There is a bubble in initial public offerings (IPOs) that will cause awful losses for investors, the Sunday Telegraph’s Questor column said. Royal Mail (RMG), with its monopoly on mail and parcel delivery and prime London property holdings, was the exception to an IPO boom that has seen companies such as Just Eat (JE.), AO World (AO.) and Boohoo.com (BOO) valued at 100 to 200 times profits. Investors should ask if owners are investing for growth or cashing in and whether the business has a dominant market position or protected technology. Ignore most IPOs and the shares will probably be cheaper six months later.
Shares in McBride (MCB), which makes own-brand household cleaning products for supermarkets, look cheap but the company needs to tell investors how it will adjust to a market that has fundamentally changed, Danny Fortson argued in his Sunday Times column, Inside the City. Despite the economic recovery, people are buying fewer cleaning products and supermarkets are squeezing suppliers hard. Chief Executive Chris Bull will set out his strategy in June and needs to reassure investors there are no more profit warnings on the horizon. Panmure Gordon thinks McBride will have to freeze its dividend. “Buy at your peril,” Fortson concluded.
Buy shares of Lifeline Scientific (LSI), Midas said in the Mail on Sunday. The company has developed a machine that improves the transportation of kidneys for transplant so that they arrive in better condition. Hospitals save up to £30,000 per transplant because there are fewer complications and more kidneys from older and less healthy patients can be used. The company is expected to report sales up at least 10 per cent to $33.2m when it reports annual results in May. Profits will be about $1m because Lifeline has been investing. The shares should rise as use of Lifeline’s product increases, while the need for kidney transplants is growing.
Mothercare (MTC) cannot rely on customer loyalty and there is little to attract them to the mother and baby chain instead of supermarkets or online operators, Danny Fortson said in the Sunday Times. That is a problem, he said in his Inside the City column. Mark Newton-Jones is standing in as Chief Executive after Simon Calver left in February and the company is seeking a new boss. Fortson asks whether Mothercare’s time may simply have passed. The company publishes a trading update April 10th.
Stick with shares of Regenersis (RGS), the Mail on Sunday’s Midas column advised in an update on the electronics repair company. The shares have increased almost fivefold since Midas tipped them in October 2011. A new European law that will fine companies which fail to safeguard customer data will provide a new avenue for growth after Regenersis agreed to buy Blancco, a Finnish company that erases data from computers and phones. Analysts predict a 13 per cent rise in profit for the year to June 30th and the dividend is forecast to increase from last year’s 2.5p to 4p this year and 5p the year after.
BUSINESS PRESS HEADLINES:
Almost one year ago the International Monetary Fund (IMF) urged the Chancellor George Osborne to abandon austerity and implement a so-called ‘Plan B’ to stimulate growth. However, as he prepares to head to the US this week, for the IMF’s spring meetings, the Washington-based international lender is set to “upgrade the forecasts for the UK reasonably significantly”, government sources expect, which Osborne will use to claim fresh vindication for his economic plan, The Daily Telegraph reports.
Amidst increasing confidence that the economic recovery is for real, finance chiefs at the UK’s largest companies have turned the most bullish in six and a half a years. Now is a good time to take risk on the balance sheet 71 per cent of them believe, according to the latest survey carried out by consultants Deloitte. A year ago that percentage was at just 34 per cent. During the worst moments of the past financial crisis just 1 per cent thought the same. The upshot is that business investment may now be set to take-off, writes The Times.
Consumer spending slowed down noticeably in March, exclusive figures obtained from Barclaycard show, growing by just 1.1 per cent when compared with the year-ago period. That was the least in 14 months and the less than the rate of inflation. In fact, sales at shops actually fell by 0.3 per cent - their worst performance in a year – while digital sales were sluggish, expanding by only 6.4 per cent, the smallest gain since the end of 2011. The data covers half of all spending on both credit and debit cards, The Daily Mail says.
Telecommunications group BT has poached a Sky veteran in what amounts to a coup that may lead to increased frictions between the two outfits as they vie for broadband customers. Delia Bushell is to become Managing Director of BT’s key sports and television division, following 14 years holding several top jobs at BSkyB and Sky Italia, according to The Times. Bushell’s most recent responsibilities were as Chief Commercial Officer at Sky Italia, where she oversaw marketing and sales for its €2.5bn residential business.
The revolving door keeps turning at RBS (RBS). Soon after the departure of the group's Finance Director, Nathan Bostock, who is moving to Santander UK, investors are now eyeing who will replace Sir Philip Hampton, the current Chairman of the largely state-owned lender. It was thought that Hampton, who is expected to step down after next year's annual general meeting, might be substituted by either Sir Sandy Crombie or Brendan Nelson, two of the existing non-executive directors. However, Sir Sandy has played down speculation that he is in the running, The Scotsman reports.
Figures from Ombudsman Services show record increases in the number of complaints against energy firms. That follows closely on regulator Ofgem’s announcement that it was referring the energy sector to the Competition and Markets Authority for a full-scale competition inquiry. In the first three months of the year those complaints rose by 224 per cent when compared with the year-ago period, to 10,638, The Daily Mail reports.
