The Investment Column: Ulster TV will find it hard to persuade sceptics of value in TalkSPORT deal

Center Parcs' shares are cheap and offer good potential for the long-term - Logistics firm TDG could deliver for our portfolio
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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, ending Mr MacKenzie's ambition of taking the group private himself.

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, ending Mr MacKenzie's ambition of taking the group private himself.

UTV hardly had to bust the bank to pay for the deal, since it seems to have been the only serious trade bidder and the value Wireless fetched is barely 1 per cent above the share price when Mr MacKenzie's ill-fated private equity bid emerged.

Yet UTV will not find it easy to justify the deal at this price and at this time. The company has been running up against the limits of what it can do in radio in the island of Ireland, where its radio licences cover 55 per cent of the population in Northern Ireland and 51 per cent in the Republic.

The Wireless Group has not been profitable at the pre-tax level, although it has broken even on the operating line. The national radio station is something of an also-ran behind the BBC's Five Live, which has deeper pockets for buying sporting rights. UTV believes that it can rejuvenate the 17 local stations and make savings by selling advertising across a wider selection of stations.

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 it is really creating value rather than simply empire-building with this new investment across the Irish Sea.

The question of timing is also difficult, since evidence from elsewhere in the UK radio sector yesterday suggested an alarming dip in advertising revenues. Wireless itself has already warned that revenues in April were affected by the general election.

Radio has grown its share of the advertising cake significantly over the past decade, and most forecasters expect that trend to continue over the long term, but the industry does face challenges from a proliferation of digital stations and there could be some painful adjustments. While the prospects for consolidation in a deregulating UK market has kept up the valuations of radio assets, it is difficult to be sure Wireless is a great prize, particularly on the evidence of this lacklustre auction.

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.

Center Parcs' shares are cheap and offer good potential for the long-term

Eighteen months ago, when Center Parcs floated, the leisure villages group was forecast to make about £27m profit on turnover of £240m for the financial year ended April 2005. Now that year has just closed, analysts expect turnover of about £240m and profit of £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 from this is that the shares were overpriced on float, the second that the City is slow to forgive a management that cashes in only to deliver a profit warning soon after.

The next conclusion is that the shares look too cheap. We have a bad record, having tipped them twice, but bear with us.

Center Parcs has been criticised for the sale and leaseback deal done before the float, which means it does not own its four villages and must give over a significant amount of its income in rent. But these are the numbers (on Altium Securities' forecasts for the recent financial year): the rent is £43m after what Altium calls Ebitdar (earnings before interest, depreciation, amortisation and rent) of £82m, leaving it plenty of headroom to cover its £4m debt interest bill, dividends of £9m and capital expenditure to upgrade the facilities.

The shares, at 61.25p, have a dividend yield of nearly 6 per cent. That is attractive in the short term, while plans are progressing for a fifth site, which gives the stock long-term potential. Buy.

Logistics firm TDG could deliver for our portfolio

With apologies for the delay, a new share tip for our portfolio of stocks for 2005. We had to let Antofagasta go when it dipped below our stop-loss, and have been agonising over a replacement.

We are looking for an undervalued company, with decent trading prospects in an uncertain economic environment, and a bit of takeover potential. We were tempted by easyJet (a strong long-term bet with acquisitive Icelanders on the shareholder register, but highly valued and vulnerable to a consumer slowdown). We were tempted by Premier Foods (a solid player with ambitions to grow by acquisition, but its shares have jumped already). We have alighted on TDG, a logistics group whose long-term contracts give it stability, whose strong cashflows protect a dividend yielding over 6 per cent, which looks undervalued given it has eliminated its debt entirely, and which operates in an industry where consolidation plans are being hatched.

TDG is unloved. 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 yesterday was told that trading, while challenging, is on course to show an improvement this year. Operating efficiencies and better-margin contracts ought to push profit up 10 per cent.

After a strong start, our portfolio is now underperforming the market. Compared to a rise of 1.4 per cent by the FTSE All-Share, we are down 1.0 per cent, although the decline would be three times greater without our stop-loss policy. TDG's addition ought to get the show back on the road.

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