CITY TALK: Fairey can squeeze out more sparks

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The Independent Online
FAIREY GROUP, the electronics to defence concern, has had a rough time in the markets over the past few months.

Having a portion of its business in Asia has hardly helped, but there was also a deterioration in its insulator business in the second half of last year, which has not exactly inspired the City. There are also concerns about its exposure to semiconductors - a sector where the Asian crisis, coupled with concerns about a downturn in the industry, has unsettled some investors.

But that is forgetting the strong European and US industrial electronics markets Fairey is operating in. The group has chalked up a solid track record over the past few years; there is little reason why it should start trading at a discount to the market.

Several stockbrokers remain committed fans of Allied Irish Banks, in spite of the remarkable 75 per cent rise in its stock price last year. Behind the optimism is good news about the Irish Budget in December. Corporate tax rates were reduced from 36 to 32 per cent, with a further improvement in post-tax profit-ability for the Irish corporations. It should also help boost inward investment into Ireland. So strong growth should benefit the bank in Ireland. AIB has also expanded into the US and now has 34 per cent of its assets there.

Morgan Stanley Dean Witter sees the shares hitting Irpounds 7, from 621p, as does Merrill Lynch.

Banner Homes (98.5p) is a small housebuilder, active in the upmarket locations of Buckinghamshire, Oxfordshire, Cambridgeshire, Berkshire and Hampshire. Its smallness is an advantage over larger competitors, as it can use sites that are too small for volume housebuilders to give it rapid asset turnover and an attractive return on capital.

Housing throughout the 1990s has been a volatile market, making Banner's achievements all the more commendable. With a land bank of more than 700 plots, equivalent to three years' output, it is in a good position to exploit today's more stable market.

Stockbroker Charterhouse Tilney estimates pre-tax profits will rise to pounds 5m this year, from pounds 1.8m in 1997. The shares are already trading on a hefty discount to the market, but at the expected rate of growth the shares are cheap indeed, trading at a mere four times' projected earnings

of 24p.

Some people have questioned how much longer shares in Pizza Express can continue to rise. Sales of pounds 71.1m last year were up 60 per cent from the pounds 44.3m of 1996, while pre-tax profits rose 58 per cent to pounds 16.2m. The rate of expansion continues unfettered, however.

At present, Pizza Express has just over 150 sites, but it plans to take that number to 300 in the UK. It has also started to expand overseas, with its first franchised operation having opened in Greece, and others set to open in Delhi, Cairo and Paris later this year.

Pizza Express also has plans on the drawing board to open pasta or chicken restaurants at some point. It looks as if the shares remain a buy for the time being.