Three to buy
Gore Street Energy Storage
The Mail on Sunday
The UK is a pioneer in battery storage systems, which allow energy from renewable power sources to be stored and released when needed. Gore Street Energy Storage Fund “is one of the industry’s leading players”. When the company listed in 2018 it had only one site, but today it has 25 facilities with storage capacity of 700MW. Battery storage “is a key component of a secure and renewable energy mix, but it is good business too”: contracts are lengthy and Gore Street’s customers, which include National Grid in the UK and EirGrid in Ireland, are “robust and reliable”. It’s targeting a 7% annual dividend yield and has ample opportunity for growth: the pipeline has a combined capacity of 1,300MW. The fund is raising £75m more at 110p per share and it’s a buy. 113p.
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Shares of recruiter Hays have lost 18% of their value since the start of 2022 despite record fees for the first half of its current financial year. They are likely to remain volatile due to global economic uncertainty, but Hays has a “solid financial position” with net cash of £237m and net finance costs covered over 13 times. The firm is highly cash generative and paid generous dividends before the pandemic. The current price “offers a relatively wide margin of safety in expectation of more difficult trading conditions”. 120.4p
The Fulham Shore
This restaurant group has come out of the pandemic as a “more resilient business” and will also benefit from “the number of competitors which fell by the wayside”. Franco Manca, its sourdough pizza brand, “has gone from strength to strength”, and both that and The Real Greek have “scalable business models” based on good-quality products, strong traffic and attractive prices. The hospitality industry faces many challenges, but this management team is one of the most experienced in the sector. Buy. 16.5p.
Two to sell
Beauty product retailer Brand Architekts’ merger with haircare and skincare company InnovaDerma “has a lot going for it”. The group will be able to offer a range of 18 products to a larger customer base and accelerate growth. However, the £13.6m acquisition equates to six times InnovaDerma’s net asset value of £2.2m, and is a 70% premium to InnovaDerma’s closing price before it was announced. That’s lofty considering the company’s operating loss of £950,000 and 10% lower revenue for its latest half-year. Brand Architekts’ share price fell 15% after the announcement, reflecting its own first-half operating loss and deeper revenue decline due to delayed product launches. While the company is making the right strategic moves, the board has overpaid at a time when consumer spending is most likely to decline and inflationary pressures are liable to stick around. Sell. 92.5p.
The social network has seen a sustained spell of underperformance against rivals Meta Platforms and Alphabet, partly due to scepticism about its ability to “monetise its millions of users”: its advertising revenue was $4.5bn compared with over $209bn at Alphabet and $69.7bn at Meta. Investors have seized on Elon Musk’s investment in the hope that he would “drive product and service innovation”. However, while his arrival “makes for good headlines… the battle lies in keeping users interested and better translating that audience into advertising sales growth”. Avoid. $46.23.
...and the rest
Coats is the world’s leading maker of threads. Demand is rising in Asia and the company is also tapping sustainability trends. Coats has a global footprint and a flexible supply chain. Buy (77p). Ryanair is Europe’s number-one airline in passenger terms, and is better equipped than its rivals to weather the sector’s volatility. The company is a good play on a travel recovery, with passenger numbers picking up. Buy (€13,66).
The Mail on Sunday
Mining-services firm Capital “makes most of its money digging for gold”. It’s benefiting from better sentiment towards the metal and looks “likely to continue in that vein for the next couple of years”. Buy (104p).
Rathbones’ appeal has been highlighted by the Royal Bank of Canada’s £1.6bn bid for rival wealth manager Brewin Dolphin. Buy (2,120p).
Drinks company Fever-Tree has strong global growth prospects and should benefit from bars reopening. The current squeeze on its share price could prompt a takeover from larger firms. Buy before they do (1,809p).
InterContinental Hotels has significant potential as hotel operators begin to recover from the pandemic. Its strong financial position should allow it to weather any further shortterm challenges. Buy (5,206p).
Order levels are recovering at promotional products supplier 4Imprint. Sales could return to pre-pandemic levels this year and that hasn’t been factored into the shares. Buy (2,875p).
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