The Week In Review: Well placed to finally pull into the fast lane

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The Independent Online

With apologies for the delay, here's a new share recommendation for our portfolio of stocks for 2005. We have taken our time in looking for an undervalued company that has decent trading prospects in an uncertain economic environment, as well as a bit of takeover potential.

With apologies for the delay, here's a new share recommendation for our portfolio of stocks for 2005. We have taken our time in looking for an undervalued company that has decent trading prospects in an uncertain economic environment, as well as a bit of takeover potential.

Now we have alighted on TDG, a logistics group whose long-term contracts give it stability. TDG has strong cash flows to protect a dividend that is yielding more than 6 per cent and the shares look undervalued given that it has eliminated its debt entirely. We also like the fact TDG operates in an industry where consolidation plans are being hatched.

TDG is an unloved company. It decided not to gear up again to return cash to shareholders, and confused investors have let the stock drift since then. But its annual shareholder meeting this week was told that trading, while challenging, is on course to show an improvement this year. The company's operating efficiencies and better-margin contracts ought to push profit up by 10 per cent.

DIMENSION DATA

This company helps business customers get the most out of their technology, which is often bought from a diverse range of suppliers, and which typically needs experts to make sense of it all. One of the attractions of the company is its spread, both geographically and operationally, and that diversification has paid dividends over the year. Stick with it.

PHYTOPHARM

Its record is second to none when it comes to signing up blue-chip partners to share the costs of developing its drugs and other products. But its record in actually getting them on the market is still very poor. The company has signed up Unilever to develop appetite-suppressant snack bars from Phytopharm's anti-obesity cactus, but products could still be three years away. Wait.

WEIR GROUP

This company is one of the world's biggest manufacturers of pumps for the oil and mining industries. Its customers are investing heavily to take advantage of sky-high commodities prices, and Weir is also enjoying additional commercial opportunities in China. Hold.

ACAMBIS

The City has punished Acambis for its lack of imagination. Instead of a transformational deal, creating a sustainably profitable biotech business in one leap, shareholders have had to settle in for a long wait. It is now developing a pipeline of new vaccines for travellers' diseases, but it seems likely the shares will get cheaper yet.

CENTER PARCS

Eighteen months ago, when Center Parcs floated, the leisure villages group was forecast to make about £27m profit for the financial year just ended. Now analysts expect £26m. Not more than a nip and a tuck, really, after a couple of trading hiccups. Yet Center Parcs shares are down 39 per cent. The first conclusion is that the shares were overpriced when the company floated; the second that the City is slow to forgive a profit warning. The next conclusion is that the shares now look too cheap. Buy.

N BROWN

The home-shopping group, the owner of catalogues Simply Be and Fashion World, and the doorstep business House of Stirling, has shown that a more targeted approach to mailings can reap useful sales benefits. But N Brown is a relatively highly indebted business and there are still problems in its finance arm. Sell.

JESSOPS

Investors who snapped up shares in Jessops when the photographic retailer floated in October had the smiles wiped off their faces when the company issued a profits warning five months later. Jessops is relying on the relatively new digital SLR market to drive demand and push up sales of cameras, but the new technology is still too pricey to tempt the average amateur snapper. Avoid.

INTERNATIONAL POWER

In the US, the reluctance of its rivals to shut down or mothball uneconomic old power stations in New England and Texas, where there is overcapacity, has meant International Power's own younger and more efficient plants are running at a loss. But power plants aren't opened or shut overnight, and the City remains confident that US supply and demand will return to balance between 2007-09. Those who have a shareholding should keep it.

FINDEL

Findel is the largest single supplier of educational products in Europe. Nursery school toys, exercise books, art materials, percussion instruments, sports equipment, bunsen burners, you name it. In addition, its home shopping division has branched out into electricals, furniture and, most recently, clothing, and sales are going very well. Hold.

ISOFT

The hospital software company's shares are on a lower valuation in part because of concerns last year that it's accounting policies are neither prudent nor properly transparent. It will take a while for a new finance director, hired earlier this month, to re-establish the company's credibility, but last year's panic was exacerbated by bad blood over the merger with Torex. Buy.

UTV will not find it easy to justify takeover of Wireless

Kelvin MacKenzie's Wireless Group, owner of TalkSport and a portfolio of 17 local radio stations, has agreed to a £98.2m takeover by Ulster Television. The Northern Irish buyers will not find it easy to justify the deal at this price and at this time.

There is some scepticism among analysts in Ireland about whether UTV has generated worthwhile returns from its radio assets at home. It will need to work hard to show that it is really creating value rather than simply empire-building with this new investment across the Irish Sea.

Ulster Television believes that it can rejuvenate the 17 local stations and make savings by selling advertising across a wider selection of stations, but evidence from elsewhere in the UK radio sector this week has suggested an alarming dip in advertising revenues.

UTV's most prized asset continues to be its Northern Irish ITV franchise, but profit growth here may have peaked, while its internet-service-provider business is finding competition tough. Avoid.

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