The Week in Review: Sales come early at French Connection
Saturday 17 November 2007
Six months ago we suggested that French Connection was worth buying on the back of its turnaround potential – either it was going to turn around, or it was going to get bought. Well, neither happened and since then the shares have almost halved. French Connection's woes are pretty straightforward – it's not getting enough punters through the door. The clothing collections themselves are not that bad, but with more uncertainty in the pipeline it is probably time to bite the bullet, cut losses and sell.
Since coming to the London market back in May, Calgary-based Addax Petroleum has not had much coverage. But this looks like a quality stock. The key to growth is the Taq Taq well in Kurdistan.It is not expected to begin production until 2009, but indications from test drilling are good. The shares trade on 11.8 times forecast 2008 earnings. That's too cheap. Buy.
Liontrust, the asset management group, has suffered some big mandate losses over the past couple of years, but still enjoys strong support from IFAs. The shares are supported by a decent yield and on 12.8 times forecast 2008 earnings trade at a slight discount to the sector. However, given the uncertainty over the markets in general, there seems to be little point in piling in on the back of these results. Hold.
Vosper and Thorneycroft started out in shipbuilding and this still accounts a large chunk of its revenue. The joint venture to merge its shipbuilding facilities with those of BAE Systems should mean that it continues to do so. The venture should get full approval from both parties before the end of this year. The shares trade on a fairly full valuation, 15.2 times forecast 2009 earnings, but this is a business that is firing on all cylinders. Buy.
We have lost count of how many warnings Northern Foods has given investors over the past two years. But it has turned a corner and the financial stability of the group looks far healthier. That does not mean the shares are good value, though – the stock trades at 12.5 times forecast 2008 earnings, which looks like a fair price. Hold.
Since collapsing to under 10p in 2003 the supply chain software group has made steady progress and looks set to break through 100p for the first time since the dot.com bubble burst. On 12.8 times forecast 2008 earnings the growth is not being factored in by the market, but it looks in good financial health. Buy
BHP Billiton's bid for Rio Tinto has reignited interest in a sector – mining – that hardly needed much more support. This week's interim results from Lonmin, the world's third largest producer of platinum, gave the sector more momentum as traders marked the shares higher on results that were, for the most part, slightly ahead of forecasts. However, the company does not expect output to rise by more than half a per cent in 2008 and has cut its forecasts for 2010. Bank, without selling out completely.
The Burberry fashion brand is still very successful with luxury consumers.The company remains comfortable with City forecasts for the rest of this year and for 2008. But even if the company is trading on a discount to some of its peers, the stock looks expensive. Hold.
Applied Intellectual Capital (AIC) develops alternative electro-chemistry technologies aimed at waste reduction, energy saving and water purification. This week AIC announced that it intends to reverse its RedOx business into an unnamed Aim cash shell. AIC investors will be able to participate in the growth of RedOx. A high-risk buy.
What happened? Bricks and mortar were supposed to be safe investments. But shares in British Land have lost 46 per cent since January. This week's first-half results were nothing to get excited about either. But has the market oversold British Land? Its presence in high-quality London office space should support the valuation, and though the hype over the benefits of its conversion to a Real Estate Investment Trust were over-cooked, this looks like a decent long-term buying opportunity. Buy.
This week's trading update from Ladbrokes, the world's biggest bookie, was far from a winner. The shares fell almost 10 per cent. If England fail to qualify for the 2008 European football championships, Ladbrokes stands to lose millions. However Ladbrokes will recover. Buy.
Concerns over the Government's commitment to continuing the outsourcing of some NHS functions has left analysts questioning the growth potential of Care UK. But outsourced healthcare projects only could for about 15 per cent of Care UK's total revenue. After this week's falls, the stock looks good value. An excellent buying opportunity.
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