MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK’s financial pages.
Three to buy
Greggs
Investors Chronicle
This much-loved bakery chain’s push to transform itself into a food-on-the-go specialist has yielded impressive results, with returns on capital employed rising to more than 16.5% last year. And there is still “untapped potential”. January’s launch of the “headline-grabbing” vegan sausage roll shows that Greggs has a good feel for consumer trends, while a burgeoning click-and-collect operation looks very promising. The potential for special dividends adds to the stock’s appeal. 2,114p
Network International
Shares
Network International facilitates digital payments in the Middle East and Africa. These markets offer significant growth potential as governments promote a shift towards an increasingly cashless society. A larger rival entering the market is a key risk, but long-term local relationships and significant prior investments are barriers to entry. An apparently steep rating of 33 times this year’s earnings could prove a bargain if it delivers on excellent growth prospects; what’s more, a takeover bid is always a possibility. 554p
Workspace
The Sunday Times
All the buzz about American operator WeWork obscures the fact that Workspace has been offering similar flexible office arrangements for years. It may not boast WeWork’s glamour, but then neither does it have WeWork’s “eye-watering losses”. It made a £137.3m pre-tax profit last year from its 64 London properties, which house 3,000 different businesses. Strong population growth in London should provide a tailwind. 867.5p
Three to sell
Beyond Meat
Barron’s
This maker of plant-based burgers and sausages has delivered a “sizzling debut” since it listed on the Nasdaq in May. Growing interest in veganism and concern about the environmental effects of animal agriculture mean that its offering has hit a “cultural sweet spot”, with the shares rocketing 125% since flotation. Sales rose by 170% last year – but on more than 27 times 2019 forecast sales, the rating looks “excessive” for a business that is still lossmaking. There is also growing competition in the “alt-meat” sector. $102
Reckitt Benckiser
The Sunday Telegraph
This healthcare giant is looking a “little peaky”. Sales growth has been sluggish of late, with prominent consumer brands such as Strepsils and Durex condoms suffering as more consumers switch to cheaper own-label options. The group still has time to turn things around, but the way forward remains unclear until outgoing boss Rakesh Kapoor is replaced. Avoid. 6,395p
Metro Bank
Motley Fool UK
2019 has proved an “annus horribilis” for this challenger bank, whose shares have lost more than two-thirds of their value since January. The rerating followed the announcement of a £350m share placing to “patch up an accounting error”. The worry is that the problems could prove to be more systemic than initially claimed. Traders certainly think so – with 12.49% of its shares sold short, Metro is now the most shorted stock on the market. Yet a valuation of 21.4 times forecast earnings still doesn’t fully price in the problems. 677.5p
…and the rest
The Daily Telegraph
Recently floated essensys sells the software that helps flexible workspaces run smoothly. It is a “clever niche” in a fast-growing industry – buy (181.5p). Full-year results show that a turnaround at precision engineering firm Renold is under way, but a lowly share-price rating suggests that the market is yet to catch on. (30p).
Investors Chronicle
A forward price/earnings (p/e) ratio of 11 at wealth manager Quilter is cheap for a business in a growing sector less burdened by regulation than other financial service providers (132p). Dotdigital’s software helps firms improve customers’ engagement through personalised marketing campaigns. Growth and cash generation are robust and it is diversifying sales internationally (100p). Copper-gold explorer SolGold offers exposure to long-term demand for copper and could prove a takeover target (30p).
Shares
Pub and brewing business Marston’s has repositioned itself amid tough trading for pubs. It now accounts for 40% of the UK bottled-ale market and also offers a 7.3% dividend yield (107.2p). First-half revenue jumped 61% at wealth manager AFH Financial (385p).
The Times
Sub-prime lender Non-Standard Finance’s attempted hostile takeover of Provident Financial has collapsed under regulatory scrutiny. It’s Provident that has a bigger doorstep operation, longer track record, and better prospects (518p). The renamed BMO Commercial Property Trust (formerly Foreign & Colonial Property Trust) is worryingly exposed to the “crisis gripping the high street”: avoid (121p). Precision engineer IMI is suffering from downturns in its oil and gas, vehicle and nuclear markets: avoid (916p).
A German view
Investors expect the government to concentrate on infrastructure during Indian prime minister Narendra Modi’s second term, says WirtschaftsWoche. Enter Larsen & Toubro (L&T), the country’s biggest engineering and construction group, whose offerings range from tunnels and bridges to water-treatment facilities and oil platforms. L&T doubled its sales in Modi’s first five-year term and a record order book of $43bn presages plenty more vigorous growth ahead. A coastal motorway in the Mumbai area and the expansion of New Delhi’s airport are key current projects. State-owned investment group LIC is a major shareholder, which “can’t hurt” when it comes to securing important contracts.
IPO watch
German car giant Volkswagen (VW) plans to spin off its heavy-duty lorry division, known as Traton, with the shares to be listed in Frankfurt and Stockholm. It will sell 10%-20% of Traton’s shares. The initial public offering (IPO) was first announced in March, but was shelved when a volatile market thwarted VW’s attempt to sell a 25% stake for €6bn. This time the valuation will be less ambitious. Truck stocks trade on higher valuations than car stocks as they are less capital intensive. VW is on a price/earnings ratio of five. A higher multiple for Traton should also give VW’s shares a boost: the carmaker will still own most of the spun-off group, says Stephen Wilmot in The Wall Street Journal.