MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK press.
Three to buy
Billington
Shares
This Barnsley-headquartered structural-steel specialist is an unsung small-cap hero. The UK construction sector has seen some high-profile profit warnings of late, but Billington has steered clear of trouble. Results this month could boost the shares, which trade on a price/earnings (p/e) ratio of 8.7 and yield more than 4%. 252.2p
Non-Standard Finance
The Sunday Times
Bosses at this sub-prime lender must be delighted with the problems at its larger rival Provident Financial. It has already poached more than 300 disgruntled Provident debt collectors, with many more likely to come. Door-to-door lending is a business model that “has withstood recessions, world wars and the 2008 financial crisis” and Non-Standard Finance now looks well placed to gobble up more business from the ailing Provident. 70.5p
NWF
The Mail on Sunday
This firm, once known as North West Farmers, is involved in three businesses with little overlap: manufacturing feed for dairy cattle, distributing fuel to rural homes and businesses, and transporting grocery products. NWF is a leading player in these business lines and is keen to increase its market share. It is well managed and has a strong dividend track record.
Three to sell
Interserve
The Sunday Telegraph
The arrival of new boss Debbie White at this struggling contractor may lead to a simpler strategy and the pruning of unprofitable contracts. Yet “in cutting through the unnecessary complexity of this business, there is no telling what nasties might emerge”. Hence we remain bearish for now, even though the shares are now down to barely three times next year’s forecast earnings. 170.5p
Provident Financial
The Times
The subprime lender’s shares saw the worst one-day fall in a FTSE 100 firm since RBS in 2009, on the back of a profit warning, a suspended dividend, an investigation by the regulator and the departure of boss Peter Crook. Don’t be tempted to hunt for a bargain. “There remains significant business and regulatory uncertainty and risk of more horrors being discovered.” 675p
Wood Group
Investors Chronicle
Wood’s all-share takeover of Amec Foster Wheeler in March was supposed to “lower volatility and add diversification and scale” to the oil and gas services company. Yet Wood’s traditional end market in the North Sea is in freefall. Add in the Serious Fraud Office’s corruption investigation into Unaoil, which has dragged in both Wood and Amec, and you have a recipe for uncertainty. Sell. 568p
And the rest
The Daily Telegraph
Special dividends from retailer Card Factory have taken the yield to 7.6% (3.54p). The market is overlooking brick firm Michelmersh’s bank of “fantastically valuable” building land (79p).
Investors Chronicle
US military contractor Raytheon will benefit from growing Pentagon demand for missile technology and cybersecurity ($177). Governance, risk and compliance (GRC) is a big threat for companies and GRC specialist Ideagen is well placed to profit (82p). Irish petrol-station operator Applegreen is expanding into the UK and has a strong balance sheet (485p).
Shares
Asset manager Standard Life Aberdeen looks well placed to deliver on the promise of its recent merger (430.8p). Audio visual equipment distributor Midwich is growing fast (374p). Capital Drilling shares are down as the Tanzanian government goes after miners, but don’t panic (39.5p). IT specialist Micro Focus is cheap for the technology sector (2,271p). Defence firm BAE Systems is a long-term buy (584.5p). Packaging demand will boost lightweight materials maker Zotefoams (327.5p). Character’s portfolio of toy brands makes it well placed for Christmas (470p).
The Times
BHP Billiton’s decision to exit US shale leaves a simpler company (1,401.5p). Cairn Energy has good development prospects in Senegal (180p). Sell EnQuest, which faces problems boosting oil production in the North Sea (29.5p).
An American view
“In a dangerous world, Lockheed stock looks like a safe bet,” says Barron’s. Lockheed Martin is the largest US defence contractor, with $47.2bn in sales last year and an order backlog twice that size. It may not look cheap, on a price-to-earnings (p/e) ratio of 20 times forecast earnings for 2018, but its sizeable order book offers “a solid foundation for future growth” at a time when geopolitical tensions are likely to lead to increases in US military spending: Donald Trump’s budget proposal for 2018 calls for a 9% increase in the defence budget. The linchpin for Lockheed will be the F-35 multi-role aircraft – under this programme, it hopes to deliver around 2,440 jets to the US armed forces and sell another 1,600 to allies. As F-35 production ramps up, margins should rise and free cash flow increase.
IPO watch
Music-streaming service Spotify has reached a long-term licensing deal with Warner Music, clearing the last big hurdle in its path to a public listing. After two years of negotiations, the Swedish firm has signed a deal under which it pays less money to music labels but restricts streaming of some new album releases to its paid service for a few weeks after launch. The company struck similar deals with Universal Music and Sony Music earlier this year. Spotify has rapidly been adding paid subscribers, reaching 60 million last month, outpacing streaming services from Apple and Amazon. The firm plans to list on the New York Stock Exchange later this year. Unusually, it does not plan to raise raise any new money from investors as part of the float.