The Week in Review: Take a break from Thomas Cook
Saturday 24 November 2007
Thomas Cook Group, the travel company, is aiming to double its profits in the next three years. The optimistic outlook glosses over some important variables. Fuel price hikes are casting a dark cloud over operators, while the threat of terrorism continues to spook some travellers.
So while it is encouraging to hear the company talk so confidently about its future, there are too many unanswered questions to warrant recommending a buy on the stock at this stage. For investors in the stock, hang on. For everyone else, don't buy.
Protherics, one of the UK's most established biopharmaceutical companies, is gearing up for a big 2008. It is second-nature for life sciences companies to point to jam tomorrow, but with six products entering phase II trials over the next six months, Protherics is able to boast that it has a larger development pipeline than any other UK biotech. While the shares have gained 20 per cent over recent months, they took a 5 per cent knock this week, providing an entry point for exposure to a biotech already generating revenue that has huge growth potential. Buy.
Trikona Trinity Capital
The UK property sector is in the doldrums, to put it mildly, so sector investors may wish to cast their eyes towards foreign markets. Trikona Trinity Capital raised £236m when it came to the market in April 2006, and so far it has invested in 12 projects in India. We believe that the Indian growth story is compelling for long-term investors. This is not a stock for the risk-averse investor, but is well worth a punt.
Accsys Technologies can make practically anything out of its wood, and has been one of the best-performing stocks on Aim over the past couple of years. This week's interim results hinted that there could be more for investors to get excited about.
The company has developed a process that can turn soft wood into hard wood in a fraction of the time that Mother Nature takes to perform the same task. This is no stock for the faint-hearted, and given the strong run the shares have had there is a chance that they will tread water until new contracts are made public. But for higher-risk investors this is a buy.
When a company raises the prospect of a "strategic review", many people start pondering whether the business will be carved up or sold off. Saying that, the strategic review at Tribal Group, an outsourcing and consultancy business that specialises in advising customers on business transformation, proved fairly prosaic as the company promised to focus on its core markets and improve profitability. However, Tribal is a very illiquid stock and shares have nosedived nearly 14 per cent over the past week, so investors may prefer to hold until upward momentum is restored.
For a mid-cap oil stock, Burren's assets are straightforward – all are producing, and Burren's future as an independent operator in west Africa and Turkmenistan looks promising. The stock is still not exactly expensive, trading on 10.9 times forecast 2008 earnings, but the days of cheap oil appear to be over, and Burren has significant reserves of 230 million barrels of oil equivalent. The stock collapsed this week on the back of failed talks with Eni, but for long-term investors this could provide an attractive entry point into a company with solid long-term prospects. Buy.
There is no such thing as a safe bet in the tech sector. Detica, one of the darlings of the Techmark index, is the latest company to fall foul of nervous investors after its mixed outlook knocked 25 per cent off its share price. Yet the long-term growth story remains intact, and Detica is a proven performer in its core IT security market. With the stock now valued at 13.5 times 2008 forecasts, according to ABN, the share-price dip could provide a good buying opportunity. Buy.
Cranswick has just about scraped through the dreadful summer; the damage done by the chill and rain during the barbecue season failed to hit the Hull-based food manufacturer as hard as some had feared. Interims revealed that sales were up 22 per cent at £303.2m, inflating pre-tax profits by 16 per cent to £18m. The food business took in 94 per cent of total sales, earning £285.1m, a 23 per cent increase over the period last year. Growth helped justify an £8m investment in a new premium bacon factory. As we said in May, the premium end of the market is the place to be, and the new factory should aid Cranswick's efforts to win new contracts with the big chains. The business looks in good shape, and at 13 times forecast 2008 earnings, the shares look to be fairly valued. Hold.
Imperial Energy is walking a tightrope – turning down an approach from the Russian gas giant Gazprom was a brave move. But it shows that Imperial's management is not going to agree to any deal that is not beneficial to shareholders. If Gazprom wants to make a more attractive offer, it should play ball and do it at a premium to the prevailing share price.
Imperial is not cheap, but given its reserves, the favourable oil price and its attraction to larger players, it is worth buying.
It's been a tough few years for the portable computing device maker. The October launch of its iKon device triggered some excitement that Psion could still be a force, but after a profits warning this week, any recovery looks a way off. Sell.
A consortium led by Petra announced a deal to buy Cullinan, the mine that yielded the Great Star of Africa, this week. The acquisition will make the company one of the world's top 10 diamond producers – and there is an unexploited Centenary Cut resource below the current operating mine. Petra could sparkle over the next few years.
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Day In a Page
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