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Weekend Press headlines & tips: Provident Financial, Royal Mail, Spectris & more

Our summary of all the shares tipped by the quality papers on Saturday and Sunday
October 21, 2013

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 Provident Financial, £15.76, will earn less from its consumer credit division than from its Vanquis credit card wing; it has sailed unscathed through the crisis, and, while Vanquis goes from strength to strength, is making cost cuts in its doorstep business; the shares look attractive at 14x earnings and a yield of 5.3 per cent. • Spectris, £22.50, is still a longer-term buy, despite rising 26p since being tipped in April; the company is very cash-generative, and has reduced debt by £119m to £135m this year, freeing scope for acquisitions. • Royal Mail, at 330p had an attractive 6 per cent yield; at 502.5p, that yield is 4 per cent, and a less compelling hold: brokers' alternative recommendations were Centrica and Inmarsat (Brewin Dolphin), Centrica, GlaxoSmithKline, Royal Dutch Shell and United Utilities (Killik & Co); Waller tips Unilever and Vodafone as long-term holds.

The Independent

No Pain, No Gain: Derek Pain investigates the weakness of portfolio stalwarts Marston's and Whitbread, and decides the event was a stock market aberration as the shares rebounded, and hopes Spirit Pub Co will follow the same course.

Market Report: Buy STV, 296p; Hold Provident Financial, £15.76; Sell Man Group, 86.9p.

The Daily Mail

Investment Extra: Emma Dunkley looks at the departure after 25 years from Invesco Perpetual of Neil Woodford to start his own fund boutique, and observes that when a big name leaves a fund, money will follow, but incoming Mark Barnett has outperformed Woodford since 2006, albeit with a much smaller value fund. Other new stars tipped to watch are Kevin Murphy and Nick Kirrage at Schroders' Recovery and Income funds and Matt Hudson at Cazenove's UK Equity Income fund.

The Sunday Times

Inside The City: Danny Fortson says Stobart Group, 127.25p, have seen a low of 75p since it fell out of the FTSE 250 in March, but a rise leaving the company valued at £433m on Friday could soon see them back in the index, and make the shares a definite hold, and one to watch for new investors. • GKN closed on Friday at an all-time high of 371p, and is benefiting from record order books at Boeing and Airbus, and the revival of US car markets: the share has 'the wind at its back'.

The Sunday Telegraph

Questor: John Ficenec says hold BSkyB, 928p; the company continues to win new customers, but pressure on profits and a serious challenge from BT make the share a hold. • Hold SABMiller, £31.58; the brewer has a strong outlook across emerging markets, but expect a dividend yield of 2.2%, making the share expensive, and one for the long-term.

The Mail on Sunday

Midas: Joanne Hart says buy Aureus Mining, 30p, the shares have been unfairly punished by the market and should move higher as production nears and sentiment turns.

Update: Kentz Corporation, 526.5p, was tipped at 393.25p in December 2012, and brokers believe it can reach 600p plus next year: investors should hold, and there is value for new buyers.

Business press headlines courtesy of Weekend City Press Review:

Royal Mail valued at £5bn in June

The FT reports that at least two investment banks pitched a maximum price per share of 500p for Royal Mail in June, 50 per cent higher than that of the final offering. Government officials said a wide range of values had been indicated, with the higher bids coming from 'banks that were ill-informed abut the company', while anonymous banking insiders suggested that, while higher values are often presented in 'beauty parades', the discrepancy was unusual: discounts for large companies tend to be no higher than 20 per cent, and the market for public offerings had improved since the summer. Others suggested that valuations put forward at the beauty parade were highly speculative, says the FT.

[Financial Times, p.1 ]

D-Day looms for Grangemouth

Ineos is to decide on Tuesday whether to close its Grangemouth plant, which supplies 85% of Scotland's petrol and processes more than 10 per cent of North Sea oil. Chief executive Jim Ratcliffe said that without agreement between the company and the Unite trade union, the plant was 'almost certain to close'. The company claims that the plant loses £150m a year, and would require the 1,350 workers to accept changes to a final salary pension scheme that 'makes the site uncompetitive', while the union claim that the offer of 'sign or be sacked' is unacceptable. The plant contains Scotland's only oil refinery, and management want to construct a US shale gas terminal to replace dwindling North Sea gas, a process that, should agreement be reached, will take until 2016 to complete.

[Sunday Times, pp. 1.1, .3.1 ]

Qinetiq to break up with sale of US arm

The US Services division of Qinetiq, which accounted for £475.6m of the group's sales of £1.3bn in the year to 31 March, is to be put up for sale, and is expected to raise around from £300m potentially up to £400m, if private equity interest is high. US boutique shop Stone Key Partners have been retained to oversee the sale of what amounts to a third of the group, which was controversially floated in 2006 and has subsequently fallen below the 200p float price, closing at £193.3p on Friday, as it suffered from Pentagon defence cuts. Qinetiq reported a £137m pre-tax loss for the year to 31 March.

[Sunday Times, p.3.1 ]

Plan to split banks ‘will hurt recovery’

The British Bankers' Association has written to the Treasury pointing out that ring-fencing laws aimed at separating 'casino' banks from high street banks could inadvertently jeopardize economic recovery by barring banks handling exports for UK SMEs from providing many forms of trade finance, and offering the most basic form of foreign exchange contract. The legislation, claims the BBA, will make it impossible for ring-fenced banks to take out buildings insurance on their head offices or branches. Anthony Browne, chief executive of the BBA, said: 'We want the Treasury to look again at the proposals', which are part of the Financial Services (Banking Reform) Bill, implementing the findings of the Vickers Commission.

[Sunday Times, p.3.2 ]

£40bn of student loans on block

Rothschild and Barclays have been asked by the government to examine selling tranches of student loans to the private sector, beginning imminently with a £900m slice, and aimed ultimately at privatising the entire portfolio - valued at £46.5bn in April 2013. The move is controversial, and 13,000 signatures have already been gathered by an online petition against the action. The difficulty of recovering debt, and the likelihood of public outrage should the debt-holders try to crack down, may make it a difficult sell. The move is the third of three major privatisations being pursued by the Shareholder Executive, following those of the Royal Mail and Urenco.

[Sunday Times, p.3.1 ]

New nuclear plant to be given final green light

Ministers are expected to announce a deal to build the UK's first nuclear power plant in a generation on Monday, in the form of an agreement guaranteeing EDF Energy billions of pounds of future revenue for developing the £14bn Hinkley Point site in Somerset, with stakes taken, the Sunday Telegraph reports, by both China National Nuclear Corporation and China General Nuclear Power Corporation. The Chinese stake will be 30 per cent, with 10 per cent taken by Areva, the French supplier of the reactor, with EDF guaranteed £90-£93 per megawatt hour for 35 years from the plant's operation date of 2020. The station is expected to supply 7 per cent of the UK's total energy needs.

[Sunday Telegraph, p.B1 ]

Economic recovery proves QE working says Paul Tucker

Outgoing deputy governor of the Bank of England Paul Tucker said in his last interview that the recovery was evidence of the efficacy of quantitative easing, and the effects of the monetary expansion were at first smothered by eurozone problems. Mr. Tucker's comments came ahead of GDP figures that are expected to show growth of 0.8 per cent in Q3, the fastest since early 2010.

[Sunday Telegraph, p.B1 ]

Former Co-op chief faces fresh questions on why bank failed

The former chief executive of the Co-operative Group, Peter Marks, will be questioned this week by the Treasury Select Committee on the reasons for the losses that have threatened the business. The questioning will concentrate on remarks made by the former chief executive of Co-operative Bank, blaming the bank's problems on the way its loan portfolio was managed after his departure; evidence that contradicted that of chief executive of the Prudential Regulation Authority Andrew Bailey, who blamed the losses were due to the assets acquired when the Co-op took over the Britannia Building Society.

[Sunday Telegraph, p.B1 ]

Taxpayer lift as Royal Mail stake hits £1.5bn

The government has gained £500m on the value of its remaining 30 per cent stake in the Royal Mail after the share price increased from 330p to over 500p on early trading. Bankers who worked on the float blamed US hedge funds for the rapid rise in the share price, although no single investor has amassed more than the 3 per cent required to publish their holdings.

[Sunday Telegraph, p.B1 ]

Vodafone: EU roaming reform 'anti-competitive’

Vodafone has claimed that EC reforms designed to scrap mobile phone roaming charges across Europe are in breach of competition laws. The reforms are aimed at gradually offering incentives for operators to abandon roaming charges by July 2016 by allowing them to form cross-border partnerships; Vodafone insist these alliances would fall foul of EU antitrust regulations.

[Sunday Telegraph, p.B2 ]