The Investment Column: Shaftesbury gets it right on property

Expro is feeling benefits of oil boom but is pricey - Oasis Healthcare leaves little to smile about
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The Independent Online

The likes of McDonald's, Next and Pizza Hut are not welcome at the "villages" owned in London's West End by Shaftesbury.

The likes of McDonald's, Next and Pizza Hut are not welcome at the "villages" owned in London's West End by Shaftesbury.

The lazy property companies that make up most of the listed sector, simply sign up chains as tenants - producing homogeneous high streets. Shaftesbury actually thinks about what sort of environment it wants to create.

In the West End, there is really no point reproducing what is found everywhere else in the country. What is required is a creative and, to some extent, a risk-taking, approach. Shaftesbury does take brands as tenants but only "concept" stores from the likes of adidas and Diesel. While it has no appetite for a pizza chain, it is taking a new restaurant from Alan Yau, the man behind Wagamama, Busaba Eathai and Hakkasan.

The City showed its appreciation of what this specialist property group does with a 12 per cent rise in the company's shares yesterday to 340p. That may also have had something to do with the fact that Shaftesbury gave its first-ever presentation to City analysts.

Net property revenue was up 9 per cent while profits before disposals and tax were nearly 20 per cent higher at £14.7m. Net asset value per share was also 20 per cent better at 352p.

Shaftesbury's estate is comprised of clusters of streets (which it calls villages) in three West End locations: around Carnaby Street, Seven Dials (Covent Garden) and Chinatown. It also has small holdings in Charlotte Street. It has 275 shops, 133 restaurants and 459,000 sq ft of office space in these areas and continues to develop the Carnaby Street area.

Jonathan Lane, the chief executive, says that after two "challenging" years, business is now thriving. Global events - such as the threat of terrorism and the Sars virus - had hit the take-up of tenancies.

Ultimately, says Mr Lane, growth lies in the success of the capital. "We're a bet on London," he says. And who would bet against Europe's biggest, most powerful and most vibrant metropolis? Buy.

Expro is feeling benefits of oil boom but is pricey

Expro International Group provides technology to the booming oil production sector. The trouble is that the company was not very slickly run - it has taken on a new chief executive and finance director over the past year - and its business lies towards the end of the exploration production process.

So while oil companies are swimming in billions of dollars of cash, as a result of soaring oil prices in recent times, Expro has not benefited. In fact, its results have been going backwards for two or three years and last year it issued two profits warnings.

Things now look better. Yesterday's interim figures showed growth - turnover was up 9 per cent on a constant currency basis. Operating profit jumped from £6.9m last year to £9.5m, as the company's high operational gearing kicked in.

Expro's technology helps companies get the most out of existing wells. For instance, a new probe that provides data from within a well is wireless and can be inserted in a well without having to take the walls apart.

Oil groups are beginning to react to the high price of oil with greater levels of investment in new production - now that the recent price levels no longer look a blip. That can only be good news for the likes of Expro. Nevertheless, the shares, at 352.5p, are too expensive on a forward rating of 22. Avoid.

Oasis Healthcare leaves little to smile about

Ouch! it's hard to know what shareholders in Oasis Healthcare find more painful: a visit to one of its dentist surgeries or the collapse in the company's share price.

The group floated four years ago to raise money to create the country's first national chain of dental practices. So far it has 125; it needs at least double that to reap any kind of advantages of scale.

Its strategy hinges on getting more people to visit the dentist more often. Its dream is that we too can become as obsessed with having the perfect Hollywood smile as our friends across the Pond.

The cavity in its plan is a whopping lack of dentists. It employs 500 across its estate but needs another 100 if it is to cut waiting lists and make full use of its dental surgeries. Despite all the company's best efforts to poach aspiring UK citizens from the likes of Latvia and Slovakia it simply cannot get the staff. Even Stephen Lambert, the new chief executive, admits the shortage is "very, very serious".

On top of that, Oasis has had a terrible few months. Its former chief executive was sacked after making a mess of the group's biggest acquisitions to date. It bought the Dencare and Ora businesses almost two years ago, and is only just getting to grips with them. Its troubles cost Oasis its profitability and the company reported an interim loss of £490,000, against losses of £580,000 during the previous period. It has net debt of £40.6m, which it must restructure during the next six months.

Not much to smile about then. If you followed our advice two years ago and got your teeth into the stock (sorry about that), hold on for better times.

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