Whitbread (WTB) looks like a reliable investment despite the imminent departure of Chairman Anthony Habgood, Matthew Goodman said in the Sunday Times’s Inside the City column. The company was a mess when Habgood took over in 2005 but he has sold peripheral businesses to focus on Premier Inn and Costa Coffee. Some analysts fear Costa has reached saturation point but Barclays thinks Whitbread shares could rise from £42 to £70 as it starts to reap rewards from overseas investment. A second, cheaper hotel brand called Hub could also ease worries about growth prospects. The stock could pause for breath but it looks like a decent long-term bet.
Buy Petra Diamonds (PDL), Questor recommended in the Sunday Telegraph. The shares are up 51 per cent since Questor recommended them in September and following the discovery of a walnut-sized blue diamond the tipster is sticking by its opinion. The potential price Petra will receive for selling the gem could wipe out Petra’s debt as it invests in upgrading its old mines. It has already said that production in the first nine months of its financial year was up 26 per cent.
Buy Empiric Student Property when it floats this week to tap into demand for more upmarket student housing, Midas advised in the Mail on Sunday. The management team will use £80m of the flotation proceeds to buy 11 properties to add to its existing fully occupied housing. In the UK’s 27 top university cities, 96 per cent of non-first years have no access to purpose-built housing. Many are prepared to pay to be near city centres, including 300,000 international students. Investors can expect a 6 per cent dividend yield in the first year and capital growth as rents rise and development properties come into use.
St Ives’ (SIV) shares have had a strong run and the media group is trading at levels not seen since before Lehman Brothers went bust in 2008, Matthew Goodman wrote in the Sunday Times. The company has transformed itself from printing books and annual reports into a media consultancy, advising on digital marketing and other things. St Ives has grown through acquisitions, leaving questions about its strategy, but its imminent trading update should reassure investors of the logic in its deals.
Steer clear of PZ Cussons (PZC), the maker of Imperial Leather soap, Questor advised in the Sunday Telegraph. It is a quality company for the long term, withstanding recessions and rewarding investors through its dividend. But the shares are looking expensive, especially with growth slowing in Africa and Asia, where it makes about half its operating profits. Its expected annual profit would have been up to £12m higher without the impact of falling emerging markets currencies.
Take some profit from Synairgen’s (SNG) success but do not sell out of the biotech company entirely, Midas said in the Mail on Sunday. The shares jumped by 20p to 70p last week when Synairgen signed a $238m deal with AstraZeneca (AZN) for Astra to develop and sell its treatment to help asthma and emphysema sufferers who have a cold or flu. Midas recommended the shares at 28p in January 2010 and at 39p two years ago. There is plenty more upside for investors when the potential blockbuster drug goes on sale in a few years.
BUSINESS PRESS HEADLINES:
Royal Bank of Scotland (RBS) is in talks over a restructuring of its Ulster Bank unit that could overcome a hurdle to selling some of the government’s majority stake. The taxpayer-backed lender is working on a plan to attract private equity into Ulster to boost its capital position before the business is merged with another Irish bank. Permanent TSB, owned by the Irish government, is considered the most likely partner for the creation of an enlarged Irish bank. Any such transaction would enable RBS to cut its holding in Ulster below 50 per cent, where it would no longer have to consolidate the lender in its accounts. - The Times
Over the weekend it emerged that Medtronic is close to announcing a $50bn (£29bn) takeover of Dublin-based orthopaedic group Covidien. The move would rule out Medtronic as a potential buyer of Smith & Nephew (SN.). “All things being equal, Medtronic’s pursuit of Covidien will be unhelpful for Smith & Nephew’s share price,” Tom Jones, analyst at Berenberg said. “Smith & Nephew has been a takeover target since 1968 when Unilever tried to acquire the company, I would not be surprised if we have to wait another 46 years”. - The Daily Telegraph
France expects US industrial group GE to boost its offer for Alstom’s power assets as it battles against a rival joint-offer from Germany’s Siemens and Japan’s Mitsubishi Heavy Industries. Siemens and Mitsubishi Heavy Industries are putting the finishing touches to a joint offer for Alstom’s turbine businesses, which is understood to include a cash element of around €9bn (£7.25bn). Siemens has set a self-imposed deadline of Monday to make an offer. - The Daily Telegraph
Britain’s banks are short-changing thousands of small businesses who are seeking compensation for huge losses run up on mis-sold instruments originally intended to shield them from interest rate rises. The Financial Conduct Authority has told ten banks to compensate 19,000 small businesses that were recklessly sold highly complex financial products known as interest rate hedges. - The Times
Chinese investment in nuclear energy, high-speed rail and North Sea oil will be high on the diplomatic agenda when Chinese premier Li Keqiang visits the UK this week, building on what he has described as an “indispensable partnership” between the two countries. Lord Sassoon, chairman of the China-Britain Business Council (CBBC) told The Telegraph that securing more Chinese investment for critical UK infrastructure will be an important element of Mr Li’s three-day tour, which will include meetings with The Queen and David Cameron. - The Telegraph
The debate about house prices is reignited on Monday amid claims by Britain's biggest property website that prices for homes have come "off the boil". For the first time this year, the asking prices posted on the Rightmove (RMV) website for homes in London fell by 0.5 per cent in early June, compared with the month before, in part due to a rapid increase in sellers rushing to cash in on rising prices. In some areas, especially in London, prices may have hit an "affordability cap", the website said. - The Guardian
