Friday tips round-up: Royal Mail, Gulf Keystone, Dunelm

13th Sep 2013 07:00

Yesterday´s trading information from Royal Mail should help investors assess the company´s correct valuation, as should the information regarding the dividend policy and the footnotes on financing arrangements and industrial relations. Key details are still missing however, not least the precise size of the offering and flotation price. The prediction that there will be no growth in UK parcel volumes in the first half (although revenues will be well ahead) is worrying. Investors also need to assess risk factors, particularly as regards any impediments which may flow from any deals reached with labour or the immediate costs of any industrial action. Still, news that £200m would have been paid out in dividends in 2013/14 (had the company been listed throughout) hints at a yield in the 7-8 per cent range. That may offset a few doubts. Using peer group multiples, a market price tag of £2.5bn-£3bn seems realistic, the FT´s Lex column says.The fact that the usually volatile share price of Gulf Keystone remained within a reasonably narrow bound this summer, despite a legal tussle over the ownership of its Shaikan field in Iraqi Kurdistan and reports of boardroom tussles, is not a coincidence. This tells us two things. One, that no one really thought that the court case had much chance. Second, that the long-term view of Gulf Keystone has more to do with when, and not if, it is bought by one of the oil majors. Yesterday the company announced the appointment of Deutsche Bank to handle the move from AIM to the main market, a process delayed by the court action and other factors. There are two views on Gulf Keystone. You can take profits, as advised by a note from Westhouse Securities this week. Or you can stick around to await that expected takeover; though investors have been disappointed before. I am not convinced that Deutsche will see much in the way of fees from this one, The Times´ Tempus writes.Family-owned low-cost home retailer Dunelm Group is not the best-covered stock in the FTSE 250 and it has a low City profile. Yet that may be about to change as it prepares to launch a TV campaign initially aimed at areas in the South West, the Midlands and the North where it is a strong presence, probably going national next year. That is important as the firm, which now has 126 superstores - with a strong presence in the South West, the Midlands and the North - is committed to another ten and wants to get to 200 in due course, with many likely to be in the South East. Dunelm is growing margins by sourcing more stock in-house. Pre-tax profits were up 12% to £108.1m, and as well as that special dividend, a final of 11.5p makes a total 2p ahead at 16p. The shares, up 10p at 940p, have traditionally sold on a high multiple, about 20 times' earnings, but those growth plans would seem to justify this, Tempus says. 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