Three weeks on from Brexit and the weakness of the pound is still the dominant factor in the list of share-tips from the national newspapers. On the plus side, this means that for the second week running, the vast majority of recommendations are positive, with five endorsements and only one warning to sell.
Tuesday
Intertek – Hold
Hold Intertek, was the message from Questor in the first share-tip of the week. The testing company has had a good run of late and the weaker pound is seen as having the potential to continue buoying shares for some time yet. Just 7 per cent of revenues come from the UK, although the benefit here largely seems to have been factored in, with the shares now trading comfortably above the target price set by many analysts. The company has the potential to grow through increased cross-selling to existing customers and also with acquisitions, although cost pressures among clients could see the resource division – which works with the commodity companies – struggle in the near term. It’s arguably too late to get on board now, but the column seems to think it’s not time to be booking profits either…
RPC – Buy
Tempus said investors should buy RPC. This is another stock that has fared well off a falling pound, with Monday’s well-received trading update adding further upside. Revenues for the quarter were significantly higher than expected – and that’s before the currency tailwinds are taken into account – and with further acquisitions planned, future growth looks likely.
Performance of stock over 1yr
Source: FE Analytics
Wednesday
Premier Oil – Sell
Tempus recommended taking profits in Premier Oil on Wednesday. The company is finally turning cash-positive and production is at a record high for the business, although it is struggling with lender negotiations as falling crude prices bite. An opportunistic purchase of some North Sea assets from E.ON has delivered real value to the stock over the first half of the year and although there could be more room to run here, the column clearly thinks now might be a good time to cycle out of any holdings.
Thursday
Icap – Buy
Buy Icap, was the message from Tempus yesterday. The company generates 73 per cent of its revenues in dollars and a further 14 per cent in euros, although the post-Brexit pound weakness is unlikely to have much benefit until hedging facilities expire in the next financial year. Volumes traded by the business continue to decline, but there’s good progress being made with the disposal of its voice broking business. Once this is gone, the remainder of the business is expected to grow as regulators move towards online platforms and banks seek to reduce risk. The column also ponders whether the slimmed down business could be seen as a takeover target in due course.
B&M European Value Retail – Buy
Questor said buy B&M European Value Retail. Poundland may have dropped out of public ownership, leaving investors who got in at the IPO nursing a 26 per cent loss, but the column clearly has higher hopes for competitor B&M. Not only did Poundland end up distracted by its acquisition of rival 99p Stores and the subsequent regulatory enquiry, but the company’s stint in public ownership also coincided with a relatively buoyant economy. The picture is now looking a little darker, but the chain is committed to further expansion and is also building a diversified presence in Germany. Using the 21.6 times multiple that Poundland was valued at for sale, B&M’s shares have around 25 per cent upside – the column clearly thinks that there’s plenty to like here.
Friday
Experian – Buy
Earlier this morning, Questor recommended buying Experian. Having released results yesterday, the overall situation remains positive for the data company, despite the risk of being hit by currency fluctuations and any weakening in consumer confidence in the UK. The company is innovating into new products such as health, fraud and analytics, and is also diversifying geographically. Analysts are eyeing a target price around 10 per cent higher than we are at now, too.
Supergroup – Buy
Tempus tipped Supergroup as a “buy”. What was once considered a fashion stock with a crazy valuation is now moving towards income territory, according to the column. Having only just started paying dividends, yesterday’s announcement of a special payment sent shares roaring ahead. The company is expanding in the US but the main focus for growth is continental Europe and the outlook is certainly positive. Shares may now trade on a 19 times multiple, which certainly isn’t cheap, but there are long-term prospects here, especially now there’s a dividend on the table.
