Three to buy
ITM Power
Investors’ Chronicle
Forecasts for hydrogen demand for the coming decade have gone from “speculative to hopeful and, now, spectacularly bullish”. The European Commission alone will have to invest £86bn to fulfil its goal to turn half of all hydrogen used in the bloc “green” by 2030. Electrolysis-unit manufacturer ITM Power is well-placed to benefit from this. Profits are not expected until 2026, even if a quarter of the hydrogen goals established by governments are met, but “its balance sheet should be up to the task”. The firm has plenty of cash and should not need to return to the market for more funding in the near future, even with “two new factories in the works”. This makes the prospect of shareholder dilution via an equity fundraising “unlikely to be a concern for some time yet”. 325p
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Jubilee Metals
The Mail on Sunday
Jubilee Metals started as a consultancy, advising miners on how to become more efficient, but soon realised there were “huge opportunities to be had from retrieving metal left behind through conventional mining techniques”. The firm expects to produce 44,000 ounces of platinum group metals and 1.2 million tons of chrome this year. It also has a process to extract copper from waste, which should go into full operation in the coming weeks. “Much of the hard graft has now been done.” 15.2p
Rightmove
The Telegraph
The property market has been booming, but property website Rightmove “has been a disappointment”. The shares have fallen 23% as investors fret about rising interest rates and the cost-of-living crisis. Yet demand is still “buoyant” for now and Rightmove’s services should remain popular among its estate-agent clients. A weaker market would hurt growth, but it has a high customer retention rate of over 91%. “Even in hard times, estate agents may face little choice but to stick with Rightmove.” 608.2p
Two to sell
GB Group
The Telegraph
It’s hard to say “anything but nice things” about this cybersecurity specialist. The latest full-year trading update prompted analysts to
increase their earnings forecasts. The business has a “good record of organic growth and has had a knack of finding good acquisitions”, including two recent deals in America and New Zealand. However its valuation “looks lofty”. The stock now trades on about five times forecast sales for the year to March 2023 and about 40 times earnings. This premium “can be justified” considering its record and the potential size of its target market, but that still “leaves little room for any unexpected disappointment… time to very reluctantly take profits”. 604p
Rank Group
The Times
Rank started out as a film-making and cinema operation in the 1930s. It had a few hits (Laurence Olivier’s Henry V and the Carry On series) but was transformed in 1956 when it formed a joint venture to distribute Xerox photocopiers outside of the US. After Xerox bought out that business in 1997, Rank “struggled to find a new identity”, until it ended up owning Mecca Bingo and Grosvenor Casinos. Last week, it issued a profit warning, saying it had been “squeezed by the working-from-home trend, a dearth of overseas tourists and belt-tightening prompted by rising inflation”. The shares aren’t expensive, but headwinds “look likely to continue well into 2023”. Sell. 108p
...and the rest
Shares
Shares in specialist sensor and testing equipment maker Spectris jumped 5% on the news it would sell a division and return the proceeds to investors via a share buyback. The stronger balance sheet leaves it well placed to invest in growth and R&D. Buy (2,951p). Strix is a world leader in the design, manufacture and supply of kettle safety controls. The market “has remained stubbornly against it” – in part due to lockdowns in China, where it sells most of its components – but there is “considerable scope” for share-price gains. Buy (218p).
The Sunday Times
Appliance retailer Marks Electrical has seen its shares fall steadily since it listed in November. But its balance sheet is cushioned by nearly £4m net cash, and sales surged 44% to £80.5m for the year to March 2022. Buy (91p).
The Times
Electrical retailer Currys may see profits struggle as inflationary pressures and falling real incomes weigh on consumer spending. Avoid (94p). Banco Santander is expected to reveal first quarter earnings per share of €0.13, up from €0.09 cents a year ago. This is primarily due to its expansion in South America and its dependance on individual customers rather than corporations. Buy (€2.79). Premier Inn operator Whitbread can benefit from the return to normality. Dividends have resumed a year earlier than expected. Buy (2,901p). Car dealer Inchcape is set for continuing strong demand. It expects profits to rise at least 25% in 2022, so a forecast price/earnings ratio of 10.9 and a yield of 3.7% do not reflect its potential. Buy (706p).
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