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Press headlines & tips: Mitie, FirstGroup, Eckoh

Find out which shares today's quality papers are tipping
August 14, 2012

PRESS TIPS:

After 25 consecutive years of growth outsourcing firm Mitie is highly valued but some in the City are wondering if the price has got ahead of itself, notes Tempus in The Times.

Monday's trading statement indicates that all remains well. Mitie concedes that the world is in a difficult place, but reports that the number of companies and public authorities looking at outsourcing plans and energy saving schemes is strong and sustainable. Broker Investec is happy to put Mitie on a forward multiple of 13 times earnings, meaning a target price for the stock of 310p a share, up from 295p. Late last year Tempus was wary of Mitie's rating of trading at 11 times next year's earnings. Holders of the stock should be happy to remain so, but we see no reason to change our caution (Last IC rating: Buy, 21 May).

The Lex column in the Financial Times has noted that shares in FirstGroup have been going like a train recently - the shares are up by more than a third in the last two months - and deduced that the market thinks the bus and train group is the favourite to win the West Coast rail franchise.

Success would improve the company's finances, at least in the short term, Lex says. Its net debt of £1.8bn at the end of March was a chunky 2.5 times its earnings before interest, tax depreciation and amortisation. If FirstGroup can tread the line between austerity-hit customers and truculent unions, it should be able to squeeze out better returns. It will need to justify the price, and investors will be watching closely - FirstGroup's shares have lagged behind Stagecoach and Go-Ahead over one, three and five years, Lex observes. As passengers might say, better late than never (Last IC rating: Hold, 23 May).

Winning contracts is turning out to be child's play for Eckoh. The speech recognition and associated payment solutions provider will announce this morning that it has bagged a significant deal with Kiddicare, the online baby products company owned by Wm Morrison, to provide secure card payment services over the phone.

Echoes of its troubled past - the company was at the centre of a TV phone-in scandal in 2007 - have subsided and the business, which has achieved double-digit revenue growth in the past four years, appears to be on track to hit that mark again. The glut of deals will also add some excitement ahead of its annual meeting on Wednesday. The shares have almost doubled since the start of 2011, notes Tempus in The Times, but still do not look pricey when cash on its balance sheet is accounted for (No recent IC rating).

  

Business press headlines:

Peter Sands, the chief executive of Standard Chartered, has flown to New York in a last ditch bid to secure a settlement and avoid a public showdown with US regulators over Iranian money laundering charges. The bank boss decided to intervene personally after a weekend of intense negotiations failed to persuade Benjamin Lawsky of New York State Department of Financial Services to water-down his ferocious attack on Standard Chartered. Ms Sands set off to America even though Mr Lawsky continued to leave the bank in limbo over the format of Wednesday's hearing and which executive he wants to appear. [The Telegraph]

Investors in Facebook, still reeling from the social network's disastrous stock market debut, are braced for further losses as the ban on early backers selling their shares begins to lift this week. In a staggered process which begins on Thursday and peaks in November, about 1.9bn shares - four times the current publicly traded number - will begin to be released from "lockup". Facebook's high-profile owners, from Microsoft and Goldman Sachs to U2 frontman Bono's venture capital fund Elevation Partners, will be free to sell the billions' worth of securities they held back from the initial public offering in May. [The Guardian]

G4S's failure to provide enough Olympic security guards has taught ministers that private firms are unsuited to providing many public services, the Defence Secretary has admitted. In an interview with The Independent, Philip Hammond said the G4S saga had caused him to rethink his scepticism towards the public sector - and made him appreciate there were some things that only state organisations like the Army could be relied upon to do. [The Independent]

Ministers are preparing to unveil a new package of measures to stimulate the flagging house-building sector next month, in an attempt to help drag Britain out of recession. The plan has been drawn up by Oliver Letwin, the prime minister's head of policy, along with Grant Shapps, housing minister, and Danny Alexander, chief secretary to the Treasury. It comes amid an unprecedented drive to stimulate housebuilding. Downing Street and the Treasury have instructed officials to come up with initiatives which could boost building by using the government's balance sheet, rather than by putting money upfront. [Financial Times]

Hotel operators across Europe are being forced to cut room rates to attract guests as the eurozone crisis hits corporate budgets. According to a biannual survey by Hogg Robinson Group, one of the world's biggest business travel companies, average room rates fell in several leading cities in the first half of this year, with Barcelona down 22 per cent and Munich down 15 per cent. Other eurozone cities under pressure included Dublin and Madrid, where the price of a room fell by 6 per cent and 2 per cent, respectively. Hotels in several destinations reported rates no better than flat. [The Times]

Inflation fell further in July, easing the pressure on household budgets, official figures are expected to show on Tuesday morning. The Office for National Statistics is forecast to say at 9.30am that annual inflation fell to 2.3 per cent in July from 2.4 per cent in June, driven lower by food and petrol prices. [The Telegraph]

Senior executives of pan-European defence group EADS were alerted five years ago about questionable payments made by one of its subsidiaries in Saudi Arabia to an account in the Cayman Islands that is now the subject of a criminal probe by the UK's Serious Fraud Office. [Financial Times]