The Week In Review: Bellway looks to build on success

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Bellway, the UK's fifth biggest house builder, has confirmed it is interested in acquiring Linden Homes. The group is expected to fetch around £300m, and Bellway has signed a confidentiality agreement.

There is no guarantee that a deal will be done, but the news followed a solid set of annual results from Bellway. It delivered a 3 per cent rise in pre-tax profits to £221m, on the back of a 5 per cent jump.

The group said it was particularly pleased to have held on to its 19 per cent profit margin, given the incentives housebuilders currently have to give to customers in order to secure a sale. This time last year Bellway had to offer cash discounts, part-exchange deals and free carpets and curtains to buyers. Market conditions have improved since then. Trading at a discount to peers, the shares are a buy.

CLINTON CARDS

Trading seems to be picking up at Clintons. In the 10 weeks to 8 October, like-for-like sales rose 1.8 per cent across the group. The Clintons chain enjoyed a 1.2 per cent increase, while sales at Birthdays soared 4.1 per cent. Although the group registered a full-year loss of £6.1m, the retailer claims to be well-placed for the all-important Christmas trading period. A recovery is on the way, but at 19 times forward earnings this seems reflected by its price. Hold.

TRINITY MIRROR

Investors should steer clear of newspaper group Trinity Mirror. So said Deutsche Bank this week. Why? Because trading conditions are dire in the UK newspaper arena. Deutsche believes the main hope for Trinity shareholders is a takeover of part or the whole of the business, but thinks a deal unlikely. Avoid.

CADBURY SCHWEPPES

Cautious words from JP Morgan knocked Cadbury Schweppes shares this week. The US broker believes the drinks and confectionery group's earnings forecasts look at risk. According to the latest market research data, Cadbury has been struggling to regain sales momentum in the UK chocolate arena since the salmonella scare it suffered in late June. And the worst may not be over for the company should the authorities, still investigating this summer's scare, take legal action. Avoid.

BULGARIAN LAND

Property prices are rocketing in Bulgaria. After decades of stagnation, the country's economy grew by 5.5 per cent last year and matched this performance in the first quarter of 2006. Bulgarian Land shares, listed on AIM, have drifted since their 100p listing. Laxey Partners, the activist investment firm, was last week reported to have used the weakness to take a stake. Buy.

CARTER & CARTER

Shares in Carter & Carter, a leader in government funded training, have gone like the clappers since coming to the market last year, giving investors a 213 per cent return. Results this week showed strong growth across the group, with full year underlying pre-tax profits more than doubling to £15.2m. C&C has an aggressive acquisition strategy but won't pay over the odds. Buy.

LEGAL & GENERAL

Life insurer Legal & General has proved a reliable bet for investors who followed our advice to buy the stock at the start of last year. The shares are up 20 per cent, with a dividend yield of more than 3.5 per cent. The shares are by no means over-valued, with L&G well positioned to take advantage of a UK market where the savings habit can only improve. But existing investors should take some profits, while new ones may want to wait for a better time to buy.

RIO TINTO

Rio Tinto's third-quarter output figures showed a sharp drop in the volumes of a number of commodities due to strikes and maintenance stoppages. Even so, Rio is expected to post a net profit of around $7.6bn this year, up nearly 50 per cent on its 2005 figure. This leaves the group's shares trading at just 8.6 times forward earnings, a substantial and unjustified discount to the wider FTSE 100, which is valued at 13 times.

RC GROUP

RC Group has developed a suite of technologies to deal with a good number of the terrorism problems the modern world faces. RC made a profit of £4.5m last year. This is expected to soar to £13.5m in 2006 and to £16.6m in 2007. At less than 10 times forward earnings, its shares are cheap particularly relative to Nasdaq listed peers.

MFI FURNITURE

Last year, there was a real worry that MFI Furniture might go to the wall. This concern only disappeared last month when the group sold-off its heavily loss making retail division for a nominal £1. What remains is the Howden Joinery business. It supplies builders up and down the UK from 362 depots. Although not the sexiest businesses in the world it is highly profitable. But the shares are highly valued. Avoid

HUNTSWORTH

Huntsworth, the international PR company, has increased its presence in Central and Eastern Europe via the purchase of Mmd Group. With its global presence the firm claims to be able to provide clients with a service in most parts of the world and in most sectors. In practice, the shares have performed poorly over the past two years and at 11 times forward earnings trade at a discount to its nearest rival, Chime Communications. This offers investors an opportunity. Buy

AXON GROUP

Axon Group is one of the best-regarded technology stocks traded on the UK markets and his week said that full-year profits would come in at around 10 per cent ahead of consensus expectations. Altium Securities said that the group's "astonishing performance" meant it has upped its forecasts 13 times in the past 26 months. Buy.

The above recommendations are taken from the daily Investment Column

m.jivkov@independent.co.uk

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