Sunday tips round-up: Gemfields, Old Mutual, JD Wetherspoon

11th Mar 2012 10:29

Precious stone miner Gemfields has embarked on an expansion plan which, to date, seems to be reaping good returns. Thus, Gemfields owns 75% of one of the world´s largest sources of emeralds, the Kagem mine in Zambia. Since its purchase three years ago the new management team has turned around the fortunes of the mine. In the year to June 2010 Gemfields delivered a maiden profit of $2.5m (£1.6m) and turnover of $19m from Kagem. Last year, profits went up eight-fold to $21m and turnover to $40m and the company hopes its emerald division will turn over $150m by 2015. Furthermore, the company´s chief executive, Ian Harebottle, has just completed the purchase of a ruby mine in Mozambique. Expected to be run along the same lines as the emerald business, there are high hopes that rubies will be delivering turnover of $150m by 2015 too. Gemfields even owns a sapphire mine in Madagascar, which is at an early stage now but could prove rewarding in years to come. No less interesting, demand for these precious stones seems to have picked up despite the economic malaise. Lastly, the company´s success at Kemba seems to rest on its chief executive´s decision to pursue a ´mine-to-market policy´, by which it helps buyers of its stones to find the best places to sell them, while in the process facilitating traceability; helping to cut counterfeiting and the use of illegally mined stones. Midas says: 'Shares are 29p and should jump on higher production of emeralds, rubies and sapphires. Buy.'Back in March 2009, Old Mutual was what you might call an undesirable investment. The financial conglomerate had scrapped its dividend after running into difficulties linked to an overzealous acquisition. Since then, the FTSE 100 group's management team - led by chief executive Julian Roberts - has slimmed down the business, exited markets and taken steps to pay down debt. Last year, Old Mutual saw operating profits rise 14% to £1.5bn, allowing the company to announce earnings per share up 13% to 15.7p and a total dividend up 25% to 5p. Curiously, Mr Roberts said the group is also poised to expand its interests in Africa, close to its domestic base of South Africa. The shares are a classic recovery play and should continue to benefit as its structure is simplified. Its focus on Africa should also entice daring investors, says The Sunday Telegraph´s Questor team. JD Wetherspoon shares have lost some of their fizz since the pubs chain warned in January that high costs were driving down profit margins. With almost 44% of revenue going straight out of the pub door and into the Treasury's coffers, investors wouldn't be blamed for turning to drink. However, Wetherspoon managed to present a relatively healthy set of half-year figures on Friday, with revenue up 8.4% and pre-tax profit slightly ahead at £33.2m from £32.2m. But analysts focused their attention on the outlook as Wetherspoon warned it would open 10 fewer pubs than expected in the second half and was likely to cut next year's growth plans to 20 to 30 new sites from a previous 50. Like-for-like trading in the six weeks to March 4 was also down 0.7%. Numis Securities said 2012 pre-tax profit could receive a slight boost from fewer pub openings but there are concerns about 2013 growth. Still, it's not yet time for last orders and Questor says hold.AB