The Week In Review: Tintin helps Ottakar's propects in booming bookshop sector

The bookshops sector has been going through something of a revolution. Ottakar's, which reported 20 per cent rise in annual pre-tax profits to £6.1m, is the second biggest specialist chain in the UK.

The bookshops sector has been going through something of a revolution. Ottakar's, which reported 20 per cent rise in annual pre-tax profits to £6.1m, is the second biggest specialist chain in the UK.

The sector has been enlivened by the arrival of US chains, the emergence of more enticing formats and huge excitement created by the likes of Harry Potter and popular history books.

Ottakar's is at the populist end of the business, with WH Smith its closest competitor. The company has 121 stores, 35 of which have been converted into its "lifestyle" format, which includes a coffee shop. Last year, the company pulled off its biggest ever acquisition, the 24-strong chain of Hammicks bookshops, for £5.5m, including debt. Almost all of these stores have now been rebranded Ottakar's.

As a result, sales were up 34 per cent but at the like-for-like level, sales were still a healthy 6.2 per cent higher. Last year the company sold 140,000 copies of the new Harry Potter book.

Over the next couple of years a film trilogy on the children's character, Tintin, will create growing excitement. Ottakar's owns the UK merchandise rights to the character for the bookstores sector, which could prove very lucrative. Given the growth prospects, it's a buy.

FORTH PORTS

Forth Ports has signed a 15-year contract with Scandinavian paper maker Stora Enso to build a £34m facility, the largest investment Forth has made for a single contract, at Tilbury east London. A further £5m will be invested at Grangemouth in Scotland to increase capacity from 120,000 to 200,000 containers a year. Property development will continue along the waterfront in Edinburgh for another 15 to 20 years in a city short of brownfield sites. Shares are worth holding.

JOHN LAING

John Laing has virtually completed its transformation to an infrastructure developer bidding for public sector projects. It is bidding for more contracts in the UK, especially in health and education where the government is investing heavily, and see increasing opportunities in Europe. It concentrates on contracts with a guaranteed income stream. The only risky business is the Chiltern Railway franchise, where profits are growing and more than 90 per cent of the trains run on time. Hold on.

TED BAKER

Ted Baker, the trendy retailer that started as a menswear brand from a single Glasgow store in 1988, hardly put a fashionable foot wrong in 2003. The group is carving a profitable niche as a "lifestyle" brand by expanding into shoes, sunglasses and even homeware. Although retail sales, up 26 per cent last year to £61.3m, still account for two thirds of group turnover, its wholesale and licensing arms, which sell via some of the world's swankiest department stores, are growing equally strongly. However, the shares look fully valued. Hold.

TOTTENHAM HOTSPUR

Tottenham Hotspur issued a textbook lesson from football's financial boot room. The question now is whether any stock market players will take note of it. The six-monthly results from Spurs to 31 December were relatively upbeat. The company maintained turnover at £33.2m and even reduced its loss before tax from £8.6m to £3m. However, the general rule still holds: avoid football clubs unless you are a die-hard fan who, having already spent thousands following your team, won't mind throwing away a bit more.

HOUSE OF FRASER

House of Fraser's management worked hard in 2003 to slash £13m of costs, and expect to save another £6m this year. Although like-for-like sales were up just 0.7 per cent in the past seven weeks, that is better than some feared, and masks a 60 basis-point improvement in its gross margin. But few analysts believe this is sustainable. Pre-tax profits were up 19 per cent to £18.6m - after another hefty round of exceptional charges totalling £8.4m. Hold.

LOK'NSTORE

Lok'nStore is in the business of self-storage centres, a sector that appears to have amazing growth prospects. The company provides space for people's junk and excess belongings, or for small businesses to store documents and other stuff. The US has more than 10 times the amount of self storage space per capita, suggesting that the growth prospects for the industry in this country will be limited only by the ability to find the right sites. Worth holding.

ELECTROCOMPONENTS

Electrocomponents or Premier Farnell? The two fight toe-to-toe in the business of supplying engineers with everything from screwdrivers to hard hats. Electrocomponents also supplies the Ministry of Defence and the National Health Service, so is a beneficiary of Gordon Brown's enthusiasm for public services. The UK market is now flat after shrinking, but growth has been surprisingly good elsewhere. Farnell is a hold, but it is worth buying Electrocomponents before the market re-rates it.

HISCOX

Terrorism fears and a lull in natural disasters have led to bumper profits for the many insurers that have raised the price of protecting a riskier world. Hiscox said profits before tax for the year had more than quadrupled, as claims were low and premiums were high. It said 2004 will be even more bountiful. Alarm bells have been ringing over how long the run can continue, with rates in some areas starting to fall, but Hiscox says the slowdown is not as sharp as had been predicted and rates are generally been maintained. Hold.

CAPE

Martin May, chairman, saw Cape, the industrial maintenance and buildings materials company, as a "basket case" when he joined two years ago. It was facing a huge litigation for asbestos poisoning, it had reached its overdraft limits and one of its major divisions was loss-making. Cape has now settled its asbestos court case with 7,500 South African miners for £7.5m, and has reclaimed £12.5m from its insurers. Asbestos has not entirely gone away, however, and there are outstanding claims. But it says these are now tailing off, and at £3m a year, are covered by its £16m of cash generation. A speculative buy.

Barratt is building a success story

Barratt Developments has tripled its annual rate of homebuilding over the past 12 years without acquisitions and despite an increasingly slow planning system.

The company, which reported sparkling interim figures last week, looks set to expand production further. Not only is output from the industry likely to be boosted by an easing of the regulatory system but Barratt is pressing ahead with an initiative to pre-fabricate houses in a factory.

Output should rise from 14,000 homes this year to 16,000 in 2006. However, it will be many years before the industry's output will catch up with demand.

Barratt said it would welcome another couple of quarter-point interest rate rises, to moderate the housing market. If rates shot up to 10 per cent then all bets would be off, but the likely economic scenario is benign.

The company reported a 35 per cent rise in interim pre-tax profits to £142.6m. The average price achieved rose 11 per cent to £161,700 and sales volume was 10 per cent higher.

For the rest of this financial year, 93 per cent of target sales are already in the bag, while 90 per cent of the planning permission needed for the next financial year's output has already been achieved. The shares are trading on a forward multiple of just six. Buy.

The above are a selection of recommendations from the daily Investment Column

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