CITY FILE : TSB to disappoint again

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The Independent Online
WITH TSB Group's results coming up next week the market has, as usual, been running up the shares in advance. This has become something of an annual ritual, as the bank's supporters keep claiming it has put all its problems behind it and everyone else speculates about the possibility of a takeover.

Equally often, however, the shares fall in disappointment after the results are announced - and this year will be no exception. Certainly, there will be a healthy rise in profits from £301m last time to around £460m this time. The dividend will rise about 1p to around 8.8p.

But TSB has had about all the benefit it can get from cutting bad-debt provisions, and the pressure is building on its banking margins. The future, therefore, does not look particularly exciting. Add to that the unlikelihood of a bid - people have been disappointed on this score for the last seven years - and the shares do not look like going anywhere except perhaps down. Sell.

THE shares of Tomorrow's Leisure languish a touch unfairly at their 1994/5 low of 10p, the price of the present £9m rights issue, which closes tomorrow. That price takes little account of the recent deal that gave Wiggins Group 29 per cent and the incentive to unlock TL's property potential.

An early fruit of that alliance is likely to be a hefty expansion of the company's Pleasure Island indoor family leisure centre in Liverpool. The site is in an area which has the highest Objective 1 Status from the point of view of qualifying for development grants from the European Union.

TL also has a four-star hotel near Darlington and a golfing centre in Essex. Now that the group has minimal gearing and shareholders' funds of £20m - dwarfing the current market capitalisation of £3.6m - it has the scope to add more sites. And the arrival of David Edwards from Scottish & Newcastle as managing director should provide the expertise to exploit the potential. A speculative buy.

ONCE a plantation stock, always a plantation stock. That seems to be the stock market's new year verdict on Harrisons & Crosfield, which still owns plantations but has diversified into animal feed and agrochemicals.

A profits warning in November has taken the shares from 150p to 142p, where they yield a whopping 8 per cent That makes an investment in the company either a great yield play - or a mirage.

Stockbroker Panmure Gordon is convinced that the dividend is safe and points out that the acquisitive Tomkins has already pondered its takeover potential.

The profits warning, the second in a short time span, has inevitably knocked sentiment. Some City folk are understandably disillusioned. But that is the time for others to pounce. A good lockaway, until a better management turns up to unlock the group's treasures.

THERE'S only one reason for shares in Rank Organisation to look as jaunty as they have over the past few days (up to 414p by Friday's close) - the eternal hope of a carve-up springing to life again. Rank remains the classic Sleeping Beauty, with the market's attention rightly concentrated on the possibility that it could hive off its 49 per cent stake in Rank Xerox.

By itself, that possibility would not be enough to justify a p/e of over 26 even if, as expected, earnings for the year to end October rise by 15 per cent when they are unveiled on Tuesday. But there's more to Rank than Xerox: despite years of underinvestment and uninspired management, it remains a big force in the booming British film business, with a queue of investors prepared to buy the Odeon chain, Pinewood Studios and the distribution business for a healthy sum. Hang on: the bust-up will come sooner rather than later.

THE cable television sector has been suffering from a boom-or-bust mentality recently, with shares in market leader Telewest looking decidedly seedy. This should not deter punters from investing in Caledonian Media Communications, the tiddler in the sector (and the only one that remains purely British-owned). Caledonian owns franchises in Aberdeen and Coventry and is coming to the market this week through a reverse takeover of the ailing Worth Investment Trust.

At 20.5p, the £40m company is valued at only £150 per home, compared with £400 for Telewest. The shares are well spread, with Nicholas Berry, one of the City's shrewdest long-term investors, owning 17 per cent. Well worth a punt.

IS IT time to buy Royal Bank of Scotland? Since last March the shares have bounced regularly between 460p and 380p. At their current level of 390p they yield a comfortable 4.4 per cent and sell on a prospective p/e ratio of nine. It is well worth taking advantage of the anomaly, because the shares offer good long-term value.