Thursday tips round-up: Carillion, Admiral, Serco

3rd Mar 2011 06:30

Construction and engineering group Carillion's annual results came in above expectations, with underlying pre-tax profits up by 7% to £122m, operating margins boosted to 4.2% and plans to hike the full-year dividend by 6% to 39.4p. Davina Mendelsohn, at Deutsche Bank, rates Carillion one of the cheapest support services stocks, with a forward earnings ratio of 8.8 times. That falls to nearly 8 times on the forecasts for 2012. Taken together with the strength confirmed by the results, this sort of valuation makes Carillion one to back. Buy, says the Independent. If Compare The Market's meerkats and Go Compare's opera singer irritate you, then spare a thought for motor-insurer Admiral's chief executive officer, Henry Engelhardt. Those niggling campaigns for rival price comparison sites gave Admiral's Confused.com a tough time in 2010. However,increased sales and higher market rates in the UK drove annual group pre-tax profit up 23% to £266m - slightly ahead of forecasts. But despite Admiral's success story until now, at more than 20 times forward earnings, the Independent thinks the stock is too highly valued. Sell, the paper advises.Similarly, the Telegraph advises avoiding Admiral. Despite Admiral's obvious attractions - the shares currently yield 4.5pc, although they trade on a rather rich price to earnings ratio of 19 - the paper believes there are better long-term opportunities for investors looking to invest in the insurance sector. Outsourcing group Serco has responded to the turbulence at home by expanding outside the UK, raising revenues by 9% in the Americas and 26% in Australia, the Middle East, Africa and Australia. A final dividend of 5.15p means the total is up a chunky 17.6 per cent to 7.35p. But, after yesterday's 4.6 per cent rise to 580½p, the shares are on more than 15 times earnings this year, which looks easily high enough, says the Times.The Telegraph disagrees. Wednesday's results reminded the market of Serco's resilience. The company is trading at 15.2 times 2011 earnings and a yield of 1.4pc. This is not strikingly cheap, however Serco has set out a stable road map of growth and seen off the worst sentiment. Buy, the paper advises.RPS Group is a consultancy group that works in energy, planning and development and environmental management, none of which turned out to be very helpful places to be in 2010. Prospects for the near term look uncertain. With the shares on about 12.5 times this year's earnings, no urgent need to chase, says the Times.Pub group and brewer Greene King, judging by its recent trading update, has coped very well. For the first 38 weeks of the current trading year, sales increased nearly 4%, an impressive outcome. A rights issue in 2009 raised more than £200m, which has been deployed through a most successful acquisition policy. Greene King's shares may not be the most exciting proposition, but look a solid longer-term prospect. Buy, says the Scotsman.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.