City File: Hanson to silence cynics

Click to follow
The Independent Online
SOME bloody-minded market cynics are suggesting that Hanson, the ultimate break-up merchant, could itself be the victim of a massive break-up. They point to an ageing and complacent top management and a number of subsidiaries in sectors such as timber and aggregates that could be floated on a higher multiple than that presently enjoyed by Lords Hanson and White.

But Friday's reduction of the asking price for the Beazer housebuilding subsidiary could transform Hanson into its real position of a recovery stock giving a solid yield of nearly 5 per cent. The US coal strike, which will depress first-quarter earnings, finished in time to allow Hanson to benefit fully from the unprecedented bad weather in the eastern US. Stick with the shares at 289p, down 10p on the Beazer revaluation.

THE MARKET is assuming that British Airways will show a healthy recovery when it reports third-quarter earnings on Tuesday: up from pounds 20m to pounds 58m, according to Mike Powell of NatWest Securities, though the improvement will not flow through to earnings per share, boosted in 1992 by a pounds 20m tax credit.

But the continuing recovery will not be enough to keep the shares airborne at their present 475p, up from below 300p in the past year, without some extra boost. This could be twofold: reduction of losses on BA's French and German subsidiaries; and a substantial reduction in the subsidies and write-offs the European Commission allows to BA's less well run, state-owned rivals, notably Air France. If aid can be capped, BA can really profit from its lower costs.

CAIRD Group, one of the dodgiest stocks of the past few years, could be over the worst. The waste group was nearly bought by Severn Trent Water at 100p a share three years ago. Since then it has been downhill all the way, with massive losses expected to be announced in the next few weeks by the new management team installed last year. But this 'kitchen sink' operation, resulting in losses of up to pounds 25m, could be the signal for a solid recovery, as Caird confines its activities to a few large landfill sites. The turnaround won't be enough for payments to be resumed on the company's 7 per cent convertible preference stock this year, but the shares must be an excellent punt at their present near- 75 per cent discount.

BEWARE the fashion for Baldwin, the wide-ranging leisure group that shot to 140p, against a 1993 low of 63p, on last Friday's announcement of doubled profits for the year to 30 October. In Baldwin's favour is the trend to self-drive camping holidays. But the company remains accident-prone - witness its investment in the ill- fated London Clubs gambling operation. Its catering division, vastly expanded with the purchase of the Muswell's chain from Allied-Lyons, is not a sure-fire winner. And the mysterious Singapore entrepreneur Ong Beng Seng, who owns 22 per cent, is another complicating factor. Steer clear.

THE great oil see-saw is now running BP's way with the shares perky after last week's better-than-even-we-expected results. This is bad news for the far larger, more predictable Shell. Because of the Dutch connection, dividends are declared in guilders. This was useful when sterling was low, but could now dilute the expected 10 per cent dividend rise.

Shell's sheer solidity militates against any favourable surprises. And the outlook for European chemical operations, dealing in products in chronic over-supply, could deepen the grey tint to the outlook. At 741p, the shares have only matched the market this past year and remain unexciting.

MARKET eyes are turning with increasing interest to the Investment Company, which has the distinction of being headed by the oldest chairman of a listed company, Major George Webb, 89 years old.

Shares are trading at 44p, some 8p below the estimated net asset value of the company, which is dedicated to investing in preference shares and other securities ranking as prior charges in the event of a break- up. Preference shares have been in demand lately.

In addition, the fund could contain up to 20p a share in cash, as several of the stocks it holds have recently come up for redemption. When the chairman gets round to hanging up his abacus, the company could be a handy shell for some thrusting young entrepreneur.

Comments