It has not been a good week for markets, with the chaos in Greece sending shares plummeting. On the upside, it means there is now more value to be had, reflected in the fact this week’s share tips from Trustnet Direct are dominated by “buy” recommendations.
Tuesday
Rolls Royce – Sell
On Tuesday, Questor recommended selling Rolls Royce. The maker of aeroplane engines issued another profit warning on Monday, sending the shares plummeting. The company faces structural challenges as airlines go through fleet renewal programmes which mean for some clients it is a case of newer engines on planes needing less maintenance, while others are waiting for new engines that are currently being developed. The shares have fallen by more than one-third from their highs, but the column said they still aren’t cheap at 15-times earnings. Projections of falling profits aren’t helping the cause either.
Performance of Rolls Royce since peak
Source: FE Analytics
Monitise – Hold
Tempus said investors should hang on to Monitise. The company may have been a promising tech story until recently, but shares have collapsed by 80 per cent over the past 12 months. Clients have not been supportive of the move from one-off payments to a subscription model, while Monday’s full-year results reported revenues that were 10 per cent or so below target. However, Tempus said the company may be at a turning point as customers migrate over to the new system. The battering the shares have taken puts a “buy” note out of the question, but there are reasons to be cautiously optimistic.
Wednesday
Robert Walters – Buy
On Wednesday Tempus tipped recruiter Robert Walters, saying that while the shares look expensive, the company should benefit from rising business confidence. There is sufficient spare capacity in the operation to see fee income increase by up to 50 per cent, which means there is no shortage of earnings momentum, either. The business has ridden out the recession well – there is plenty to like about the future even if the stock is fully valued.
Interserve – Buy
Questor recommended investors buy Interserve, which is split between construction and property maintenance. Even though the former has not done so well recently, there is a strong order book and recent contract wins to cheer in terms of outsourced services. Revenues are growing well and profit margins are also getting larger. Shares trade on 10 times earnings and offer a 4 per cent dividend.
Thursday
Bwin.party – Hold
On Thursday, Tempus said investors should hold on to online gambling firm Bwin.party. It appointed advisers eight months ago to help a sale and a conclusion appears close, with two suitors left in the running. 888 Holdings and GVC Holdings are the interested parties and both are said to be tabling similar part-cash, part-equity offers, valuing the shares at about 110p – 10 per cent more than the current price. It hasn’t been a good five years for Bwin.party, but the column recommended investors sit tight and take what is on offer.
Fever Tree Drinks – Buy
Tempus also tipped Fever Tree Drinks, which controls 50 per cent of the world’s premium drink-mixer market. Shares floated last November at 134p and closed on Wednesday at 318p, having tacked on a further 10 per cent following some well-received earnings. Demand for craft gins is surging so the popularity of top-quality tonics is set to increase as well. Private equity backer LDC has sold its remaining stake but there is no shortage of momentum here.
Friday
Aveva – Hold
Tempus said investors should hang on to Aveva. The software firm’s share price shows it has been a rollercoaster ride over the past few years and rumours of a takeover drove the stock significantly higher just last month. These proved to be false and the shares fell a little, while the company’s heavy involvement in the offshore industry hasn’t helped either, with low oil prices weighing. It has a solid cash pile behind it and the shares are still well below their all-time high, which was hit before a profit warning last September. The stock may be high quality, but there is still a need for caution.
Unite – Buy
Questor said investors should buy Unite. Demand for student accommodation is not going to disappear anywhere fast and this stock makes for a good, asset-backed yield play. The shares have trebled in value over the past three years, with the firm building a solid foothold. The current dividend of around 2 per cent is also expected to rise by 15 per cent a year for the next two years. The column said there is still more to come here despite the rampant capital appreciation that has been seen already.
