City File: A seam worth mining

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The Independent Online
ILL-WIND department. The growing doubts surrounding Richard Budge's bid for the English coal industry make Coal Investments a splendid two-way bet. The shares of the underbidder for a number of the Coal Board's regions have sagged to 108p from a year's high of 130p since the decision went against CI's boss, Malcolm Edwards, and his team.

If Mr Budge can raise the money, the market will revalue anyone digging coal -and Mr Edwards already has a number of mines.

If Mr Budge fails then Mr Edwards will be the only serious bidder for British Coal's prize properties. Pile in.

SOMETIMES a weak share price merely reduces, but does not eliminate, previous excesses. So it is with John Laing, argues the highly regarded building team at stockbrokers Panmure Gordon, with the shares propped up by long- term hopes of profits from privately funded infrastructure projects.

At 238p the shares are well below their 428p 12-month peak. But 'profits are driven by housing, as contracting is loss- making and a p/e ratio of 15 is very demanding for the sector. Closer to 10 times would be more reasonable.'

No fun there.

PANMURE is equally optimistic about the building distribution supershare Wolseley, 'riding the recovery wave in the US and UK . . . so powerful in its respective markets that friendly acquisitions are more readily available'. Pre-tax profits on Tuesday are forecast at just over pounds 200m.

Enter the doubters, led by Robert Donald of NatWest Securities. Agreeing that Wolseley is a 'great company', he thinks that the pounds 200m figure is 'an unrealistically high target put out by some brokers'. But Donald gives the game away with a chart showing that the price, at 752p down 16p on the week, is well below its spring peak of 975p. The ayes have it.

THE STOCK market flotation of an established brand can have a halo effect on the already-quoted sector. Watch, then, for activity in Emess shares as publicity surrounding the Thorn Lighting float illuminates lesser rivals.

Despite a strong profits recovery this year, Emess has been under a cloud because the dividend on the convertible preference stock has been mopping up distributable earnings. That creates a high gearing effect that should begin to bite next year, when profits are expected to top pounds 8m compared with a hoped-for pounds 6m this year and 1993's pounds 4m.

That would take net earnings from -1.5p a share to +1.5p. From there on, progress should be rapid.

JUDGING by the queues at its new pub in Ealing, west London, Yates Brothers Wine Lodges is heading for bubbling results on 9 November, when it reports its first set of figures since it went public in July.

The group then raised pounds 7.5m, which it plans to spend on doubling the Bolton-based chain from 50 to 100 in the next five years. As the family-controlled business has been rolling out the barrel for 110 years, it tends to know what it is doing. Expect the half-year profits to be well on the way to a 33 per cent increase for the year to March. A good time to buy, as the share price has come back from 180p to 166p.

BRITISH PETROLEUM is a chart buy, says Richard Marshall of Investment Research of Cambridge. Despite a market value of pounds 23bn, the shares can move quite niftily, more than doubling in the past two years.

'The share price shows no sign of reversing its long uptrend, extending back to the low point in September 1992,' Mr Marshall says. 'There is presently a trading range between 375p and 425p from which the shares must break out to signal the next important move. They can be expected to make their next big move on the upside rather than break down.'

If so, they are finely poised at 403p, but Mr Marshall says profits are recovering sharply this year, and he expects a significant rise in earnings into next year and beyond. Buy, despite a low yield of 2.9 per cent.

(Graph omitted)

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