MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK press.
THREE TO BUY
1pm: The Mail on Sunday
Small companies often need tailor-made lending packages, which traditional banks aren’t willing to provide. This alternative lender specialises in providing funds to small businesses. The sector is risky but 1pm has a good track record: bad debts accounted for just 1% of loans last year. Management has ambitious expansion plans and the firm’s wide customer base should provide a degree of resilience. 51p
Next: Shares
Upgraded profit guidance suggests there is a buying opportunity at this “fallen stockmarket darling”. Profit before tax dropped 9.5% in the six months to July amid tough trading in clothing retail, but growth online and improved product ranges mean that the run-up to Christmas may go better. The firm is buying back shares. Do the same while it’s unloved. 5,000p
YouGov: Investors Chronicle
The online market-research company has a track record of beating analysts’ expectations. The last few years have not been kind to the polling industry, but YouGov has come out better than most and sits on a trove of brand and media data that should enable it to maintain high margins at its data-products division. Buy ahead of next month’s full-year results. 265p
THREE TO SELL
Capita: The Times
This outsourcing firm was a good recovery pick in January, but the shares have since declined.
The group’s half-year figures disappointed. Changes in accounting standards meant that profits from last year turned out to be a third lower than reported. Add in large write-offs, and even though the shares trade on less than 12 times earnings, they are best avoided. 569.5p
Savannah Resources: The Daily Telegraph
The Telegraph’s Questor column tipped this miner amid hopes that the “Trump bump” would send metals prices soaring, but the White House has failed to deliver. And Savannah’s shares have failed to respond to rising copper prices this month. The market thinks that the business has spread its management and capital resources too thinly. Look for better opportunities elsewhere. 4.75p
Stobart Group: The Sunday Telegraph
Stobart started as a trucking business, but has since mutated into one of the FTSE’s “most bizarre conglomerates”, owning a fleet of turboprop planes, a mountain of woodchips and a former council depot in Rotherham. Some fund managers rate it highly and the yield is tasty, but the firm made an £8m loss last year. It can’t fund those dividends by cashing in investment properties forever. 284.5p
AND THE REST
The Daily Telegraph: Financial-services group Old Mutual is splitting up, but the share price doesn’t reflect its prospects after this (193.25p). Pest-control firm Rentokil has turned its business around and growth has improved of late (293.25p).
Investors Chronicle: Energy firm SSE looks cheap and offers a 6.8% forward dividend yield (1,419p). Fears over Brexit and retail uncertainty mean that shares in regional property developer Town Centre Securities are trading at a discount (300p). Shares in challenger bank Paragon are going cheap despite a growing loan book (410.25p).
Shares: Indonesian palm-oil producer MP Evans offers strong profits and dividend growth (745p). Sustainable-investment specialist Impax Asset Management looks even better after a
US acquisition (126.5p).
The Times: Support-services firm Babcock is more resilient than its rivals (846.5p). A recovery is underway at commercial vehicle-rental provider Northgate (424p). Speedy Hire has had three chief executives in the last few years, but the recovery is now established (51.75p). Avoid trading firm IG Group as it could soon face tougher regulation (648p). Leave troubled educational publisher Pearson alone, even at the current share price (576.5p). Shares in children’s services provider Cambian Group look expensive (200p). Drinks maker Diageo is doing well, but its progress is in the share price (2,426.5p).
IPO watch
Southeast Asia’s biggest-ever tech-sector IPO is in the offing. Games and e-commerce firm Sea, previously known as Garena, will list on the New York Stock Exchange to raise $1bn. The Singapore-based firm, backed by Chinese internet giant Tencent, is one of the region’s biggest startups and was valued at $3.8bn during a fundraising last year. Sea started out as an online gaming portal, but soon added a range of internet services including online retail, payments, and messaging. Its games portal had 40.1 million monthly users as of June 2017, with 12.9 million users spending an average of 2.3 hours every day on the service. Sea has grown its revenue from $160.8m in 2014 to $345.7m in 2016, while losses widened from $90.9m to $225m during this period.
An American view
“Oracle has hit a patch of turbulence on its way to the cloud,” says Jack Hough in Barron’s. The software giant, hitherto largely reliant on sales of programs that run on the client’s own computer systems, is finally rejigging its operations to allow for online, subscription-based delivery of its products and services. Revenue from the cloud business has grown quickly from a low base. The bigger picture is encouraging too. Oracle dominates relational database-management software, helping firms store and make sense of information. Recently, it also joined Microsoft and Alphabet in a race to build big data centres to compete with Amazon Web Services. Oracle is in a strong position with 400,000 customers worldwide, and, on a p/e of 16 times forecast earnings, it is cheaper than peers.