Portfolio

Wednesday tips round-up: Babcock, Hornby, Playtech...

Date: Wednesday 26 Jan 2011

Wednesday tips round-up: Babcock, Hornby, Playtech...

Babcock bought rival VT last year and said investors would be looking at how well it performed. So far, it seems the integration is on track, with management confident of hitting a run-rate of £11m by the end of March.

Babcock also exceeded expectations on paying down debt following the VT acquisition. According to analysts, the stock is trading on a price of 10.8 times estimated full-year 2011 earnings, dropping to 9.4 times next year. It looks a solid buy says the Independent.

It has been a January to forget for Games Workshop, the maker of table-top war games. In the first week of this month, the company cited "difficult trading conditions" and warned that profits for the year to 29 May would be below market expectations. Games Workshop's wholesale business and niche customer base provide it with some shelter from a further fall in consumer spending, but its battles are over yet so hold says the Independent.

The ferrochrome market is picking up, with spot prices firming on signs of recovery in the stainless steel market. Ferrochrome is a key ingredient in the production of stainless steel, so an uptick there should underpin prices in coming months. This backdrop bodes well for International Ferro Metals, which boasts an enviable leverage to ferrochrome prices. The bad news is that IFM faces furnace problems, which makes it only a speculative buy says the Independent.

Hornby shares have slumped 11% after the group issued a profit warning. The company said it would miss full-year expectations because of a slowdown in sales before Christmas. As with other retailers, Hornby has blamed the snow. The current year earnings multiple is 10.1 times, but this will increase as analysts reduce their forecasts. There appears to be too much uncertainty for investors to put new money in the shares at this time. Hold says the Telegraph.

Its fans says that Playtech, a provider of online services, is bound to grow as gaming is increasingly legalised and regulated. There is, however, sometimes a reason why shares are poorly rated. Playtech carries with it a couple of legacy issues that still worry investors. A rating of about 11 times’ 2010 earnings and about ten times’ this year’s looks attractive, given the prospects for growth, but investors should be aware of the uncertainties says the Times.

Imperial Leather group PZ Cussons' confidence in the future mean the dividend is up 10%. The shares yield just short of 2% and sell on about 21 times’ this year’s earnings. A firm hold says the Times.

On the most pessimistic view, banknote printer and possible bid target De la Rue's pre-tax profits this year will scrape to get much above £30m, which puts the shares on a weighty multiple of more than 18 times’ earnings. A more optimistic scenario sees £45m. Even at these levels, little reason to chase says the Times.

Please note: Digital Look provides a round-up of news, tips and information that is impacting share prices and the market. Digital Look cannot take any responsibility for information provided by third parties. This is for your general information only as not intended to be relied upon by users in making an investment decision or any other decision. Please obtain a copy of the relevant publication and carry out your own research before considering acting on any of this information.

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