Tuesday, June 15, 2010

LONDON Tuesday tips round-up: Weir, Mothercare, United Utilities

Date: Tuesday 15 Jun 2010
British Pound symbol with flag on white illustrationEngineering group Weir issued a surprise update yesterday, revealing that trading over the nine weeks to the 4 June had been stronger than expected. Particularly encouraging was the disclosure that original equipment orders had begun to increase.

In terms of enterprise value to earnings before interest, tax, depreciation and amortisation, Weir trades on a multiple of 7.4 times. That compares favourably to a sector average of 7.8 times. Buy before that gap closes says the Independent.
3i stock is cheap enough to be interesting, but it will be a long time before the private equity industry returns to its glory days of the middle years of the last decade. As a listed group, 3i suffers from the sector's damaged reputation. Hold says the Independent.

What is really attractive about 
Mothercare from a long-term point of view is the group’s international franchise business in both Mothercare and the Early Learning Centre. The nice part about franchising is that it involves relatively little upfront investment from the company. The shares are trading on a March 2011 earnings multiple of 14.2, falling to 12 in the following year. The yield is 3.5%. The shares are once again a buy for the international growth says the Telegraph.
Cineworld is a cash-generative business with an impressive yield that offers growth opportunities as well. Yesterday the company unveiled a deal that will allow the full digitisation of all its UK and Ireland screens. The shares are trading on a December 2010 earnings multiple of 10.3 times, falling to 9.3 next year. Buy for the income says theTelegraph.

Anyone travelling on London's Underground system can't help but notice men in their twenties and thirties wearing 
SuperGroup's Superdry brand. And SuperGroup yesterday signalled its growing international ambitions by revealing plans to launch in the UAE this summer. While its shares trade on a 2011 price to earnings ratio of 14.4, we think this is a relatively modest premium to the rest of the retail sector considering SuperGroup's growth potential. Buy says the Independent.

United Utilities five-year commitment to raise the dividend payout by the rate of inflation plus 2%, modest inflation should actually suit the company rather well — its revenues are linked to RPI but it generates much of its own power and with government work in short supply, it can drive a hard bargain on construction costs. At 565p, up 5p, or 12 times earnings and providing a 5.3% dividend yield, tuck away says the Times.

In theory, online gamer 
888 is well placed to benefit if, as seems likely, the American ban is relaxed, possibly on a state-by-state basis, in the next 12 months or so. But there remains a sticking point: 888 has yet to agree a settlement with the Department of Justice, and recent guidance from the Nevada gaming authorities suggests its fledgeling tie-up with Harrah’s Entertainment, the Las Vegas casino group, could be at risk unless it reaches a deal soon. At 50½p, or ten times earnings, avoid says the Times.

British pound currency symbol on black vector flagThe Gulf of Mexico problems could cause a hiatus in spending on offshore technology, but engineer 
Hamworthy sells into Brazil, the North Sea and West Africa. At 301¼p, or seven times next year’s earnings, once £72m of cash is stripped out, hold says the Times.

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