The Investment Column: Watch this space: Regus is good bet to keep on growing

Tanfield; National Express
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The Independent Online

Our view: Buy

Share price: 73p (+2.5p)

Regus offers small firms the ideal hedge in times of uncertainty. Why enter into a lengthy lease for office space when Regus can provide accommodation virtually off the hoof with no long-term commitment?

The flipside, of course, is that this can also leave Regus with a headache if firms hand back the keys at a moment's notice. Despite turmoil in markets, that is not happening. In fact, firms are now hiring space for longer periods a sure sign of their own confidence.

It isn't just start-ups which go to Regus. Even big companies such as Glaxo, Google and IBM use it when they need accommodation at short notice.

The company now operates from 950 locations in 400 cities, providing fully staffed temporary offices and meeting rooms equip-ped with video conferencing facilities.

If there are any blips, they are not showing on the company's own radar screen despite worries about the US which led to a sharp sell-off in the shares several months ago.

In an update before this month's year end, Regus said all its markets, including the US, were growing. It has gone into more countries New Zealand, Bulgaria, Jordan and Kenya are the latest while during the second half the number of workstations available for hire increased 24 per cent to 132,000.

Revenue for the 11 months to end November was up 27 per cent at 783m and a progressive dividend policy, introduced in 2006, sees the final payout bumped up by 67 per cent to 1p. With ar-ound 80m expected in the kitty at the year end, share buy-backs remain likely.

Regus is a more mature and balanced company than five years ago when the shares sunk to 5p and its future was being questioned. The company is in more markets with a wider customer base.

The US generates one-third of revenue but there are now other cushions available which were not in place in 2002. At 73p, the shares sell on just over 7 times 2008 earnings and look attractive.


Our view: Hold

Share price: 131.25p (+1.25p)

Electric vehicles are not known for their speed but this has not held back the share price of Tanfield, maker of zero emission electric trucks and vans.

From a lowly 20p in July 2006, the shares touched 203p before throttling back to current levels around 131.25p. The trick for Tanfield is to avoid becoming one of those British companies which develops a world-beating product only to see it overtaken by cheaper, better versions from elsewhere. So far, the omens are encouraging. Tanfield builds electric vans and trucks for fleet operators needing to deliver to customers in congested towns and cities. They have a range of up to 150 miles on one battery charge and a top speed of 50mph sufficient for meandering around congested city streets.

As more authorities set up congestion charging systems, electric-powered vehicles backed by tax breaks are becoming an increasingly attractive alternative.

Tanfield announced a further order for 100 vehicles yesterday in a pre-close statement confirming it is on course for an exciting 2008 when production is likely to accelerate from around 260 vehicles a year at the moment to close on 1,500. The US is expected to grow faster than the UK.

The company is not a one-trick pony. It also has a successful business making aerial work platforms for the construction industry. Together, the two businesses are expected to lift profits from around 16.6m in the current year to around 40m in 2008.

In the short term, it offers huge promise but the shares already sell on 35 times current earnings. That is expensive despite the impressive scope for growth. Hold for now.

National Express

Our view: Buy

Share price: 1105p (+44p)

Ol! National Express may be the official coach operator for Wembley Stadium but business is as brisk on the streets of Barcelona as it is on match days in north west London.

Growth in passenger numbers on its buses and coaches in Spain has helped drive 2007 results towards the top end of expectations. The company, delivering an upbeat pre-close trading statement, saw its shares move sharply ahead after slipping 12 per cent over the last month.

Alsa National Express's Spanish operation which is now Spain's largest private coach and bus operator, carried an impressive 4 per cent more passengers during the second half. Considering the competition from low-cost airlines, this is quite an achievement.

The company has staked its reputation on expansion into mainland Europe and needed evidence that its strategy was right.

Back in Blighty, tinkering with the fare structure helped revenue climb 11 per cent on trains and 6 per cent on buses and scheduled coaches. There was also positive news from the US.

The shares gained 92p before coming back to 1,105p, up 44p and should make further progress. Buy.