Thursday tips round-up: Sage, Prudential, Babcock

3rd Dec 2009 06:17

The virtues of Sage ? a strong base of recurring revenues and tight management of costs ? remain intact. The pressure on sales is also likely to ease from here. However, at 221p, or 11 times current year forecasts, and yielding 3.5 per cent, their shares require something more than resilience if they are to outperform, says the Times.Shares in Prudential were recommended on February 24 at 288¾p and are now up 123pc compared with a market up 35pc. Shares in insurance companies are highly exposed to movements in the stock market, so the Telegraph's Questor feels that now would be a good time to take these profits.Babcock provides support services to the UK military and other organisations requiring its engineering expertise. It specialises in nuclear support services, railway infrastructure work and engineering for power transmission and oil pipelines. Babcock shares have presented a nice profit in a few short months so the Telegraph's Questor would like to bank these to reduce support services exposure.Numis looks extraordinarily expensive on conventional measures of value: its shares trade at 75 times the best guess of current-year earnings, against 17 times for Evolution and 12 times for Collins Stewart. That steep multiple elicited an "avoid" recommendation from the Times column in May, since when the shares have risen 18 per cent. An anticipated revival of IPO and merger and acquisition activity in 2010 is likely to send them higher still. Even so, at 171½p, up 10p, there should be better times to buy, according to the Times.The Independent says that while investors could do very well from Numis in the next year, it would wait for another positive update on trading. Hold.Staffline remains a small player, but the City expects it to make improved, adjusted pre-tax profits for 2009 of £3.5m. Partly as it operates in the recruitment sector, which has been badly buffeted by the recession, Staffline's shares now trade on a cheap 2010 price-to-earnings ratio of just five times Buy, says the Independent.Huntsworth, the marketing services agency, yesterday announced the $33m purchase of Dutko, the US lobbying group based in Washington. The attraction is that the deal is reasonably priced (at six times historic profits) and should enhance current-year earnings by 6 per cent. Payment in shares, a deferred consideration of £7 million pegged on future profitability, and the 9 per cent stake in Huntsworth taken by Dutko's vendors also suggest the pitfalls of similar US deals should be neatly avoided. At 65¾p, or less than eight times 2010 earnings, and yielding 4.3 per cent, buy, says the Times.The Telegraph's Questor really likes the Aggreko business - and it will be very successful over the longer term. However, Questor feels that the valuation is pretty full rights now. The shares were recommended on January 20 at 406½p and they are up 89pc compared with a market up 30pc. Now seems like a good time to take profits.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.