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Press headlines & tips: Croda, Restaurant Group, Royal Dutch Shell

Find out which shares today's quality papers are tipping
November 2, 2012

PRESS TIPS:

Tempus in The Times writes that Croda is not as recession-proof as we thought, reporting weaker than expected third-quarter results. It has reported a stronger start to the fourth quarter, although it still cautioned that it expected its performance in the final three months of the year to be similar to the third quarter. The slowing of profits growth in consumer care, allied to a two per cent fall in its performance technologies unit, which makes things like lubricant additives, initially spooked the market. Still, provided October's sales rebound continues, there is no reason for investors to lose faith. Croda's focus on high-value niche markets with innovative technologies gives it pricing power while its strong cash generation and minimal debt burden means it can continue to make bolt-on acquisitions while considering share buybacks (Last IC rating: Hold, 24 Jul).

Tempus says that Restaurant Group, which runs Frankie & Benny's eateries at many of the country's biggest cinema complexes, reported record trading for the brand last weekend thanks to Skyfall and is licking its lips over the forthcoming launch of The Hobbit and the next instalment of the Twilight Saga. But yesterday's trading update suggests Frankie's is by no means reliant on a strong film schedule. Andrew Page, Restaurant Group's Chief Executive, said that the chain's trading had held up well during the summer despite a weak film programme and the rival attractions of Euro 2012 and the Olympic Games. The shares, up 2.2 per cent to 383p, are trading on a chunky 16 times' this year's earnings, but with a strong balance sheet and good cashflow, Restaurant Group is proving one of the recession's winners. Hold (Last IC rating: Buy, 1 Nov).

Royal Dutch Shell has ambitious plans to increase production over the next few years, and despite investor fears that the level of investment needed will crimp returns, Questor in The Telegraph feels confident this is the correct strategy for Shell to pursue. The most important thing for investors to consider about Shell is its cash generation. The company's stated strategy is to improve cash flow by 50 per cent to $200bn over the 2012-15 period. The quarterly dividend was increased by 1c to 43c and it will be paid on December 20th. The shares trade without entitlement to this payment from November 14th. The prospective yield in 2013 is a healthy 5 per cent. The company has the scope to increase its payments, despite its ambitious capital expenditure plans. Gearing stood at just 8.6 per cent, down from 10.8 per cent a year ago, so borrowings are very low. The shares remain a buy for income and delivery on strategy (Last IC rating: Buy, 27 Jul).

 

Business press headlines:

A slew of economic data from China and the Pacific Rim show that orders are picking up and trade is rebounding after the industrial recession of the past few months. The Baltic Dry Index, measuring shipping rates for commodities - watched as a proxy for Chinese demand - has come back from the dead, rising 50 per cent since July. Container freight rates on Asian routes have started to recover. The Danish group Maersk raised its shipping rates two weeks ago, and the Chinese operator COSCO followed suit on Thursday. The HSBC/Markit index for Chinese manufacturing jumped to 49.5 in October. It is still below the expansion line of 50 - for the 12th month in a row - but domestic orders have risen sharply, suggesting that the world's second-biggest economy is at last generating its own momentum. "China's manufacturing sector has picked itself off the floor but it is not moving with anything like the speed we've been used to over the past few years," said Mark Williams from Capital Economics, The Telegraph says.

The board of the Bank of England was kept in the dark for more than a year about a multibillion-pound scheme hatched by Bank executives to keep HBOS and Royal Bank of Scotland afloat at the height of the financial crisis. Details of how a plan to lend £62.5bn to the two collapsing banks was concealed from 12 of the 16 non-executive directors is contained in a report published today into the Bank's handling of emergency liquidity assistance operations in 2008. Questions about the governance of the Bank and the dominance of the senior team headed by the Governor, Sir Mervyn King, were raised by two other reports into the Bank also published today. One dissecting the Monetary Policy Committee's error-strewn forecasting track record said that the Bank's attempts to get to grips with its mistakes was insufficient. Officials needed to reflect "more deeply and more systematically" about how they had gone wrong, it said, The Times reports.

Standard Chartered and BBVA have joined the global banks that will be required to hold extra capital because of their importance to the world financial system, the Financial Stability Board announced on Thursday. Three banks, Lloyds Banking Group, Commerzbank and Dexia, have dropped off the list of 28 "global systemically important financial institutions". Dexia is being restructured and Lloyds and Commerzbank are shrinking. Banks on the list will be required to hold additional capital equal to between 1 per cent and 2.5 per cent of their assets, adjusted for risk, on top of the Basel III minimums, for a total ratio of 8 per cent to 9.5 per cent, starting in 2016. The Financial Stability Board, made up of regulators, central bankers and representatives of international bodies, plans to update its list of GSifis every November, and the methodology for determining which banks are systemic will also be reviewed every three years, the Financial Times reports.

China's central bank pumped a record $60bn into the country's money markets this week in an attempt to ensure that there will be ample cash in the economy to support the government's push for more infrastructure investment. The People's Bank of China was continuing its pattern in recent weeks of injecting a large amount of short-term liquidity into the financial system via its open-market operations. The net injection for this week came to Rmb379bn ($60.7bn), the highest weekly amount ever. The previous record was set in late September, just before a weeklong national holiday when demand for cash spiked. This time, however, there was no immediate prompt for the massive injection, apart from the central bank's determination to keep monetary conditions relatively loose, according to the Financial Times.

Commodity giant Glencore's controversial prediction that it could benefit from the impact of the US drought on harvests appears to have come to fruition, as it reported business has been "good". The FTSE 100 commodities giant said that its marketing division, which trades raw materials, had seen a "healthy" improvement in the third quarter of the year. Agriculture, which has seen the prices of many crops soar because of the severe drought in America, had proved "particularly strong", it said. Glencore has argued in response to criticism that its production and trading support the movement of agricultural commodities around the world, according to The Telegraph.