Friday tips round-up: John Wood Group, RWS, Centamin

14th Dec 2012 07:23

Analysts were being steered towards a more cautious outlook for 2013 from John Wood Group, the energy services company, on Thursday, even if the latest trading statement is upbeat enough. The company has performed extraordinarily well during the global downturn. The engineering side has seen earnings growth in the 30% area in 2011 and this year as well. A note from Credit Suisse yesterday estimated that another of Wood's three divisions, production services, has grown earnings annually by 8% since 2007, in an industry where earnings elsewhere have yet to go beyond their 2008 peak. Furthermore, global spending on oil and gas exploration and production is set to grow by 6 per cent to 7 per cent next year, with Wood's business expected to comfortably outperform this. On a bit more than 11 times' earnings, they look like a good long-term bet, says The Times's Tempus column. RWS is probably one of the few businesses that floated nine years ago and have grown sales, profits and dividends each year since. The company provides translation and other services to corporates issuing patents in a variety of jurisdictions to protect their intellectual property. This is a growth area, especially in Asia, where western companies want to ensure that their products are protected against unlicensed competition. Meanwhile, RWS is starting the process the other way, signing up a couple of Chinese producers that want to ensure they can launch in western markets. Inevitably, patent applications rise and fall with global economic trends, but the long-term trend is upwards ? international patent applications were up 11% in 2011 on the previous year. The shares have been strong performers this year, up 22% despite an 8% fall yesterday on profit-taking. On 16 times' earnings, that looks like a decent entry point for long-term growth, Tempus believes. Over the past few years, Centamin has had the misfortune to become a poster child for the problems a company can face when it has just one asset. The share price has gone from boom to bust - rising from 22¼p in late 2008 to almost 200p two years ago before falling back to below 30p. The shares fell by 47% yesterday - having plunged as low 60% - as the company was forced to halt its mining operations due to a lack of diesel. This was caused by an "illegal" retrospective claim from its local fuel provider, Egyptian Petroleum Corporation (EGPC), which is refusing to authorise sales to Centamin's mine until this payment is met. Centamin's management has now got to the point where the layers in the government have to decide what's going to happen. Are they going to behave like Argentina and nationalise the asset - which would halt any foreign direct investment in the country in its tracks for many years to come. Such a move may scupper the $4.8bn (£3bn) IMF loan that Egypt desperately needs. There were a number of brave traders taking long positions yesterday in the hope that a quick rectification may result in a quick profit. The Telegraph's Questor team continues to rate the shares as a hold, as the risk has now increased. Please note: Digital Look provides a round-up of news, tips and information that is impacting share prices and the market. Digital Look cannot take any responsibility for information provided by third parties. This is for your general information only as not intended to be relied upon by users in making an investment decision or any other decision. Please obtain a copy of the relevant publication and carry out your own research before considering acting on any of this information.AB