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Sunday share tips: Fenner, Compass Group, Morgan Sindall

By Digital Look

Date: Sunday 12 Nov 2017

Sunday share tips: Fenner, Compass Group, Morgan Sindall

(ShareCast News) - Fenner shares were a 'buy' for the Sunday Times' Inside the City column. The plastics engineering group specialises in the manufacture of conveyor belts, industrial seals, medical device components and other bespoke polymers in its Precision division. Having sunk to a six-year low early last year, as its traditional coal markets waned amid the green energy revolution, the stocks has rebounded in style along with crude oil prices.
Fenner will report annual results on Wednesday to show benefits of recent cost cutting in an improved dividend. Acquisitions are on the menu too, another potential attraction that did not look on the cards in recent years. One doubt is over who will replace long-time boss Mark Abrahams.

Compass Group was a 'hold' for Questor in the Sunday Telegraph as the caterer serves up an extra dollop of dividends but with premium-priced shares looking one of the more expensive items on the menu. Newly promoted Dominic Blakemore is donning the chief's hat in the spring after a long and prosperous stint under his predecessor. Some analysts see growth of around 5% for coming years with healthy cash levels allowing further special dividends.

Can Blakemore keep the successful recipe going? Compass serves several billion meals from office canteens, sports stadiums and other kitchens around the globe, with North America the main contributor at 58.5% of revenue in the first half of the year, with growth of 7.1% and operating profits up 7.6%. Full-year results on later this month after underlying sales growth accelerated to 5% in the third quarter if excluding the effect of Easter, with operating margin also improving in the quarter. "Strong" net new business was reported from North America, "good progress" in Europe, and a "challenging - but improving" for the Rest of World. Jefferies forecast almost 6% growth for the final three months of the year and said the margin gains could mean management's guidance is undercooked.

Morgan Sindall is a 'buy', said Midas in the Mail on Sunday as the office fit-out and construction group should be a beneficiary of the government's firm plans to upgrade UK infrastructure, along with ongoing focus on margins. The business began in fit-out work in the City, and this arm has remained resilient and profitable, with increases expected this year as market and margins grow. The construction and infrastructure division has focused on being more selective on contracts. Other units include regeneration and social housing, in partnership with housing associations and local authorities, as well as a small property services arm to offer repairs and maintenance as part of social housing contracts.

A November trading statement said full year results will be slightly ahead of expectations, with margins up in construction and fit-out, a £3.8bn order book and another £3.3bn for regeneration. Analysts forecast profits of £65m this year, rising above £71m next year, with a 42p dividend in 2017 and 46p in 2018. Management aim to increase the operating profit margin of little more than 1.7% last year to more than 2%.


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