LONDON Wednesday tips round-up: Ted Baker, Bellway, Oxford Instruments

Date: Wednesday 16 Jun 2010

Fasion retailer Ted Baker's strong brand and distinctive product ranges appear to have lost none of their niche appeal.

Neither does a sharee price  of 510p, or 13 times earnings, look stretched for a company producing consistent double-digit profit growth, which has £15m of cash on its balance sheet, and which comes with a 4% dividend yield. Hold on says the Times.

Shares in Ted Baker now look pricey, trading on a 2011 price-earnings ratio of 13 times, a premium to the sector average of 10.5 times. Only dive back in when Ted Baker's shares represent better value, hold says the Independent.

Housebuilder Bellway yesterday reported that the uncertainty regarding the looming fiscal squeeze had resulted in a "slight reduction in both site visitor levels and weekly sales rates" since the election. The housing sector holds immense promise in the long term but the short to medium-term picture is clouded by the prospect of sharp public spending cuts, the possibility of a below-par economic recovery and continued weakness – in historical terms – in the availability of mortgages, so sell says the Independent.
Oxford Instruments is a very successful business, and yesterday posted a full-year profit of £27.4m, compared with £18.1m last year. Orders were up 22.4% and, crucially for investors, the dividend for the full year is 8.4p, giving a decent yield of 3.1%. Buy says the Independent.

Oxford took in a record £250m of orders, bolstered by a £40m deal to supply superconducting wire to the International Thermonuclear Experimental Reactor project in France. Looking ahead, the company says that research markets in Asia are growing strongly, and industrial demand has returned to pre-recession levels. Further, only 5% of sales are drawn from the UK, which will also bring a currency boost. Hold on says the Times.
Western Coal has one of the best production growth prospects around. The company plans to increase its output from 3m tonnes a year to 10m tonnes over the next four to five years. It plans to do this organically and without raising new money. It should be able to do this from cashflow. For a company that has low debt and a strong growth profile, the shares appear undervalued. They are trading on a March 2011 earnings multiple of just 5 times, falling to 4.3 in 2012. The shares are a buy for their growth prospects says the Telegraph.

The main reason to hold GlaxoSmithKline shares is for their income – they are currently yielding 5.2% – but the company should return to growth over the medium term. Glaxo has a three-pronged strategy to achieve this return to growth, after a difficult few years prompted by patent expiries. Trading on a December 2010 earnings multiple of 10 times, falling to 9.7 next year and yielding 5.2%, the shares are a solid yield play with growth potential. Buy says the Telegraph.
Hargreaves Services, the AIM-listed miner and distributor of the fossil fuel, yesterday unveiled a three-year deal to ship an annual 100,000 tonnes of coking coal from its Monckton colliery in South Yorkshire to the South African ferrochrome operations of Xstrata, At 610p, Hargreaves is valued at less than six times the forecast of current-year earnings — far too cheap if expectations of 18% profit growth are fulfilled. But while investors remain concerned that Hargreaves has lost focus, that discount is likely to persist. Pass says the Times.