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Press tips & headlines: Associated British Foods, Telford Homes, Gulf Keystone Petroleum

Here is a selection of today's business press headlines.
April 22, 2014

Research from Redburn Partners shows that markets have new–found faith in Primark, the retail arm of Associated British Foods (ABF). Yet investors may have cause to be wary. The company’s stock price has risen by 50 per cent over the last twelve months, in reaction to plans to expand its budget fashion chain Primark across the Continent.

However, and amongst several other factors to contend with, that business segment is now valued at 36 times’ its earnings. That is astronomical no matter how one does the maths. It is also far in excess of the valuation afforded by markets to the likes of Marks&Spencer, the UK’s largest clothing retailer, which generates twice as much turnover and profit. Hence, the stock may be primed for a fall, writes The Sunday Times’ Danny Fortson.

As if the boost to property prices in the east of London from the 2012 Olympics were not enough, Telford Homes (TEF) is also benefitting from the introduction of the Help-to-Buy scheme. Updating ahead of its annual results, the firm said it expects profits to more than double and to so do again by 2018. True, the stock is at the mercy of the London housing market, but to expect such a large increase in profits is not ridiculous. As of March 31st the firm was 98 per cent sold for the next year, 70 per cent sold for 2016 and 25 per cent sold for 2017.

The shares are trading on a price-to-earnings ratio of approximately 14.3 times’ forecast profits, falling to 12.3 times for next year and 10 times for March 2010, which begins to look cheap. For now, the London housing market looks well supported, so buy, says The Sunday Telegraph’s Questor column.

Contrary to the usual pattern, far from benefiting from its passage to a full listing oil explorer Gulf Keystone (GKP has seen a sharp drop in its share price over the last month. Then again, and by the company’s own admission, had it not been able to secure a $250m debt deal, eleven days ago, then it would have run out of money by May. Indeed, the investment case for the stock has always been one of ‘jam tomorrow’. “The day when it finally delivers still feels a long way off,” writes Danny Fortson.

BUSINESS PRESS HEADLINES:

AstraZeneca (AZN) has recruited the services of two Wall Street heavyweights to fend off any possible further takeover attempt by US rival Pfizer. The American company, for its part, has hired JP Morgan to advise it on a possible purchase. Shares of Pfizer actually gained on the news although default swaps on the firm’s debt hit a three-month high of 31 basis points on Monday. Analysts Stateside are divided over the likelihood of another bid for the UK outfit, although broker Citi considers it to be likely, The Daily Telegraph says.

Arriving at the Ukrainian capital, Kiev, US Vice President Joe Biden delivered a message of support for the eastern European country. That comes as the US is making preparations for another round of sanctions against Russia which may be imposed as early as this week. Moscow and Kiev are accusing each other of violating the terms of last Thursday’s agreement reached in Geneva, The Wall Street Journal reports.

The UK’s six largest energy companies have been urged by the Association for the Conservation of Energy to hand back savings arising from lower than expected spending on a household insulation scheme. A study from the group shows that the companies will carry out fewer insulation jobs this year under the Energy Companies Obligation, which will result in at least £245m in lower spend, according to The Times.

After an inauspicious start to the Easter bank, shoppers rushed into the shops on Sunday, with average footfall jumping by 12.1 per cent when compared with the same day last year. That followed an 8.2 per cent drop in comparison with Good Friday and Saturday of 2013, figures from Springboard showed. “People are naturally cautious about spending money,” the retail insights Director at the consultancy said, according to The Times.

In a further sign of a pick-up in housing, Aberdeen-based Stewart Milne is to build 5,000 homes across Britain in the coming three years. Those plans include a significant expansion in Edinburgh and east central Scotland. With over 30 sites under development in Scotland and the north-west of England the firm already has reservations running 25 per cent ahead of its own forecasts, The Scotsman says.

Better economic conditions have done little to solve the late payment of bills which has been plaguing small businesses, according to the Forum of Private Business. The organisation’s banking and finance survey showed that 29 per cent of respondents actually saw another deterioration in the average number of days past the deadline on which a payment is due, The Scotsman writes.