City File: Countrywide is drain on Hambros

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The Independent Online
THERE are dark mutterings that Hambros will have to raise more capital. Despite having floated its insurance arm earlier this year, the drain from Hambro Countrywide, the estate agency side, is making it difficult to manoeuvre.

Corporate finance is no longer a huge fee earner, and in recent years the group has been forced to lean increasingly on capital-intensive businesses such as lending, leasing and Eurobonds.

Results on Thursday will reveal that, without the pounds 10m of profits from the insurance sell- off, Hambro would have only just covered its full-year dividend of 13.8p. Neil Baker at Credit Lyonnais-Laing reckons that if everything goes right at Countrywide, Hambros can make just over pounds 100m in the current year. But this would still represent only 28p of earnings per share. Sell.

FINE Art Developments, the Bradford-based card maker, has defied the recession and is gearing up for recovery. It has invested heavily in new machinery, some of which can make 13 million greeting cards a day.

With a company so heavily geared to Christmas, it is hard to second-guess its prospects. But its broker, BZW, predicts pre-tax profits of pounds 38.5m for the year to next March. At 541p the shares are on 16 times prospective earnings and look cheap.

Emap power

Emap promises to hit the ground running next week. Not only will the publishing group reveal a significant increase in profits tomorrow, on Tuesday it will put in two applications for the re-advertised London independent radio licences.

Kiss FM, the soul and rap station where Emap owns 98 per cent, is almost certain to have its licence renewed and Emap is confident that its application for an AM licence with a women's station headed by Joan Bakewell will also succeed.

As for the results, the acquisition of titles from the collapsed Maxwell empire and the revitalisation of titles bought from News International will power the profits up more than 50 per cent to pounds 42m. But the shares, at 361p, already reflect the good news.

FOR those who like high-risk investment strategies, how about an account play in Zeneca nil-paid rights? Currently at 24p, they will be worth nothing if the rights issue flops, but you could double your money if there is even only a small uplift in the underlying stock, presently trading at an absurdly low 621p a share. At this level the shares are on a prospective yield of 5.7 per cent and a prospective earnings multiple of under 12. Everybody knows that the pharmaceuticals sector is bombed out, but this has got to be ridiculous.

Waiting to fall

LAST Thursday, only a day after George Soros's tie-up with British Land, the market in property shares came to its senses. Nevertheless many companies - and their shares - remain exposed, like MEPC, which ended the week 15p up at 441p after results that a normal market would have treated as pretty gloomy, simply because MEPC did not follow other companies in announcing a rights issue.

This sort of reasoning indicates a market waiting for an excuse to fall after a rise that many feel is overdone. Next week Great Portland Estates will test the market: its rise from 120p earlier this year to its Friday close of 193p is simply too much.

Bulls will say, rightly, that the company has reduced its historically high exposure to central London - especially to the hard-hit garment district north of Oxford Circus - but, like many other well-established companies, it has a steady flow of leases falling in at the wrong time and the wrong place. Sell on the show of strength likely after the results.

WHAT next for Wassall, the fast-growing conglomerate headed by former Hanson acolytes? It needs another acquisition to maintain its momentum. How about David Abell's Suter?

The company is ideal for Wassall, solid and recovering but undervalued because of continued City concern over Mr Abell's management style. Furthermore, there is already a connection. When Wassall bid for Metal Closures, Suter helped out by assenting its stake and underwriting some of the costs of the deal.

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