The Week In Review: Kazakhs merit a risky buy
Saturday 10 December 2005
Kazakhmys floated only last month, but next week it will join the FTSE 100 index of Britain's biggest companies. Privatised by the Kazakhstan government in stages after 1992, the company has 16 copper mines across three regions of the country.
Kazakhstan is oil rich and mineral rich, and one day will simply be rich. For now, it is among the lowest-cost places to mine. Kazakhmys is investing in new capacity and is expected to boost production by 50 per cent over eight years. Good relations with the government should mean opportunistic acquisitions on top of this.
The list of risks should put most people off. Mining is dangerous, and production can be lost due to accidents or technical difficulties. In addition, Kazakhstan, despite having been spared the ethnic violence of other countries in this region, is still a flawed democracy whose privatisations are widely resented.
Still, Kazakhmys is paying a market-average dividend, which mitigates some of the risks. For long-term, risk-hungry investors with cash to spare, buy.
Persimmon will become the UK's biggest housebuilder when it completes the £643m acquisition of Westbury. Persimmon is one of the most diverse of the housebuilders, both geographically and by type of home. But it has avoided too great a concentration on city apartment blocks, where the market appears somewhat rickety. Hold.
Unlike other pubs groups, which have lamented the consumer slowdown, Greene King is upbeat. It expects a strong Christmas period, which should also benefit from the relaxation of licensing hours. After a 23 per cent rise in first-half profits before tax and one-off items to £55.8m, and trading at about 12 times 2006 earnings, the stock is cheap compared with its peers. Buy.
Packaging is not highly profitable and even a dynamic new management team at API has struggled. After forecasts were downgraded in the autumn, profits for the year to 30 September still came in below the house broker's prediction this week. There has been progress on improving margins. But the latest results have been poleaxed by the Chinese tobacco industry, to which it supplies foil for cigarette packets. Investors are ruing the rejection of a 200p-a-share bid earlier this year. Avoid.
Aberdeen Asset Management, can look back on 2005 with pride. The group, brought low by the scandal surrounding split-capital investment trusts, has been reshaped as "the fund manager's fund manager". Thanks to the £265m acquisition of Deutsche Asset Management, Aberdeen is one of the best-balanced fund managers on the stock market. Buy.
Helphire has tied up a string of deals with insurance companies that offer replacement hire cars as part of their cover. So far, 40 per cent offer such a service, and Helphire reckons another 40 per cent are talking to replacement car-hire operators such as it. Meanwhile, the purchase of Albany last year has taken Helphire further into personal injury claims management and the organisation of vehicle repair, both lucrative areas. Hold.
Royal Bank of Scotland was highly rated for a time following its acquisition of NatWest in 2000, but meeting expectations may often no longer be quite good enough. Despite solid results this week, the shares remain lowly rated. But almost every sector analyst still rates the shares a bargain. Buy.
Alea, the Bermuda and London-based reinsurer, ran out of capital this summer and failed to persuade investors to give it more. It has spent the last few weeks selling off the remaining parts of its active business. As the company moves towards wind-up, money will be handed back to shareholders - compensating for the inevitable crumbling of the company's share price. But working out the true valuation is tricky. Avoid.
From a distance, Computerland UK's interim results do not look particularly impressive. The IT services group registered a 30 per cent slump in pre-tax profits to £800,000 and a 10 per cent fall in sales. But shareholders should not despair. By far the group's biggest division sees it offer organisations with a one-stop shop for their IT needs. This side of the business has registered growth in every one of the last 12 quarters and there is no reason to think this trend will not continue Buy the shares.
The above are recommendations from the daily Investment Column.
Shareholder friendly HBOS on song with big 2005 profits
Those of a sensitive disposition should avoid their TV for the foreseeable future. This week's stonking trading update from HBOS has given Howard, the cheesy bank manager from its adverts, something else to sing about.
The H in HBOS is Halifax, the UK's biggest mortgage lender; the BOS is Bank of Scotland. Across the group, stronger sales of insurance and investment products are offsetting the slower mortgage market. And the company's costs are among the industry's lowest. Profits this year will exceed City expectations.
HBOS has mounted a strong challenge to the Big Four high-street banks in current accounts and lending to business. But some in the City have begun to question where future growth will come from. HBOS has few operations abroad, but has been building up its international division.
You can trust its chief executive James Crosby to keep running a tight ship. Rather than spend big on expansion, he has given £910m back to shareholders so far this year, via a share buy-back scheme that boosts the share price. He plans to hand back £750m more next year. Plus dividend yield stands at about 4 per cent.
Shareholders after a safe investment likely to deliver solid income without too many frights need look no further. Buy.firstname.lastname@example.org
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