City File: Cadbury shares leap barrier

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The Independent Online
AT 524p, Cadbury Schweppes shares have broken out of the 400-500p trading range in which they were locked for two years. Investment Research of Cambridge says this gives 'a strong chart signal for further significant advances over the next 12 months'. And leading analysts reckon the group has broken through a ceiling that confined it to earnings per share of around 25p between 1988 and 1992.

Last September's takeover of A&W Brands, the US-based soft drinks group, is a key factor behind the latest surge, which is expected to have pushed up profits to pounds 404m in 1993 and to take them to pounds 468m this year, lifting earnings to 32.5p. Investment Research's Richard Marshall believes the price will hit 650p by next January.

AMONG the more intriguing companies reporting next week is Caldwell Investments. The group, run by the Yorkshire entrepreneur Stanley Wootliff, has carved a niche in the 'non- fashion' underwear market, particularly in Germany, raising all sorts of questions about what fashion underwear might entail.

Caldwell recently bought a Bolton-based company that makes ladies' non-fashion underwear and has now started a joint venture to import Romanian-made suits, hopefully more fashionable than those worn by the late lamented Nicolae Ceausescu.

The group should be announcing pre-tax profits of more than pounds 500,000, which may put off questions about what its Liechtenstein subsidiary makes. Even though the shares, at 57p, are at a 1993/94 high, they could redefine the meaning of cheap.

ONE OF the hottest tips for 1994 must be Mid-States, the leading motor parts distribution business based in Nashville, Tennessee. It is expanding steadily, both organically and through takeover of smaller rivals in a fragmented industry.

Mid-States is now quoted only in London because of its historically close ties with Lord Stevens' interests. He is the chairman of Mid-States, and Invesco owns a 15 per cent non- beneficial interest.

As a result, a shadow hangs over the shares which, at 110p, are only just above 15 times historic earnings. However, they are soon to be quoted in New York. Although the spectre of Lord Stevens continues to haunt the company, Mid-States should start to bound ahead once the company has been introduced to a far larger pool of US investors.

DESPITE the efforts of Smith New Court, which we highlighted two weeks ago, ill-informed rumours have created a fresh buying opportunity in the shares of Sheffield Insulations Group, the highly successful home-protection company.

The price has fallen back from a 1993/94 peak of 276p to 260p, on the back of selling from a provincial broker who misguidedly persuaded his clients that the company had suffered its usual seasonal loss last month. In fact, those closer to SIG insist it recorded a rare profit at a time when the building industry virtually shuts down. That should secure the forecasts of BWD Rensberg, Panmure Gordon and Smith New Court that SIG will take its pre-tax profits up from pounds 3m to pounds 9m for 1993.

The shares are selling on a heady 53 times 1992 earnings, but that comes down to 22 times the 11.8p expected for 1993, and 19 times 1994's predicted 13.6p. Expensive, but good value.

THE JUSTIFIABLY criticised Stock Exchange committee that allocates sectors has done no favours to Stratagem, the fast- growing group headed by the former World Bank man Bernard Kerrison. Despite owning a computer servicing group and a chain of car dealers, it is classified in that backwater known as 'other financial'.

Although it had considered selling its computer operation, Firstpoint, it has now changed its mind and this appears a wise decision. The operation has just won a massive contract in the communications market, the details of which will soon be revealed. The shares have shown some form this year, rising more than 20p to 142p, but it is clear that they have much further to go.

ANYBODY who followed City File's advice six weeks ago to buy shares in Gemcor, which is mining for gold in Sardinia, will not have been disappointed. Shares in the Australian resources group have soared from 14p to 25p.

Now there is more good news. Gemcor has a 23 per cent affiliate, under group management, which has mining interests in Papua New Guinea. The affiliate recently paid less than pounds 2m for a 35 per cent stake in a PNG mining operation, taking its holding to 97 per cent, and then sold a 70 per cent stake in the operation to a Canadian group, Venezuelan Goldfields, for pounds 12m.

It may not be easy to follow what is going on at Gemcor, but it seems to be doing things right and there is more mileage in these shares.

AMONG the contenders for the trendiest share of the year must be Verson, the international engineering group that closed at 24p on Friday, four times its 1993 low, following a cheerful interim statement. The shares had been held back by auditors' warnings over excessive gearing, but the chairman Tim Kelleher has been proved right in his insistence that cash flow would reduce the problem.

Verson's strong suit is its involvement in the re-equipment boom in the world motor industry. Verson is big in automated welding systems and owns Clearing, the world leader in massive presses for the motor industry. Clearing had troubles with US automakers when it was owned by the Japanese, but is now back in favour. Verson's bulls are saying that the shares could go to pounds 1 within the year.