Wednesday tips round-up: Serco, Babcock, Stobart

13th May 2009 06:52

Outsource group Serco said yesterday that 2009 has started strongly and that it is on track to meet full-year expectations. The group trades at a deserved premium. The shares have come off a little since December, which now makes Serco a better punt. Buy says the Independent.There are some compelling reasons to invest in Intercontinental Hotels. The group, which owns Holiday Inn, is the world's biggest operator of mid-scale hotels. It has a $1bn marketing budget, which helps, as does the company's strong balance sheet and pipeline of 1,700 new hotels. But its market has not yet returned to health and there is more pain to come first. Avoid says the Independent.The longer-term dynamics behind support services group Babcock's growth remain intact. Several long-expected contracts, such as the deal to maintain and refuel HMS Vigilant, the nuclear submarine, have been signed, taking its order book to £5.7bn. At 480p, up 68p, or 11 times current-year earnings, and with profits set to rise more than 40% this year, a buy says the Times.Prior to the share jump, Babcock traded on a price-earnings ratio of less than 10 times next year's forecasts, a heavy discount for a seasoned performer. With Arbuthnot and KBC Peel Hunt setting a target price of 550p to reflect continued growth this year, the engineer still looks undervalued. Buy agrees the Telegraph.Capital demands of new projects explain why logistics group Stobart chose to lower its full-year dividend to 6p, from 8p previously. But the company also showed no ill effects from recession. Pre-tax profits were an above-forecast £23m. At 107p, up 9¾p, or 12 times next year's earnings, hold on says the Times.Recent volumes have ticked up at Magners cider group C&C thanks to the weather and off-trade promotions and, if forecasts for a warm summer prove accurate, the fizz may soon return to the shares. At €1.94, or ten times current-year earnings, buy says the Times.Lloyd's of London insurer Brit is having a whale of a time as a range of natural disasters last year pushed up premiums. The group reported yesterday that it raised its average premium by 4.6% in the first quarter and that it expects prices to continue to rise throughout the rest of the year. A discount of about 25% to the market is excessive. Buy says the Independent.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.