The Investment Column: Bellway rings time on bargains but its shares are still worth holding

Whitehead Mann; Expomedia
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The Independent Online

This time last year Bellway had to offer cash discounts, part exchange deals and free carpets and curtains to sell new homes.

Since then market conditions have improved for the group and in the wake of yesterday's interim results it told investors that it has been able to cut back the promotional activity needed to flog houses. Bellway's message was that the spring selling season had started well, although a full-blown recovery in the sector is some way off.

Despite the difficulty of the past 12 months for the industry, the housebuilder's share price has enjoyed a boom. Consolidation hopes have been behind this. Historically, the stock market has valued housebuilders inline or slightly below their net asset value. These days, Bellway trades at a sizeable premium and this is likely to deter many possible bidders for the company.

Nevertheless, the group is one of the sector's best operators and deserves its top rating. This year is expected to be Bellway's 10th year of profit growth and 15th year of volume growth. Its management says it is largely unperturbed by the consolidation in the sector and instead very much focused on its own organic growth.

Analysts yesterday highlighted the company as a major beneficiary from the 2012 London Olympics thanks to the large tracts of land it owns in the east of the capital, where the games will be staged.

Given the shortage of homes in the UK, the housing sector is likely be a good bet for some time to come. Within it, Bellway should be core holding for an investor.

Whitehead Mann

Is Whitehead Mann about to enjoy a major renaissance? That is the key question facing anyone following the headhunting company presently, and if the answer is yes there could be lot of money to be made by investors.

Whitehead Mann hit the rocks soon after the departure of Anna Mann, its founding partner, back in 2004. In the months that followed, it was embarrassed by being linked to a number of bungled appointments to high-profile boardrooms, most notably British Land and Sainsbury's. However, the root cause of the group's troubles was its over-expansion in the late 1990s and a failure to properly integrate acquisitions.

A rescue-rights issue was needed at the start of 2005. Whitehead Mann raised £13m at 40p and promised to focus on what it knows best - filling top corporate posts in the UK. The group has since closed its loss-making North American operations, brought all its London staff under one roof and introduced a new bonus system to motivate staff.

The medicine seems to be working and given the nature of headhunting - essentially a fixed-cost business where the major outgoings are employee salaries and office space rent - the recovery could be spectacular as any rise in sales goes straight to the bottom line.

Yesterday, Whitehead Mann indicated that its recovery is on track and that it had moved into profit during the final quarter of its financial year. Analysts expect it to post a small loss for the year ending 31 March 2006 compared with a deficit of £20m in 2005.

Yet the company's shares remain below last year's right issue price. At yesterday's closing price of 39p, the stock was trading at 10 times the 2007 earnings forecasts, presenting investors with a great buying opportunity.

Expomedia

The exhibitions group Expomedia is focusing on all the right parts of the world. Fast growing countries like Russia, India and Poland are increasingly forming the core of its business.

Although the group is some way from catching its established rival ITE Group, it is no slouch. Since Expomedia was formed five years ago, it has created a solid foundation for future growth. From here on rapid turnover growth should be quickly converted to profit.

The company's prospects in India are particularly exciting. It recently secured a 28,000 sq m venue, which represents 10 per cent of total exhibition space in the country. The deal is a major coup for Expomedia. Local costs are very low while rates stand at international levels so it should do very well from the exhibitions it puts on there.

Yesterday's annual results saw the group post a pre-tax loss of £700,000. This figure is forecast to become a profit of £1.7m by the end of this year, and then earnings are tipped to really take off after that.

For the year ending 31 December 2007, City analysts expect to see Expomedia make a profit of more than £8m, making the stock a great long-term bet.

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