Airtours flies too close to the sun

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The Independent Online
Airtours cheered the travel industry - and analysts - by hiking the prices of its late-season 1996 holidays while heavily pushing its 1997 brochures even as most people were still enjoying this summer's break. But the strategy, which appears to be an attempt to smooth out the travel industry's notoriously uneven cash flows, is a big gamble. While there will always be holidaymakers interested in an all-in week in Benidorm, the British are growing more sophisticated in their holiday plans and are more inclined to create their own break. The heavy marketing push by Airtours and the other integrated package holiday firms could backfire, with few punters willing (or able) to part with their cash for next year's holiday while the credit-card bill for this year's remains unpaid. The Airtours share price, lurking just below its all-time high at 588p, has not taken this risk into account. Sell.

BAT (465p) took a knock earlier this week courtesy of Grady Carter, the smoker who blamed the company's Brown and Williamson subsidiary for getting him addicted to cigarettes 40 years ago and giving him lung cancer. He was awarded $400,000 (pounds 260,000) by a Florida court for his efforts. This hacked pounds 1.4bn off the company's share price, which on reflection seems like an overreaction. If BAT does spin off its insurance businesses, its cash-generative tobacco operations will lie at a heavy discount to the market. Buy.

ANOTHER source of investor jitters at the moment is Boots (622p), which is only just returning to favour after taking full control of Do-It-All, the troubled home improvement retailer. The fall from grace also reflected a dip in profits, almost entirely to do with problems at the aforesaid DIY operations. However, the management is confident that it can solve the problems, and the core Boots the Chemists business is still going great guns, with aggressive expansion plans for the next two years. Also, if the artificial price cartel (Resale Price Maintenance) is removed from over-the-counter medicines, Boots is likely to benefit most as the market leader. Buy up to 640p.

THE insistence by the government (now enacted in legislation) that all London taxis have adequate wheelchair access could prove a goldmine for Manganese Bronze, manufacturer of the majority of black cabs. Only half of London's 18,000 cabs currently meet the standard, and the rest will have to be up to scratch by the year 2000 to keep their licences. The company currently builds around 2,700 vehicles a year, which retail at pounds 25,000 a pop. Its shares, now at 339p, are looking good for the millenium.

BAKING cakes has not been a great business in recent years, with margins for all food manufacturers flattened by the supermarkets' aggressive buying policies. No surprise then that Northumbrian Fine Foods (12.5p), suppliers of own-label cakes, flapjacks and biscuits to Asda, Boots and Tesco, has struggled along on net margins of three per cent in the last two years. But at the same time the company has managed to maintain a fairly solid financial position, which has allowed it to expand sales volume and pay a steadily increasing dividend. A research note from Wise Speke (which also acts as official broker to the company) out this week talks up the company, but acknowledges that the inhospitable market will never allow it to deliver spectacular returns. An opportunistic buy, but not for the faint of heart.

WHILE the hoopla leading to the demerger of Thorn EMI has concentrated on the glamorous EMI music business, the Thorn electrical rentals business looks the more attractive bet for long-term value. Its shares will start trading tomorrow at 400p, valuing the company at pounds 1.77bn and displacing Cookson from the FTSE-100 index. Even at this level, the shares look cheap.