Share tips of the week – 3 December

Six to buy

Grainger

(Investors’ Chronicle) Newcastle-based Grainger has been a residential landlord for over a century. Results for the 12 months to 30 September showed that it had added 1,300 new properties to its portfolio; 91.5% of them have already been let. Overall occupancy fell during the pandemic, but has recovered to 95%. The group is set to switch to real-estate investment trust (Reit) status, which would eliminate capital-gains tax liabilities incurred on asset sales and boost earnings. A forecast book value of 310p a share for the year to 30 September 2022 suggests that the market “continues to doubt the structural growth story. We don’t”. 313p 

CentralNic

(Shares) Internet-services firm CentralNic provides businesses with the tools needed to “thrive online”: website registry services, distributions and consultancy. Online marketing is a fast-growing sector: in the nine months to 30 September the division’s revenue jumped by 129% to $94.1m, with organic growth of 47%. To boost its expertise further it has acquired Germany’s Wando Internet Solutions. Despite the promising outlook, the stock’s valuation is “pedestrian”. 143p 

Pennon 

(The Daily Telegraph) FTSE 250 water-services company Pennon is looking to hike dividends by an annual rate 2% higher than inflation over the next four years, making it attractive for investors worried about rising prices. Pennon has started the second phase of its £400m share-buyback programme following the sale of its waste-management business. It has also reduced debt, leaving it with net cash. Demand for water and waste services will remain “relatively resilient” regardless of the wider economic picture. 1,237p 

Gentherm

(Barron’s) Gentherm has 60% of the global market for heated and air-conditioned seats; its closest rival has a mere 10%. Vehicle production worldwide has stalled due to a global semiconductor shortage, but supply-chain problems should abate by late 2022. Climate-controlled seating “is expanding to the mass market”: the technology was used in 18% of new cars in the US in 2020, compared with only 4% in 2013. The company remains convinced that it can reach $2.5bn in sales by 2025. $84 

Palace Capital 

(The Sunday Times) Workers are moving away from the capital, which bodes well for Palace Capital, a regional developer and landlord. The real-estate investment trust owns £262m of property in towns and cities outside London and lets to tenants such as Vue cinemas and Accor hotels. It maintained high levels of rent collection throughout the pandemic. Over the next few months the group could consolidate to “strip out back-office costs and free up cash”. The stock has been weak over the last five years, but it has bounced by 30% this year to a market value of £120m as investors have cottoned on to its potential. 259p 

Rainbow Rare Earths 

(The Mail on Sunday) China accounts for 75% of global rare-earth production and 95% of refining and processing. Rare-earth metals are key components of wind turbines and electric cars. The West is keen to reduce its reliance on China and Rainbow Rare Earths is a rare non-Chinese player in the sector. It is on track to become one of the largest producers outside China. A major project in Burundi looks promising and costs should be “relatively modest” as expensive underground drilling is not required. Analysts expect the stock to triple in two years. 13p

...and the rest

Investors’ Chronicle 

Online wine-retailer Naked Wines’ half-year results induced “a hangover” among investors. Sales grew by just 6% and the number of new customers fell despite a £21m investment in acquiring them. Sell (544p). Storage company Big Yellow Group’s shares are on an 88% premium to 2022 book value. Take profits now (1,580p). 

Shares

Financial and business-data group Euromoney posted unexpectedly good full-year results for the 12 months to 30 September: pre-tax profits jumped by 13% and the total dividend distribution was up 60% from the year before. Buy (1,002p). Marketing-technology group Dotdigital has upped forecasts after a record year. Covid-19 has accelerated the shift to digital platforms, and there is also “enormous post-pandemic scope for ongoing growth”. Buy (187p). 

The Daily Telegraph

Vimto-maker Nichols has continued to deliver despite “wars in the Middle East, Britain’s sugar tax and lockdowns”. It ended the first half of its financial year in June with no debt, £48.4m in cash and “a small pension surplus on its balance sheet”. Sales for the first nine months of the year are up by 17% year-on-year to £107m, ahead of expectations. The company understands the “challenges posed by inflation”, but it has a solid balance sheet and a good record. Hold for now (1,330p).

The Mail on Sunday 

Taseko Mines, a Canadian copper miner, has benefited from rising demand for the red metal. It produces 120 million pounds of copper per year and holds $190m of cash on its balance sheet. Shareholders who feel they have already been “well rewarded” could take profits, but with the stock at 151p they would be wise to retain at least half of their holdings.