The Week In Review: PayPoint pushes all the buttons, so it's time to cash in

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A bullish note from UBS sent PayPoint shares soaring 12 per cent this week. But the stock is still 25 per cent lower than it was three months ago, making it a great long-term bet.

PayPoint, listed in 2004, runs an electronic bill payment network in 14,000 convenience stores in the UK and Ireland. It collects payments on behalf of almost 500 clients, including mobile phone operators, cable TV companies, energy suppliers and local councils.

The company is benefiting from the decline both in the number of Post Office branches and the use of them. It is also steadily building up its client base.

In May, the group unveiled a 152 per cent rise in annual profits to £20m. UBS expects £23m this year and £27m next. The shares, which trade at 21 times forward earnings, are worth tucking away. Buy.

FUTURE

On Tuesday, magazine publisher Future issued its third profits warning of the year. A slew of analyst downgrades followed. Future is facing weak advertising revenues and newsstand sales in the UK and US. The group, which publishes more than 150 consumer magazines, is now forecast to make a profit of just £9m this year (£13m previously). Avoid.

LONRHO AFRICA

When Tiny Rowland was at its helm, Lonrho Africa was a pan-African giant owning anything from mines to hotels, car dealerships and pig farms. By the time executive chairman David Lenigas joined in December, all that remained was a hotel in Mozambique and £20m in cash. Since then, Lonrho has bought a controlling stake in Luba Freeport in Equatorial Guinea. Paying just £1.1m for the 63 per cent stake, it looks a bargain. Still, this is a high-risk share for brave investors only.

BODYCOTE

Worries about rising energy costs forced shares in Bodycote 5 per cent lower this week, despite a strong set of interim results from the engineer. Profits are up 20 per cent to £35m. The group's heat-treatment technology makes metals for the aerospace, car and oil and gas industries, stronger and more durable. Energy costs are a factor, but it is hard to see why investors are so anxious. Buy

PANMURE GORDON

Shares in Panmure Gordon have lost nearly a third of their value in the past six months amid worries about global equity markets. But business has been strong at the stockbroker - this week, it reported a jump in first-half pre-tax profits to £5m from £400,000. Buy.

MEARS GROUP

Anyone who bought into support services company Mears at flotation 10 years ago would have made their money 25 times over. And Mears goes from strength to strength; in the six months to the end of June 2006, sales rose 22.5 per cent, profits 23 per cent and interim dividend 29 per cent. It secured £170m of new business, taking its order book to £1.1bn. Hold.

ABSOLUTE CAPITAL

Momentum is building behind Absolute Capital Management, the AIM-listed hedge fund operator. It unveiled a 175 per cent jump in first-half operating profits to $13.9m (£9.5m); assets under management are up 46 per cent to $1.2bn (they have trebled in 18 months); and it plans to launch two new funds. The shares look substantially undervalued at a 50 per cent discount to AIM rival RAB Capital. Buy.

RAYMARINE

A year ago, this column tipped Raymarine, which makes devices for the leisure boating market, at 230p a share. They have since have gained over 50 per cent and this week Raymarine posted a 19 per cent increase in first-half profits to £19.3m plus a 12 per cent jump in sales to £83m. But although the figures mostly beat expectations, some analysts were disappointed by the 8 per cent fall in sales to US retailers. Take profits,

RENTOKIL

Yet another setback for long suffering shareholders in Rentokil. The group says profits at its textiles and washroom services business this year will not meet expectations. To blame are tough trading conditions in Europe. At 15 times forward earnings, with no evidence of a recovery in sight, Rentokil shares are overvalued.

PLAYTECH

Playtech develops and licences software for the online gaming industry. Its clients include Ukbetting, BetFred and the Tote. This week, the group posted maiden interim results: profits leapt 172 per cent in the six months to the end of June to $37m. At less than 10 times forward earnings and on a yield of 4.2 per cent, the shares are worth a punt despite the risks associated with the online gaming sector.

INSPICIO

In less than a year Inspicio has gone from cash shell to major player in the global testing and inspection market. It has done this via a series of acquisitions but the slew of deals has led to worry that management has lost focus on the key task of turning around the Inspectorate business bought in October - this has weighed on the group's shares. The aim is to increase profit margins at Inspectorate from 1.7 per cent to 8 per cent by 2008. Many peers enjoy margins of more than 10 per cent. Buy.

These recommendations are taken from the daily Investment Column

Work on flood defences delivers watertight profit

The ground engineering company Keller is busy bolstering New Orleans' flood defences to make sure that the tragedy that followed last year's Hurricane Katrina is not repeated. The work it is doing in Louisiana has helped deliver a massive 114 per cent rise in interim profits to £33m. It also said this week that its full-year results would beat expectations.

Ground engineers undertake structural work to strengthen the foundations for new buildings and carry out remedial work on old sites. Keller, which gets 53 per cent of its revenues from the US, said that business is booming across the Atlantic despite a cooling in the residential market.

The slowdown in this segment has been countered by strength in commercial orders and from public infrastructure projects. However, the US was not the only place Keller enjoyed strong growth. All four of its main territories saw sales rise by more than 30 per cent in the six months to June.

The engineer is keen to make an acquisition in Eastern Europe, which would plug a key gap in its geographic coverage. Although its shares have nearly doubled over the past 12 months, at 12 times forecast earnings, they are worth holding on to.

m.jivkov@independent.co.uk

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