The need to solve issues remotely meant it saved on billable hours for travel and employed fewer people. Overall, management reckons the pandemic had a net positive impact on profits of £30m. Buy (2,348p). Engineering and services company Wood Group has recorded its biggest pre-tax loss in a decade. Most of the group’s business relies on the “struggling” energy sector. It is also grappling with corruption investigations linked to a 2017 acquisition. Sell (301p).
The Mail on Sunday
Mobile payments platform Boku allows users to buy music, games and films. Customers include Spotify, Netflix, and Apple. Since the pandemic began it has won new contracts. Last year saw $6.9bn of payments go through its system and growth is forecast for this year and beyond. Buy (174p).
IP Group, an intellectual-property specialist that invests in high-growth businesses, has just produced an annual profit and unveiled a “maiden dividend”. Net assets grew by 16% to £1.3bn in 2020. Buy (123p). Shares in Secure Income Reit are on a “sizeable discount” to net asset value (NAV) of 11% owing to its large holdings in the hotel and leisure sectors. But these are primed to benefit from the economy’s reopening, and the group should deliver then. Buy (35p).
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