Share tips of the week – 8 October
MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
Five to buy
Mitchells & Butlers
(The Mail on Sunday) M&B has had “a torrid time” in the last 18 months. But now that the economy is reopening, “punters are making up for lost time”. Results for the last eight weeks showed that sales reached 104% of their pre-pandemic levels for the same period. The firm also has £64m less debt than two months ago. Note that majority shareholder Odyzean intends to override the wishes of other investors and back the re-election of a chairman that a quarter of total shareholders voted against. If you can get past that, “the shares are worth a sip”. 251p
(Investors’ Chronicle) The sun is shining for Serica Energy. The oil and gas producer had enjoyed a major increase in prices compared with 2020 even before the jump in gas prices in recent weeks. The company is responsible for around 5% of the UK’s gas output, and this figure will only go up in the coming years as Serica develops production facilities. Serica has also benefited from the rise in crude oil prices; crude accounts for a fifth of its production, while the rest is gas. Prices averaged nearly 150p per therm in September compared with 56p in the first half of the year. If this continues in 2022, the company should see an increase in cash flow. 214p
(Shares) Henry Boot grew to be a “prime contractor” for military buildings and hospitals during World War I. Today it invests in land and property, developing sites and erecting buildings. The growing demand for homes and offices in cities and suburbs all bode well for the firm. Results for the six months to June 2021 showed it possessed a land bank capable of delivering more than 92,000 residential homes and build-to-rent sites across the country. There was an 18% increase in sales to £129m and a 220% rise in profits to £23m. The founding family has a 46% stake in the business and a strong record on social and corporate-governance issues, another attractive trait. 281p
Bluefield Solar Income Fund
(The Sunday Telegraph) Bluefield Solar Income Fund owns and operates one of the UK’s largest portfolios of solar power, with 106 projects throughout the country. It recently raised £103m in equity to acquire 109 smaller-scale onshore wind turbines and battery-storage assets after shareholders called for diversification. It can now hold up to 25% of its portfolio in renewables other than solar assets. Just under two-thirds of its revenue stems from government subsidies, which proved beneficial when energy prices slumped during the pandemic and could imply a more stable and consistent dividend outlook. It plans to diversify into other renewables, and the rising appeal of environmental, social and governance (ESG)-related investments looks positive. 122p
(The Sunday Times) Playtech is responsible for the software that runs online gambling for betting companies and national lotteries. The recent sale of Finalto, its financial trading unit, for £185m brought in some cash and “removes what was... a sponge on its balance sheet”. The firm has struggled in recent years thanks to poor performances in Asia and Italy, but “it is clearly on the turn”. It has lucrative contracts in “gaming-mad” Latin America, under which it gets a share of the revenues, service fees and profits. It does not deserve to be valued at just seven times this year’s profits. 476p
...and the rest
Card Factory’s strong reliance on in-store purchases made for a difficult pandemic. Recently, however, customers have been spending more than before Covid-19, which has helped narrow losses. There could be plenty of upside if the group can make its online offering work, but that remains to be seen. Hold (55p). Motor-finance specialist S&U is back on track. It has seen a decrease in impairments and gained more insight into its customers’ creditworthiness. Almost 75% of the pre-tax profit estimate for the year to July 2022 has already been booked. Buy (2,890p).
The Mail on Sunday
Water company United Utilities’ latest update was positive. Hybrid working has benefited the firm as we continue to turn on the taps at home but are also using more water in the office now. However, higher inflation is raising operating costs. The 4.4% yield makes the shares worth holding, but they look a bit pricy at this level. Hold (969p).
The Daily Telegraph
It has been a lousy few months for London’s commercial-property market, and Great Portland Estates has suffered. But footfall in the West End increased by 12% in the month of August, while London’s growing workforce and the return of tourists will mean a rise in activity. The group boasts a solid balance sheet. Buy (754p).
Quixant, which makes devices that control pay-to-play digital gambling machines, has profited from the rise in casino and slot machine use. Sales in the first half of 2021 jumped by an annual 31% and losses narrowed. Plentiful cash should protect it from rising costs. Buy (174p).