The Week In Review: This toy group is ahead of the game

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The Independent Online

Character Group owns licences on a number of popular children's characters, such as Scooby Doo and Doctor Who. The spinoff toys and games to the characters are manufactured mainly in South-east Asia and this week's trading statement confirmed a very strong year-end. Furthermore, with an exciting product pipeline, 2007 looks like it could be even better. The fourth quarter of the calendar year is traditionally the strongest for toy groups, and Character is no exception. Given the popularity of many of CG's ranges, it ought to be a very merry Christmas for the group. The last quarter normally counts for about 50 per cent of annual sales. The house broker, Charles Stanley, increased its full-year, pre-tax profits forecast to £5m, giving per-share earnings of 6.74p for 2006. These numbers are likely to be hit, and the shares still trade on an undemanding multiple of just 11 times. With a healthy dividend yield of 4 per cent, that's too cheap and the shares deserve a further re-rating. Buy.

SIG

The roofing and insulation group has enjoyed success for years, but worries about falls in its products' prices sent the shares into retreat this week. SIG claims 2004 and 2005 were an exception and that price growth of 2 per cent is normal, which is true. SIG shares trade at a premium to the wider building materials sector, but they are worth holding on to.

OMEGA INTERNATIONAL

Omega International, the kitchen-maker, has beat City forecasts again this week. The group is now on course to meet its target of doubling in size by 2010. Buyers of Omega's kitchens are well-off - often less susceptible to the ups and downs of the economic cycle, although, of course, not immune. For such a fast-growing company, a rating of 17 times forward earnings is too low. Buy.

REDROW

This housebuilder has been generous to shareholders. For the past three years, it has lifted its dividend by 20 per cent. The group posted a 13 per cent drop in annual profits this week, but it's balance sheet is in great shape. These results reflect a period when the UK housing market has been weak, but this has passed. The stock trades at less than 10 times forward earnings, but, with the possibility of a bid, this is not costly. Buy.

IP GROUP

IP Group forges links between university science departments and the commercial sector. This week's results reflect its success. IP has nine long-term partnerships with UK universities (investors should not be surprised if it secures a 10th before the end of the year) and equity stakes in 47 firms. It's the biggest player of its kind and worth backing. Buy.

REGUS

The temporary-office-space group aims to expand, and plans to lift the number of workstations it has globally by 50 per cent this year. Chief executive Mark Dixon singled out Asia as a key target market. At present just 7 per cent of its sales come from here. Regus's dependency on the fortunes of the US and UK economies is reducing. At 10 times forecast earnings for 2007, Regus shares are worth buying.

MONTERRICO METALS

Alan Garcia, Peru's new president, has been supportive of Monterrico's planned Rio Blanco copper mine. Building is expected to start in 2008 and production in early 2010. If it finds a partner to share the £550m costs, it will own Peru's largest copper mine, one of the 10 biggest in the world. Monterrico's shares should be tucked away.

ANTISOMA

An update on the progress of Antisoma's AS1402 cancer treatment had no impact on shares this week. Investors are more interested in its lead cancer drug, AS1404, which is in the end stages of trials. Initial results have been encouraging. If all goes to plan, AS1404 could be a billion-dollar drug, That is a big if. However, there have been a raft of share purchases by the group's directors since July. Shares might be worth a punt, but don't bet the ranch.

AGGREKO

Profits at power company Aggreko are booming. The group boasted a 78 per cent rise in first-half, pre-tax profits this week, and if this autumn's hurricane season remains benign, it will be on course for just as impressive results in the second half. Aggreko's shares trade at around 16 times forward earnings, a far from demanding rating. However, the bulk of the group's operations (excluding the services it provides to the developing world) are highly sensitive to the global economic cycle and any slowdown could have a significant impact on its profits. Hold

UNITE GROUP

It is no surprise that business is going very well at Unite Group, the UK's biggest provider of student accommodation. More than 80 per cent of students live away from home and there is a shortage of accommodation. It is estimated that an extra 28,000 bedrooms will be required in every year until at least 2010, to meet the growth in student numbers and currently there are only 15,000 beds added annually. Given the economics of the industry in which it operates, there seems little to stop Unite hitting its demanding targets. Buy.

SHED PRODUCTIONS

Investors in Shed Productions are anxious to discover whether ITV will commission another series of Bad Girls? If the answer is no, Shed stock is likely to plummet given the series accounts for about 15 per cent of group profits. Ratings for the current series have been strong, but rumours of its being axed have not yet evaporated. Investors would do well to avoid the stock until we hear the verdict.

The above recommendations are taken from the daily Investment Column.

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