Thursday tips round-up: Sage, Brewin Dolphin

5th Dec 2013 07:44

On Wednesday software manufacturer Sage reported a 33m pound increase in free cash-flow for the full-year to 417m pounds. This is key as the company likes to return to shareholders. Indeed, the company´s Chief Executive, Guy Berruyer, said he does not expect to return another 572m pounds to shareholders this year. That does not matter, The Daily Telegraph´s Questor team says. That is because returns will still be healthy. Berruyer said dividends will continue to a grow at a six per cent per year pace. As well, the company´s Chief reaffirmed his long-term target for revenue growth of six per cent.The stock currently changes hands at 14.4 times forecast earnings, falling to 13.1 times next year, looking fairly cheap, Questor adds. As well, the estimates from analysts on which those projections are based are also pretty conservative, calling for revenue growth of only 2% in 2014 and 4% in 2015. "The balance sheet is strong, and the free cash-flow and earnings cover the dividend more than twice, so this looks like a handy place to park some cash. Buy," Questor told its readers.Almost three years ago Brewin Dolphin changed its strategy in a bid to get ahead of looming changes in the regulatory landscape. Hence, instead of concentrating on the acquisition of smaller fund managers it would now position itself as a pure wealth manager. Alonsgide improvements in its IT systems those regulatory changes meant there was an opportunity to provide better service to clients and fill the "advice gap" which was about to emerge in the financial services sector. As well, it looked to increase the proportion of higher-margin funds under discretionary management. In the year to end September discretionary funds under management grew by 17% to £21.3bn. A third of that reflected net new business gained. The company has also set challenging medium-term margin targets for its management team. The outfit has also pledged to payout up to 80% of earnings as dividends. The most recent final dividend rose by 20% to 8.6p, well ahead of market expectations. Its shares sell on about 16 times' earnings and offer a forward yield of about 4%. Yes, that multiple is a little high, but, "on the assumption those targets can be met, the shares look like good long-term value," The Times Tempus said. 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