Wednesday tips round-up: Barclays, Centamin Egypt, Cookson...

3rd Aug 2011 06:46

On the face of it, Barclays' interim figures were reassuring. Strip out the £1 billion insurance mis-selling bill and the absurd distraction caused by own-debt valuation, and the bank produced a respectable 24 per cent improvement in profits. Like all banks, Barclays faces serious headwinds from adverse new capital rules and is at the mercy of the wider economy: if growth continues to slow or turn negative, those bad debt provisions will start to pick up again. Much of the concern about banks in general and Barclays in particular is already in the price. The bank is forecast to make underlying pre-tax profits of around £5.7 billion this year, putting it on a multiple of about ten times full-year adjusted earnings and valuing it at 0.62 times book value. That's not expensive. But until the eurozone scare properly recedes and the ringfencing outcome becomes clearer, it would be silly to chase the shares any higher, suggests the Times.Yesterday, shares in Centamin Egypt fell by the most they have ever fallen in a day after the company cut its production forecasts. The statement was material - and pretty grim. Although the group's mine at Sukari is far away from Cairo and other trouble spots in the Arab Spring, it has not escaped the impact of the civil unrest. Despite the production problem, Sukari remains a high-quality asset with more than 9m of ounces of gold reserves. The share price is likely to remain depressed for the next few months until evidence of a production ramp-up from underground mining appears. However, despite the risks, the shares look very cheap. The shares remain a risky, speculative buy because of the world-class quality of the Sukari mine, says Questor at the Telegraph.Cookson, the engineering group, may not be the most fashionable of companies, but it has been something of a star for its investors - at least until very recently. The company has been buoyed by the continued rebound in the world's steel and electronics market, and, as far as the numbers are concerned, it is ticking all the right boxes. Yesterday Cookson again provided evidence that its recent success is sustainable. Pre-tax profits grew 27 per cent to £132.1m on revenue of £1.4bn, up 12 per cent.However, there is a perception among investors that the company may find it tough to hit its targets (Cookson is looking for a 12 per cent return on sales). If it loses its pricing power, that could happen. Then there are also the ongoing worries about the global economy, rising again thanks to the kerfuffle over America's debt in Washington DC. While we acknowledge the concerns, we'd point out that Cookson remains a fundamentally strong company. Moreover, putting the recent volatility aside, we can't ignore the fact that at their current levels, the shares look undervalued. Buy, says the Independent.The stock market kicking administered yesterday to Hargreaves Lansdown was ferocious. The shares fell almost 13 per cent to 506½p in the worst day for the company since it joined the FTSE 100 in March. The scare was over the decision on Monday by the Financial Services Authority to force investment platforms such as Hargreaves to disclose to clients the rebates they quietly receive from fund management houses and, possibly, eventually to ban the payments outright. Hargreaves, which has waxed fat on the back of these payments, is seen as vulnerable to any crackdown. Last year about £60 million, or one third of its revenues, came from such payments. Even after yesterday's sell-off, they trade on about 27 times forecast earnings for this year. But that racy multiple makes Hargreaves vulnerable to any negative story. The crackdown and the associated uncertainty will overshadow the shares for years. Avoid, recommends the Times.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.