MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK’s financial press.
Three to buy
Photo-Me operates and sells photo booths and printing kiosks across
18 countries. The firm generates 90% of its business outside the UK and so offers a good hedge against Brexit uncertainty, and its expanding laundry unit means further diversification. Earnings have grown at double-digit rates for the past four years, and the stock yields an attractive 5.2%. 161p
The Sunday Times
Shares in the pharmaceutical giant slid 16% after it revealed a key cancer-drug trial had disappointed. The crash was exacerbated by speculation about the future of boss Pascal Soriot. Yet while it may take time for better news to come through, speculation about a possible bid from Novartis should keep a floor on the share price in the meantime. 4,456p
The Daily Telegraph
Insurers Just Retirement and Partnership merged last year to create Just Group, which offers traditional annuities and equity-release schemes. It has achieved its £40m cost savings target ahead of schedule, while former chancellor George Osborne’s pension reforms have led insurers to pull out of the annuities market. This should mean more business. 135p
Three to sell
British American Tobacco
BAT’s acquisition of US peer Reynolds American has completed. The deal should bring $400m in cost savings, and gives BAT a stake in Reynolds’ fast-growing Vuse vaping product, which is vital given that investors are questioning the long-term outlook for tobacco firms. Yet despite a dividend hike the stock only yields 3.5% at the current share price. “There is better income elsewhere.” 5,322p
Defence spending is rising, but that is unlikely to spark a turnaround at this defence contractor. Overly aggressive expansion has left the firm struggling to make a profit on recent contracts, including one to develop air-to-air refuelling tankers for the US Air Force. The shares could slide if there are further contractual problems. Today’s price “doesn’t adequately reflect the downside risk”. 136p
The Sunday Telegraph
This animal-genetics company breeds and sells genetically superior pigs and top-quality bull sperm to livestock producers worldwide. The market is excited about gene-editing technology, which may lead to more disease-resistant herds, but it could be years away from commercialisation. On 26 times earnings, the shares look expensive “given how many uncertainties exist”. Avoid for now. 1,734p
And the rest
The Daily Telegraph (Questor)
A share-price slide at consultancy and recruitment specialist Parity Group offers a buying opportunity for the risk-tolerant (10p). A hot summer has weighed on Cineworld, but its long-term competitive position remains robust (689p).
Business analytics specialist Relx “is a byword for solid reliability” (1,665p). Investors may be tempted to take profits after a strong run at private-equity business 3i, but management has an excellent track record of delivering high returns (935p). Shares in property investment and development trust Segro are not cheap, but the firm is well-placed in the fast-growing market for warehouses to service internet shopping (519.5p). Precision-instruments supplier Spectris is not cheap, but is worth buying for the long term (2,439p).
Lloyds has made further provisions for PPI mis-selling claims, but with margins growing, the dividend looks safe (67p). Dividends are growing at convenience chain McColl’s, but the shares still only trade on 12 times earnings (215p). Profits at construction firm Morgan Sindall are rising fast and the group’s diverse revenue streams give it more stability (1,270p).
Strong results at a US peer bode well for tool-hire business Ashtead (1,676p). Shares in veterinary-products developer Dechra are not cheap, but its “super-charged” growth prospects and recent acquisitions justify its rating (1,729p).
A French view
The market for Eutelsat, Europe’s largest satellite operator, is evolving fast, says French daily Le Figaro. Internet traffic is tripling every two years, video on demand has been boosted by high-definition broadcasts, and mobile connectivity is growing rapidly. The company delivered better-than-expected results last week, with CEO Rodolphe Belmer claiming it had “delivered or over-delivered on all our financial commitments”, despite like-for-like revenue slipping by 2.2%. Video dominates Eutelsat’s business, and it is betting on the growth of high-definition and ultra-high-definition video, says Le Figaro, while also “preparing to take part in the great battle of fixed broadband and mobile internet”, markets that “promise a bright future”. It trades on a price/earnings ratio of 15 and yields 5.2%.
New York-based celebrity chef Bobby Flay is planning to float Bobby’s Burger Palace. The restaurant group, which he founded in 2008, competes with fast-food chains such as Five Guys and Shake Shack. The initial public offering comes two and a half years after the latter went public, and 18 months after its shares plunged from $90 to $32. Flay plans to raise $15m via a Regulation A+ offering, which was first introduced in the US in 2015, and is designed to make it easier for small firms to raise money by cutting the paperwork involved (ie, no audited financial statements are required). The underwriter is small investment bank TriPoint Global Equities. The proceeds will be spent on expanding the US chain nationally and internationally.