Thursday tips round-up: Admiral, Melrose, Pennon...

25th Aug 2011 06:41

Admiral's shares suffered yesterday, says the Investment Column at the Independent. The company reported high headline numbers: first-half profits of £16.6m were 27 per cent ahead of the same period last year, while turnover rose by 53 per cent to £1.1bn. But some analysts expected better for the shares to justify their lofty rating. Their main worry was the cost of big personal injury claims from prior years, which appear to have increased considerably. We said avoid back in March, with the shares at 1,665p. That has proved to be sound advice. However, even after their recent falls, the shares still trade at 17 times full-year earnings. Given that premium prices are slowing and the increase in those injury claims, the fact that the company is going to find it tough to maintain its growth levels, and our concerns over service, the shares are too pricey. Avoid, says the Independent.I rather suspect that Melrose will not end up owning Charter International, the business that the acquisitive engineer has been stalking since the latter issued several profit warnings in June, says the Tempus team at the Times. On Tuesday it emerged that a second bidder was looking, probably a big American engineer with interests in industrial welding. A cash offer, at a decent price, from a US business would be surely be favoured by fund managers, in these markets, over Melrose's cash-and-shares offer. A trade buyer, interested in the ESAB welding business and aiming to sell Howden, the highly regarded pump maker, should also be able to extract value more easily than Melrose could. The shares sell on ten times' earnings. If Charter is lost and no new shares have to be issued, that looks like a good entry point, suggests the Times.Pennon has two main subsidiaries, South West Water and waste disposal company Viridor, notes the Scotsman. Viridor has been growing rapidly over the past years and an increasing emphasis on environmental policy allied to the UK government's stated ambitions in securing renewable energy should prove positive influences. Viridor is also expanding through acquisition, recently acquiring a small recycling company in Cheshire; it is also investing in a 350,000 tonne waste plant in Cardiff. As a result, Viridor, which currently represents around 25 per cent of operating profit, is likely to see this increase in the coming years. With takeover prospects adding speculative frissons, Pennon looks worth investigating further at these levels, according to the Scotsman, which recommends a buy.Roger Cagle, the deputy chief executive of Soco International, insists that his assets in offshore Vietnam are not for sale ? yet, notes the Tempus team at the Times. The Te Giac Trang oil well started producing only on Monday, at 16,000 barrels a day; production will ramp up to 55,000 bpd by the end of the year. Soco might then consider offers, but until there is that degree of certainty, don't bother. Alternatively, Mr Cagle can truck on as he is, which would mean the return of some of that extra cash to investors from Soco, which does not pay a dividend. The shares, up 9p to 294.5p, are within pennies of where they were in the autumn, after they collapsed on a disappointing drilling update, which does not suggest much appreciation of the progress made in Vietnam since. As ever with oil explorers, highly speculative, warns the Times.Carillion, the building and support services group, is something of a jack of all trades, says the Investment Column at the Independent. If you need transport to a hospital, it often provides the ambulance, maintains the roads down which you travel, employs the porters who get you to the clinic and, finally, the people who keep that clinic clean. Yesterday's interims were ahead of some analysts' expectations, with first-half pre-tax profits coming in at £72.5m, 10 per cent ahead of the first six months of last year. Moreover, the shares are now trading at just 7.5 times the forecast earnings, with a very respectable prospective yield of 5.3 per cent. That's far too cheap for a business that boasts a rapidly growing pipeline and good opportunities. Buy, says the Independent.BCPlease 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.