Bottom Line: Time is on side of Alpha Airports

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FORTE is becoming very adept at squeezing the last penny from the sale of non-core operations. The 140p flotation price for Alpha Airports, the in-flight catering and airport retailing group, is no giveaway, but the offer should still fly.

At the offer price Alpha shares are on a p/e of 16 on forecast pre- tax profits of pounds 19.1m for the year which ends this month. Assuming a 13.7 per cent rise in earnings to 9.95p this year, the prospective p/e is 14.

Not over-demanding, but there are identifiable risks. The two big unknowns for existing operations are Alpha's landlords - airport owners such as BAA - and the airlines. Both are already beginning to tighten their belts on costs ahead of a tougher competitive pricing regime.

Alpha depends not only on securing new contracts for flight catering but on retaining old business put out for tender. Margins in both areas will be squeezed.

In retailing, Alpha has yet to demonstrate that it has found the right product mix. It will also have to resolve the problem of the abolition of the European duty-free market in 1999.

Around 75 per cent of Alpha's retail profits come from duty-free, and half of that is accounted for by European traffic.

The problem for BAA, however, is even greater because its duty- free profit margins are considerably greater than Alpha's. So will this induce BAA to increase rents?

It probably will. But, even if it does, time is on Alpha's side. By then it should have notched up several joint venture successes in flight catering, particularly in the US, involving low capital outlays.

Joint ventures are clearly the hub for profits growth, and investors could do worse than climb aboard and enjoy the ride.