City File: Laing builds up strength

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BZW, the broker, has a man in Kuala Lumpur who's making soothing noises over the great Malaysia scare, at least as far as John Laing is concerned. Laing is contracted to build a dozen district hospitals,but construction is already under way and the contract is safe.

The news reinforces BZW's case for buying the shares, which dropped 20p to close the week at 385p. For Laing is the archetypal construction recovery stock, heavily involved in building houses for first-time buyers in the South-east and with the funds and experience to participate in the new trend for privately financed infrastructure projects - it's already involved in building the second Severn crossing. By contrast, the well-regarded construction team at Panmure Gordon remain bears, worried about Laing's over-dependence on social housing and the long-term nature of any joy from infrastructure projects.

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ALTHOUGH Pizza Express undoubtedly sells some of the best in the business, the shares have raced far ahead of customers' appetites. When it was reversed into Star Computers early last year, it turned into one of 1993's hottest stocks. Placed at 40p, the shares issued in return for Peter Boizot's chain opened at 70p and had raced up to 141p by last week, before the market trend set them back, though only by a few pence.

The market clearly saw unlimited possibilities because the chain was expanding, especially outside its London base, and new management was running it on a much tighter rein. But even now, at 136p, the shares are on nearly 30 times earnings and dangerously exposed. Sadly, a decided sell.

BUY ON a dividend cut. That is the message for investors hesitating over a plunge into Ladbroke, which is expected to halve its final dividend next week. Nevertheless, Jason Holden of NatWest Securities says: 'It's showing an improvement both in visibility and the quality of earnings which should point up the underlying quality of the business.' Crucially, worries over the value of the property portfolio have been greatly relieved by recent sales at above book value. So the shares, at 202p, yielding nearly 5 per cent even on the reduced dividend, are an excellent punt on a recovery in Ladbroke's sectors - DIY, hotels, property and racing - and an improvement in its once rather dismal reputation.

CHARTISTS are becoming increasingly excited at the behaviour of shares in Rolls-Royce, the aero-engine maker that is due to report 1993 results on 10 March.

For some months, analysts have been expecting the group to announce a recovery from 1992's pounds 184m loss to a healthy pounds 75m profit last year and possibly more than pounds 100m in 1994.

This has taken a while to be reflected in the share price. However, Investment Research of Cambridge points out that the shares are now seriously challenging the 175p barrier for the first time since 1990. This implies the outlook has changed significantly, they infer. Worth buying a few ahead of the figures.

A REVAMPED management team at Great Western Resources, the energy exploration group, is well worth following, according to the broker Henderson Crosthwaite. The new, and far less flamboyant, managers recently raised pounds 15m from a rights issue and institutional placing at 38p a share. The money will go towards an extensive drilling programme in the Gulf of Mexico and on a dramatic find in Peru, which could transform the outlook. Ignoring unproved prospects, the shares, at around the placing price, are already at a 25 per cent discount to asset value and a fraction of their 250p peak in 1991.

DIRECT selling of (naturally- based) cosmetics door-to-door in Latin America and Eastern Europe is one of the improbable successes of the Oriflame Group. This company is run from Sweden but quoted in London. Panmure Gordon, which placed 1.2 million shares with institutional investors late last year at 322p, remains a fan at 280p. The broker reckons earnings per share for the year to 31 March will be up by only 7 per cent because of weakness in the Swedish currency. But the longer-term prospects are excellent throughout the world. Oriflame has greatly increased its sales force in Latin America and will be a prime beneficiary of the gradual increase in disposable income in its biggest markets.