Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK’s financial pages.

Three to buy

Cake Box

The Mail on Sunday

This cakes business was founded in 2008 to serve those whose religions restrict egg consumption, and today has 91 franchised stores nationwide. About 90% of customers don’t have dietary restrictions, suggesting that egg-free cakes can be as scrumptious as any other kind. Pre-tax profits leapt 73% in the year to March and the business recently floated on Aim, giving investors the opportunity to back an “aggressive” expansion plan. The stock is a “fun addition to a balanced portfolio”. 137p

Marlowe

Shares

Stricter health and safety legislation is increasing corporations’ awareness of fire prevention. The trend means “rapid growth” for this support-services business, which installs, tests and certifies complex fire, water and ventilation systems. Acquisitions and potential moves into new areas, such as asbestos surveying, also bode well. It’s a “superb” defensive stock. 426p

MoneySupermarket.com

The Sunday Telegraph

This comparison website’s “increasingly odd” advertising campaigns involving “twerking businessmen” and the like at least keep it in the public mind. Yet its fantastic share-price run has been disrupted by profit warnings in the past year. The firm’s growth rates have been lagging behind rivals such as GoCompare, but forthcoming interim figures should lift “some of the fog” about the earnings outlook. The shares trade on 17 times next year’s forecast earnings – cheap for a technology stock – and a private takeover is always a possibility. 315p


Three to sell

Debenhams

Investors Chronicle

A third profit warning in six months increases our fears for the dividend at this high-street stalwart. Management’s efforts to revamp stores have been hampered by a persistent downward earnings trend and a “disastrous Christmas trading period”. High-end and online retailers are gobbling up UK apparel market share. A dividend cut would be the “sensible thing to do”, but would be taken badly by the market. Sell. 16.75p

Stagecoach

The Times

Shares in this transport group have slumped from 400p in 2015 to south of 150p on the back of a disastrous performance at the East Coast mainline franchise, which the government temporarily renationalised in May. Remaining rail franchises are due for renewal in 2020, raising the possibility that Stagecoach could lose all of its trains and be forced to fall back on a bus business that faces its own headwinds. A lowered dividend makes the shares even less appealing. 139.75p

IWG

The Times

This serviced office provider claims to be “leading the flexible workspace revolution”, but we beg to differ, says The Times. There have been two profit warnings in eight months at the Regus owner, which struggles with an image as a provider of “drab meeting rooms, wilted potted plants and clunky desktop computers”. There have been attempts to tap into the co-working trend, but they have the feeling of a firm “madly scrabbling to catch up”. Better sell now than wait for the current bidding war to produce a takeover. 315p


…and the rest

The Daily Telegraph

“Recruiter with a difference” FDM fills vacancies with clients by “training people from scratch itself” and is equipped to supply a tight market for
IT jobs (993p).

Investors Chronicle

Buy the dip at Chilean miner Antofagasta to gain exposure to tightening global copper supplies (1,011p). A recovery in prices for agricultural products is good for farms supplier Wynnstay (473p). UK “quantum dot” technology leader Nanoco has a history of overpromising, but looks good value at the current price (42p).

The Mail on Sunday

The outlook for Royal Mail is uncertain, but income seekers should hold for its near-5% dividend (505.5p).

Shares

Higher oil prices are bad news for cruise operator Carnival, but it is still a good long-term bet (4,395p). A reassuring trading update supports a positive view of over-50s specialist Saga (125.25p). Analysts reckon that hotel developer PPHE Hotel appears undervalued (1,410p).

The Times

Vehicle rental business Northgate is being boosted by a booming Spanish operation, which is offsetting lacklustre trading at home (399.5p). If there is a global trade war over car tariffs, Ford’s geographically diversified operations make it better placed than its rivals($11.52). Quilter, a wealth-management spin-off from Old Mutual, could appeal to growth investors (152p). Aim newbie Mind Gym offers exposure to a growing corporate trend towards outsourcing training courses (146p).


A German view

Aristocrat Leisure has hit the jackpot, says WirtschaftsWoche. The Australian group is the world’s top producer of gambling machines; its core business consists of slot machines for casinos. The takeover of a US rival has allowed it to become the biggest player in Las Vegas. The casino industry looks set for continued growth, given the healthy world economy. Aristocrat’s acquisition of Israel’s Plarium last year gave it a strong foothold in the mobile-gaming market, which is thriving on social networks. A fifth of sales will be made online in the year to October 2018. Over the past seven years Aristocrat has quintupled its revenues and increased net earnings by a factor of 12.


IPO Watch

Another “monster” initial public offering (IPO) is taking place in Hong Kong, says Hellie Detrick in Fortune. Meituan-Dianping, dubbed China’s “Amazon of services”, is going public  – hot on the heels of smartphone-maker Xiaomi announcing its $6bn listing. Meituan is hoping to raise $4bn. It is worth a total of $60bn, double the valuation last October, says Sherisse Pham on CNN, when investors including Chinese tech giant Tencent topped up its funding by $4bn. Meituan sells everything from film tickets to cab rides via its smartphone app, and boats 320 million users, with revenue in 2017 of ¥33.9bn, up from ¥12.9bn in 2016. It has yet to make a profit.