Welcome to our summary of the weekend's quality press tips, provided on Mondays by Weekend City Press Review.
PRESS TIPS:
The Times
■ Tempus: Martin Waller says Tate & Lyle (TATE) rose 6p to 745p on bad news that was better than expected; falls in the price of sweeteners were offset by the falls in corn; further weakness would represent a buying opportunity (Last IC rating: Hold, 30 May).
■ Good Energy (GOOD) may be an opportunity if it can service its bond (No IC rating).
■ Wolfson Microelectronics (WLF), volatile in a volatile sector, closed on Friday at 152.75p, up 3.75p; the shares trade on 17 times earnings, and are at the bottom of their trading cycle, so the only way is up, but there may be further shocks (Last IC rating: Hold, 30 Jul).
The Independent
■ No Pain, No Gain: Derek Pain says veterinary products supplier Animalcare (ANCR), bought at 171p two years ago, and now 181p, show a poor return, but long-term prospects are bright, with broker Panmure Gordon setting a 245p target price (Last IC rating: Hold, 25 Sept).
■ Market Report: Buy Pendragon (PDG), 33.75p (Last IC rating: Hold, 6 Aug); Hold Serco (SRP), 528.5p (Last IC rating: Hold, 29 Aug); Sell Carpetright (CPR), 616.5p (Last IC rating: Sell, 26 Jun).
The Daily Mail
■ Investment Extra: Ian Lyall says the state of the economy will rest on the disposal of the state-owned stake in Lloyds Banking Group (LLOY), while the TSB divestment looks to be a good investment when, and if, it lists (Last IC rating: Hold, 17 Sept).
The Sunday Times
■ Inside The City: Danny Fortson says WH Smith (SMWH), 853p, is still basking in the afterglow of Kate Swann, but the shares are a safe bet - for now (Last IC rating: Buy, 12 Sept).
■ BP (BP.) finally has some good news, and the dividend income is fine, but the stock is in limbo for the foreseeable future (Last IC rating: Hold, 30 Jul).
The Sunday Telegraph
■ Questor: The Daily Telegraph says hold Tate & Lyle (TATE), 745p; the company has transformed since selling the sugar and syrups business, and, despite a cold US summer that hit profits, costs are falling and a nice 3.5 per cent forecast dividend is very reasonable (Last IC rating: Hold, 30 May).
■ Buy Energy Assets (EAS), 317p; the Aim-listed minnow is very high risk, but the smart gas meter installer will do well on energy efficiency demands (No IC rating).
The Mail on Sunday
■ Midas: Joanne Hart says Royal Mail should be well priced: long-term investors should buy for the yield, but keep a close eye over a competitive market and uncertain labour relations (Last IC comment: 3 Oct).
■ Income investors should take a look at Foresight Solar Fund, floating on Aim this month at 100p with a 6p dividend planned; the fund has a strong record and is a solid investment (No IC rating).
Business press headlines courtesy of Weekend City Press Review:
Cheap credit fuels boom in car sales
According to figures from the Society of Motor Manufacturers, credit accounted for 74.5 per cent of financing for new car purchases in the year to August, against a pre-recession level of 50 per cent, pushing sales to the highest level for over five years. The availability of cheap finance fuelling sales casts doubts on the depth of the consumer recovery, as consumer credit grows at its fastest rate since 2008, and car manufacturers' desperation to shift units sees them offering zero-deposit deals secured to the vehicle as car sales are expected to top 2.2m in 2013. [Financial Times, p.1]
UBS among several banks probed by Swiss watchdog over forex trades
The Swiss markets regulator, Finma, was reported to be investigating UBS and other banks over alleged manipulation of the $4tn daily global foreign exchange market. The Swiss competition regulator, Weko, is also said to be launching an investigation into a possible banking cartel over manipulated foreign currency exchange rates. The FT reports that the biggest FX dealers are UBS, Deutsche Bank, Citigroup and Barclays. [Financial Times, p.1]
Royal Mail will pay no tax for years after float
Royal Mail has built up a £2.8bn tax credit over several years of losses and payments into its pension scheme: tax experts estimate that the corporate tax bill for the privatised organisation could be covered for the next five to ten years. This is revealed in the fine print of the float prospectus, and there is no suggestion of wrongdoing by Royal Mail; the practice of using tax relief from previous years' losses is well-established. Shadow business secretary Chuka Umunna said: 'This disclosure of its tax position is another nail in the coffin of any claims by ministers that this is in the best interests of consumers and businesses.' The Communication Workers Union is balloting over strike action, but the earliest it can stage a walkout is 1 23 October, over a week after the listing. [Sunday Times, p.3.1]
Revealed: Whitehall's Serco hitlist
The Sunday Times reports that Jeremy Stafford, UK and Europe chief executive of Serco (SRP), is expected to leave as the company faces a Cabinet Office investigation into its largest contracts, including the £1.5bn deal to run the Atomic Weapons Establishment, a £55m schools inspection contract for Ofsted and a £400m deal to run the Defence Academy. The probe has been expected since Serco and G4S were accused of overcharging by millions of pounds on tagging contracts in August. Serco derives a quarter of its £4.9bn annual income from government contracts. [Sunday Times, p.3.1]
Ineos: cut pensions or plant will close
Ineos chief executive Calum MacLean said the company's Grangemouth refinery near Falkirk, from which comes almost all of Scotland's petrol and diesel, will close unless the 1,300 workers there agree to end the current defined-benefit pension scheme. Ineos wrote down the site's value to zero last month after losing £600m over four years, and the switch to a defined-contribution pension scheme was part of a £300m 'survival plan' published last week to save the plant. Workers at the plant, under the aegis of the Unite union, are to launch industrial action on Monday. Ineos moved to Switzerland in 2010 to cut its tax bill, but relocated the refinery to qualify for government assistance. [Sunday Times, p.3.2]
Google and Intel enter race to buy Blackberry
Google, Intel and SAP are reported to be in talks with ailing Blackberry over a bid or break-up of the smartphone maker, with the company's secure messaging system and its patent portfolio likely to attract interest. An agreement with Fairfax Financial, headed by Prem Watsa, could be derailed before the first round of the auction ends early next week, when interest must be registered. The Sunday Times considers Samsung, LG, Microsoft and private equity companies including Cerberus Capital Management as potential bidders. Last week, Blackberry was sued in the US for misleading investors; it was accused of issuing false statements to the stock market in an attempt to inflate its share price. [Sunday Times, p.3.3]
Tesco's Turkey ultimatum
Tesco (TSCO) investors are reported to be increasing pressure on the retail giant to either sell or take radical action to save its Turkish 191-store Kipa chain. Tesco last week revealed sales dipping by 5 per cent in Europe, with Turkey the worst hit area as sales plummeted by 12 per cent. Losses at Kipa are expected to triple to £60m this year, and investors including Harris Associates called for action; chief executive Philip Clarke 'has made it clear he does not want to quit Turkey', says the Sunday Times. [Sunday Times, p.3.1]
Carbon tax 'too expensive'
Both Tata Steel (TTST) and BASF (BFA) have warned that the carbon price floor levied on fossil fuels used in power generation is putting them at a competitive disadvantage. A £100m compensation package promised to protect energy companies from the tax introduced last April has been delayed pending EU approval, expected by the summer of 2013. If rejected, the tax may become unworkable. BASF said: 'It is an unsustainable policy that is damaging UK competitiveness. It should be scrapped'. The carbon tax was intended to encourage new low-carbon power plants such as wind farms and nuclear sites by making it increasingly expensive to run carbon-emitting coal and gas plants, but has failed to secure the low-carbon investment, while critics say it simply serves to push up the price of electricity. [Sunday Telegraph, p.B1]
Tesco chief needs to prove himself, say investors
Tesco (TSCO) needs to be more aggressive in its UK turnaround plan, a major shareholder has told the Sunday Telegraph, they 'believe the margin is sustainable with existing market share trends', and Philip Clarke is 'running out of time to prove to shareholders he is the right man for the job'. Tesco's biggest shareholders include Berkshire Hathaway, with 5 per cent, and the Norwegian sovereign wealth fund. [Sunday Telegraph, p.B1]
Hinkley nuclear deal hinges on profit sharing
After more than a year, talks with EDF over revenues for the proposed £14bn Hinkley Point C nuclear project are expected to reach a conclusion within weeks. Ministers are considering bearing some of the construction risk for the £14bn project, in return for a lower subsidy level and a share of the spoils if a refinancing leaves EDF enjoying bumper profits. The energy company will be guaranteed a 'strike price' between £90 and £93 for each megawatt-hour of electricity generated over a 35-year contract. The market price, currently about £50, will be topped up with levies on consumers' bills. [Sunday Telegraph, p.B1]
