The Week In Review: Regent Inns unfazed by smoking ban

It always looked like the pub and bar industry was approaching the smoking ban in England and Wales with confidence bordering on arrogance. And so it has proved, with the wet summer, lack of any major sporting events, and the smoking ban all helping to hit beer sales across the UK.

But the news is not all bad. Full-year results from Aim-listed Regent Inns were in line with expectations, with pre-tax profits rising 23.5 per cent to £6.1m on a 16.7 per cent increase in turnover to £148.9m.

That is a decent performance, and Regent should be in a strong position in comparison to its peers, thanks to the niche attractions of its portfolio. It operates Walkabout pubs and Jongleurs comedy bars. Neither should be particularly affected by the smoking ban, and refurbishment elsewhere in its estate looks to be paying dividends.

Shares in Regent Inns have fallen sharply in the last four months and now trade at an attractive 10.1 times forecast 2008 earnings. That looks a good entry-level price, and with more consolidation in the sector almost inevitable, Regent's strong cash generation and position in niche markets make it a contender to play a part. Buy.

Hochschild Mining

The mining sector has been on fire over the last three years but value investors might be tempted to ignore it due to the lofty valuations some stocks trade at. However, there are one or two pockets of value left and no portfolio should be without some exposure to mining.

This week US investment bank Citigroup upgraded its forecasts for gold and silver prices in 2008 and 2009 and Hochschild Mining looks like a strong play and underrated player in both. By the end of the year it should produce over 14 million ounces of silver and 200,000 ounces of gold. The company is confident that it will hit these targets.

The shares trade on 10 times forecast 2009 earnings, according to Citigroup's upgraded forecasts. There is little to suggest that demand for precious metals will fall any time soon and if Hochschild's production targets are hit, the risk is firmly to the upside. Buy.

Debts.co.uk

It has been an annus horribilis for the Individual Voluntary Arrangement industry, plagued by falling applications, higher marketing costs, and big banks declining to play ball. Despite reporting a 61.9 per cent jump in full-year profits to £3.4m this week, Debts.co.uk languishes at an all-time low.

Its business model has proved resilient and it remains the only IVA provider not to have warned. Even so, investors are nursing ugly losses, and the stock is down more than 75 per cent since hitting a high of 220p just over 12 months ago. Second-half pre-tax earnings rose by 64.6 per cent against the first half to £2.1m on the back of a 90.2 per cent rise in turnover to £11.6m. On the face of it, an excellent set of numbers. But it is difficult to escape the feeling that Debts.co.uk is swimming against a rising tide.For investors already in the stock, Debts.co.uk should be given the benefit of the doubt. But for new investors there are far less risky options. Hold.

Vodafone

It was only a few years ago that Vodafone was a mobile evangelist, intent on selling off its German fixed-line business. By the end of 2005, it was talking about the potential of broadband and convergence. Fast-forward to today and Vodafone is a fully fledged consolidator in the broadband sector after splashing out £537m on Tele2's Spanish and Italian fixed-line businesses.

Under Arun Sarin's leadership, Vodafone has become synonymous with investment in high-growth emerging markets. Yet its strategy in mature markets to cut costs and drive growth from new services such broadband is just as important. Despite various threats to the company's progress over the coming years, the shares look a good bet to keep progressing toward the 200p level. Buy.

YouGov

YouGov has been a pioneer of online polling – using the internet rather than traditional face-to-face and telephone means that YouGov is one of the lowest-cost and highest margin operators.

Its full-year results included the kind of numbers Mr Brown or Mr Cameron would give their right arms for. Pre-tax profits rose by 39 per cent to £5.7m on the back of a 51 per cent jump in group turnover to £14.3m.

The shares trade on a forward multiple of over 23 times forecast 2008 earnings, a full rating. But YouGov has plenty of momentum, and with elections on both sides of the Atlantic coming up the outlook remains positive. Buy.

International Greetings

August's trading update from International Greetings sent the stock into freefall. But despite the tough market conditions in the cards, wrapping and stationery industry, the company is carrying on with its acquisition strategy.

This week's 50 per cent investment in the Australian group Artwrap is a bold move, and the deal looks sensible. However, even though the shares trade on an undemanding 9.4 times forecast 2008 earnings, new investors would be unwise to assume that underlying market conditions have improved dramatically. A good deal, but not good enough to pile in. Hold.

Experian

The sub-prime crisis may no longer be making the headlines but the fallout has plenty of legs left in it. Experian, the world's largest consumer credit-rating agency, was sharply lower in this week's trade on the back of cautious comments on the UK and US markets the company made along with a first-half trading update.

Even so, the numbers themselves were encouraging. Total growth for the first half should come in at 17 per cent. The company is confident it will hit market forecasts for the full year, implying pre-tax profits in the region of £425m, translating into per-share earnings of 31.9p.

The shares trade on approximately 14.3 times forecast 2008 earnings. But the fallout from the sub-prime disaster is just beginning to filter through, so despite the solid performance and this week's sell-off, there are not enough good reasons to buy the shares. Hold.

UK Coal

The share-price momentum that drove UK Coal to deliver about 300 per cent of upside between January 2006 and April 2007 appears to have run out of steam. This week, the company confirmed that it has signed a coal supply deal with the German utility giant E.On for six million tons of coal over the next four years. But investors should not be tempted by what is really a routine contract re-negotiation.

However, with the property side of the business dominating the numbers and investor sentiment, it is easy to overlook the fact that the mining side of the business will move into profitability in the second half of the year. But until the property side of the business makes another big leap forward, the shares look fully valued. Hold.

EBTM

Fashions come and go but the popularity of heavy-metal T-shirts has never dimmed. With teenagers less inclined to spend their money on CDs these days, merchandise is an important growth driver for the music industry.

That's good news for EBTM, a music-inspired fashion retailer. EBTM's revenue has risen eight-fold over the past year and it is set to record its first profit next year. It's very cheap, trading at 5.4 times projected earnings for 2008, falling to a bargain basement 3.7 times in 2009, according to Blue Oar. Even if this is not one for widows and orphans, it could be one for rockers. Buy.

Cookson

Three months ago this column recommended a hold on engineering group Cookson because it was difficult to see significant upside. Well, since then the shares have outperformed the market. So is there any more upside left in Cookson? This week's £497m acquisition of Foseco certainly changes the outlook from good to even better, and it looks like a sensible price at 16.3 times forecast 2008 earnings.

Cookson trades on an undemanding 13.6 times forecast 2009 earnings, not including Foseco – good value considering the impact Foseco could have on earnings and future growth prospects. Buy.

Air Partner

The way the market is performing, there should be a Lear Jet in every garage by 2010. Well, maybe not, but you don't have to be a billionaire to find yourself on a private jet these days. Air Partner has been involved in the private jet business for over 40 years, and if this week's full-year results are anything to go by, it will be for many years to come.

The numbers were excellent. A 32 per cent jump in sales to £185.8m led to a 49 per cent increase in pre-tax profit of £7.6m. It will pay another special dividend, this time 60p per share, its fifth in the last 12 years. The company came to the market at 75p and has paid out 273p per share in dividends since then.

The stock is not exactly cheap at approximately 23 times forecast 2008 earnings, but for investors with a healthy appetite for risk these shares could continue to fly. Buy.

Innovation Group

The Innovation Group has eased fears of a disappointing second half after upgrading forecasts for the year on the back of a welcome rise in software revenue. It has also acquired one of its key rivals, Nobilas Claims and Fleet Solutions. It has to absorb substantial losses – some £9m last year – but analysts believe TIG will turn the unit around quickly.

Although it is still a minnow, the recent £25m deal with Royal & Sun Alliance shows that it has a lot of potential. TIG's shares are at the same level as in 2004 and its valuation of 14 times 2008 projected earnings does not reflect its growth potential. Buy.

a.dewson@independent.co.uk

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