MoneyWeek’s comprehensive guide to this week’s share tips from the rest of the UK’s financial press.
Three to buy
National Express
The Times
National Express is often grouped with other transport companies, but a decision to sell its British rail routes makes it a “very different investment proposition”. The UK rail sector is unattractive to many investors because of the uncertainty of the franchise system. Shorn of its rail interests, National Express can reduce risk and now has funds to spend on expansion in the US, Spain and elsewhere. 350p
Biffa
The Daily Telegraph
Waste-management company Biffa returned to the stockmarket last year after eight years of private-equity ownership. The shares trade on 12 times earnings, making them cheaper than those of international peers while offering a 3.7% dividend yield. The weak pound means that overseas predators are now circling. 183p
Town Centre Securities
The Mail on Sunday
This regional property firm owns retail premises and offices concentrated in northern and Scottish cities, including the Merrion shopping centre in Leeds. It is also involved in several developments that should bring in fresh revenue. This is a “family business and proud of it” with a history of solid dividends. Its non-London focus should make it more resilient than its peers to volatility in the UK property market. 277.5p
Three to sell
The GYM Group
Investors Chronicle
GYM Group’s disruptive business model generated excitement when it floated in 2015. It is now the second-biggest player in the UK’s low-cost gym market. Growth in this sector is still going strong, but companies in “hot” parts of the leisure sector have disappointed after overextending themselves. With the shares trading on 27 times 2017 earnings, any bad news is likely to see the rating slip. 194p
Coca-Cola HBC
Shares
Encouraging full-year results drove the share price up at this drinks bottler. Margins have improved and analysts predict special dividends and acquisitions for 2017. But HBC’s three largest markets – Russia, Nigeria and Italy – are unlikely to offer reliable growth.
The shares are trading on more than 20 times prospective earnings, “too rich a rating given a cocktail of risks”. 1,986p
Capita
The Sunday Times
Shares in the support-services giant have almost halved since September and relegation from the FTSE 100 is likely. Management grew revenues in the last decade with acquisitions, but that has left the balance sheet “riddled with complexity”. Forthcoming results look set to show “tanking profits and dangerously high debt”. The City is likely to remain sceptical. Sell. 577.5p
And the rest
Investors Chronicle
Engineering service group Renew Holdings offers a reliable income (440p). Software firm Sage dominates its market (633p). Small-cap engineer Renold may be about to turn the corner (56.5p).
Shares
Satellite operator Inmarsat has had a tough year, but the shares are attractive (702p). Premium drinks maker Distil is nearing a profit breakthrough (1.5p). Oil and gas play Pantheon Resources has good prospects (92.75p). Kraft Heinz’s failed bid highlights the “fantastic” potential of consumer goods giant Unilever (3,567p). Pensions-services firm Xafinity generates cash to fund good dividends (153p). Furniture and interiors specialist Havelock Europa has recovery potential (8.5p).
The Daily Telegraph
Shareholders in the newspaper and book distributor Connect Group – the former distribution division of WH Smith – who are patient enough to wait for its restructuring to pay off can enjoy a healthy dividend yield in the meantime (145.75p). Forthcoming full-year results could boost shares in media group ITV (202p).
The Times
FTSE 100 packaging specialist Mondi is well placed for the coming year (1,888p). Shares in business-to-business events organiser UBM should continue to make progress (759p). Housebuilder Barratt Developments has just extended its special dividend scheme for another year, putting the stock on an appealing yield of nearly 8% (517p).
An American view
Some 85% of the world’s transactions still involve cash, says Reshma Kapadia on Barrons.com. So companies such as Global Payments, which provides electronic payment-processing services for smaller businesses and charges a fee per transaction, are sitting on “a potential gold mine” as the world shifts gradually away from paper money. McKinsey estimates that the global payment industry will grow by a fifth between 2015 and 2020.
The company, which generates 30% of its revenue outside the US, is expected to grow earnings by a quarter this year, helped by a recent acquisition. This new line of business, integrating payment-processing systems into customers’ software to help them to handle billing and inventory management, is especially helpful for retaining customers.
IPO watch
Impact Healthcare is a real-estate investment trust (Reit) that is hoping to raise £160m when it lists on the main market of the London Stock Exchange this month. It has agreed to acquire a portfolio of up to 58 residential care homes with 2,558 beds for £152.8m. These will then be leased to established care home operators for an initial term of 20 years with an option to extend for two ten-year periods.
It will receive rent of £11.7m, with annual increases linked to the retail price index (RPI), subject to a minimum of 2% and a maximum of 4%. The Reit will pay quarterly dividends and is targeting an annual yield of 6%. It will also pursue growth through expanding existing homes and acquiring other properties. The shares are expected to start trading on 7 March.