The Week In Review: EasyJet flying high in the long term

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The Independent Online

EasyJet, the no-frills airline, this week boasted of a strong Easter having flown 2.85 million passengers during April, a 17 per cent rise on a year ago. The announcement follows last week's better than expected interim results when the airline raised its profit forecasts for the full year. Andy Harrison, the group's new chief executive, told the City to expect profit growth of 10 to 15 per cent for the year compared with mid-to-high single digit growth previously. This leaves analysts forecasting a pre-tax profit of around £95m, up from £67m in 2005.

Back in January, easyJet stock traded at well over 400p. Then many investors were betting on a takeover of the company. But this hope faded in April when FL Group, the Icelandic investment company, sold its 17 per cent stake at 338p and the shares have now fallen back to around this level. However, even without a takeover, the shares are a long-term buy.

DATACASH

Datacash, which helps companies authorise credit and debit card transactions, plans to buy Proc Cyber, a South African payment processor, for £62m in shares. This column tipped the stock as a buy in January at 125.75p. Since then they are up 35 per cent. Buy.

VERNALIS

The drug developer Vernalis shone with positive clinical trial data this week which brings it a step closer to expanding the use of its migraine drug Frova to treat headaches related to menstruation. The company expects to become self-financing by early 2009, armed with a strong portfolio of drugs. Worth a punt.

DIMENSION DATA

Dimension Data's first-half results contained headline-grabbing growth figures: revenue rose 16 per cent while operating profit jumped 33 per cent. But scratching the surface showed the South African-based IT services player was far less impressive at the margin level. Sell.

HICHENS HARRISON

Hichens Harrison, the City's oldest firm of stockbrokers, is to expand into the Middle East with an office in Dubai. Last year the group made an operating profit of £1.2m; 2006 should see a solid improvement. Buy.

SAGE

Sage is the great UK technology survivor. It's the only UK tech stock to have kept its place in the FTSE 100 since the tech downturn. After slowing organic growth in the first half, some investors may be getting edgy, but Sage is a proven performer. Buy.

ACAMBIS

The Cambridge vaccine maker Acambis is going through turbulent times. It went to court in Washington DC on Monday to fight a patent-infringement lawsuit that could endanger a lucrative contract to provide smallpox vaccines to the US government. Hold.

PREMIER FOODS

Premier Foods is hungry for acquisitions, with Robert Schofield, its chief executive, running the slide run over a number of possible deals. Meanwhile, the company's latest trading statement tthis week boasted of "positive sales development across our portfolio". The stock trades on a forward multiple of 12.5 and is underpinned by a 4.5 per cent dividend yield. Buy.

FIREONE

FireOne is one of the numerous companies to have its fortunes pinned to the success of the global online gambling boom and, like its clients, its shareholders have had plenty of highs and lows since it floated in London in June. Results this week were once again impressive. It may be a bumpy ride, but we reiterate our "buy" advice.

FINDEL

Not many home shopping companies have a profitable sideline in Bunsen burners. Findel is unique, with a strong educational division making up for poor retail sales. But group profits before tax fell 15 per cent to £35.1m last year after £17m in restructuring costs and amortisation. Take profits.

BIOTRACE INT'L

Biotrace's germ testing equipment is a defence against everything from listeria in food to biological warfare. Nato has awarded the group a contract to supply field laboratories which will test the air for nuclear, biological or chemical weapons. Not one for the faint-hearted, but for the brave, it is probably worth a punt.

Don't bet on 888's online gambling ambitions

888, which runs the Pacific Poker website, thinks it is in a better position than rivals such as PartyGaming and Sportingbet because it is less reliant on the US, where lawmakers' campaign against online gambling continues.

By driving business into Europe and other areas, it has cut the share of revenues it gets from the US to 55 per cent from 90 per cent five years ago, with the declared goal of getting it down to 20 to 25 per cent.

However, the company faces mounting competition, especially as PartyGaming has been expanding into casino games. And, unlike some of its rivals, 888 does not have a shared purse which allows punters to play different games using the same account, and needs to broaden its game offering.

It also faces an uphill struggle with its plans to buy a sports-betting business at a reasonable price. Given these concerns, investors would do well to take some profits.

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