SUNDAY Tips Watcher Alert (UK)

20th December 2009

Sunday tips round-up: Ryanair, Petrofac, Southern Cross

On Friday, low-cost airline Ryanair confirmed that talks had broken down with Boeing over the purchase of 200 new aircraft – and said it would not be ordering more. This means the company will start distributing its substantial cash pile to shareholders.

Problems in the global economy mean the group is likely to be loss-making in the next few quarters. However, it is highly leveraged to the upturn when it comes and, whatever you may think about its style, the business runs well. The shares are trading on a March 2010 earnings multiple of 18.8, falling to 15.2 next year. Buy says the Sunday Telegraph.

Care home operator Southern Cross is on the road to recovery and if all goes according to plan, quality of care should improve even as costs come down. Long term, more and more elderly people will need residential care and Southern should benefit, particularly if the improvement programme continues to deliver. The shares are 137.75p and should reward patient investors. Buy says the Mail on Sunday.

Petrofac designs and builds all the facilities needed to run oil and gas fields efficiently, it manages these facilities once they are built and even invests in oil exploration. Last week, it said profits after tax would be at least $330m (about Ł200m) for 2009, a year-on-year increase of 25%. Petrofac shares have been a good investment over the past 18 months and they should continue in that vein. Investors in need of cash may be tempted to sell now. Otherwise, hold says the Mail on Sunday.

Miner Hochschild's investments in other precious metal groups now account for 11% of total assets. This diversification into gold and other locations makes strategic sense. Hochschild operates four underground epithermal vein mines, three in Peru, one in Argentina and one open pit mine in Mexico. The outlook for precious metals remains positive as the outlook for the dollar is negative. The shares are trading on a March 2010 earnings multiple of 18.8, falling to 15.2 in 2011. Buy says the Sunday Telegraph.