Bunzl rolls steadily toward bigger profits

City Talk
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The Independent Online
NOTE THE relentless strength of Bunzl, the cigarette papers and plastics group. Although at 179p it is only a net 7p up so far this year, there has been steady progress since Anthony Habgood took the reins, selling off sluggish operations and backing winners. Richard Marshall at Investment Research points out that 1994 results showed significant profit increases in all divisions, and backs forecasts of a rise from £79.8m to £96m this year. That puts the shares on a prospective price- earnings ratio of 12.4 and a 4.1 per cent yield. Marshall is looking for the shares to hit 230p by next April. Buy.

SPECULATORS are gathering once more around John Mansfield, the tiny builders' merchant that was floated on the stock market only last June. In an extraordinary oversight by the Stock Exchange authorities, in a matter of months Mansfield has in effect become a shell that can be snapped up with little more than pocket money by the likes of Nigel Wray, the Fleet Street Letter millionaire. He is believed to have built a 14 per cent stake, but at 4p the company is still valued at less than £3m. Worth a pin-money punt.

THE hectic auction for Southern Business Group, which looks to have been won by the US-based Alco, puts the spotlight on the next target in the fast-moving UK photocopier industry. The two to watch are Eurocopy and Copymore. Each is a fraction of SBG's size, and both have large management shareholdings. Significantly, Alco has a 4 per cent stake in the smaller Copymore, where the chairman and chief executive, Jeff Godbold, has 42%.

At 67p, the shares trade on only 13.7 times historic earnings, making them good value - with or without a bid. Eurocopy may be a tougher nut: it has expansion ambitions of its own.

BEWARE the froth surrounding shares in PhoneLink, which supplies electronic information services for telephone users. The shares have shot up from 176p to 247p in the past month, largely on the strength of a £2.25m deal to sell its Tel-Me personal computer phone link through British Telecommunications. While such a big partner is comforting, the shares have raced far ahead of the facts and are vulnerable to a bear attack. Avoid.

THE achievements of regional companies are often lost in the shadow of their bigger brothers, which can provide buying opportunities. Just such a chance may be occurring in Severfield Reeve, a Yorkshire engineering minnow that last week unveiled a 77 per cent rise in profits to £722,000. That is inspiring ABN Amro Hoare Govett, the stockbroker, to publish a buy note after Easter, forecasting 1995 profits of £1.5m and a prospective p/e of 8.8 at 56p. Buy.

THE stockbroker Charles Stanley likes BAT Industries, the tobacco colossus, shrugging aside the slight fall in last year's profits to argue that the acquisition of American Tobacco will boost long-term profit margins and market share, while the financial services division of Eagle Star and Allied Dunbar will gain from higher investment income. At 536p, this quality stock nevertheless offers a yield likely to rise from 6 per cent to 6.5 per cent this year.

SIG, the former Sheffield Insulation Group, has long been a favourite of this column, and the shares look ready to motor again, powered by the recent £12m takeover of Komfort, a ceiling and partitioning maker. UBS expects profits this year to jump from £19.8m to £24m, and £29m in 1996. At 243p, the prospective p/e is only 11.6 for this year, falling to 9.8 next. Good value.