BAA worth holding for long haul
Filtronic looks dear, but don't sell just yet; Take some profit at the Hornby express
Tuesday 03 February 2004
BAA, the privatised airports operator that owns Heathrow, Gatwick and five other major UK airports, is no stranger to political controversy. It successfully lobbied to be allowed a fifth terminal at Heathrow, and the Government's most recent policy pronouncement agreed to let it build another runway at the fast-growing Stansted airport in Essex. Even Heathrow may be allowed to expand further to accommodate the ever-growing demand for air travel - environmental targets permitting.
Yet there is a sense that the company is in danger again over how to fund expansion at Stansted. Airlines using the other, profitable London airports don't want to have to subsidise growth at an airport still used mainly by low-cost rivals. Shareholders may have to stump up. And there are growing calls for the whole company to be broken up to undo the stranglehold it has on travel into the South-east.
Nervous times for investors, then, and after a reasonably strong run for the shares many are starting to think of flying out of BAA. Certainly, many asset-based valuations fail to see much upside for the shares in the short-term.
As a long-term play, though, there is a strong case for holding the stock. As third-quarter figures yesterday testified, BAA's ambitious Heathrow Terminal 5 project is on budget and ahead of schedule. The management team, led by Mike Clasper, has steered an enviable course through disruption since 11 September 2001 and rising security costs have now been accommodated. Passenger numbers, after a wobble during the Sars outbreak, are strongly back on the up, especially at no-frills hubs such as Stansted and Southampton. Even airport shopping revenues have stayed buoyant despite the distractions.
It's risky, of course, and a dividend yield of 2 per cent is paltry compensation if BAA runs out of political and operational luck. But the projected long-term increase in passenger numbers is enough to make the shares worth holding.
Filtronic looks dear, but don't sell just yet
Filtronic, a supplier of components used in telecoms networks and mobile phones, has had a tough couple of years as the phone operators cut their spending.
But three months ago, apparently, that all changed. Purse strings loosened and operators have started to splash out again in the run-up to the launch of third generation, or 3G, services. Excellent news for Filtronic, which supplies some of the parts that sit in base stations as well as antennae for handsets.
Sales for the six months to November came in flat at £121.5m. Pre-tax profits were £2.2m, up from just £50,000.
In the group's wireless infrastructure division, its largest, demand has increased for base station products while Filtronic says it is also developing a record number of antennae for new mobile phone designs.
The shares, which closed at 454.25p last night, have had a storming run over the past year, and it is difficult to justify the share price on any fundamental valuation. The company also has a patchy track record that is likely to make it one of the sector's more volatile performers.
The company is understandably cautious, not least because its powerful customers are able to squeeze prices. It is also difficult to predict how big the 3G story will be. Nevertheless, given the interest that will likely surround 3G and the telecoms sectors in 2004, the shares are not to be sold at this stage.
Take some profit at the Hornby express
Hornby shares used to be a bit like their train sets: old fashioned-looking and chugging round and round in circles. Now they are more like the group's Scalextric slot-car racing sets: painted with go-faster stripes and racing ahead at full throttle.
Both sides of the business have been dragged into the modern age, with manufacturing shifted to China and a variety of new product launches to drive sales. A £500-a-pop "real steam" train set and a Harry Potter Hogwart's Express have become sought after collectibles. And Scalextric, too, is fighting back against the attractions of computer games, launching technology to link the sets to the internet to allow racing against other enthusiasts the world over. All the effort has improved profits fivefold and the share price tenfold.
Yesterday's update talked in measured tones about pre-Christmas sales having been "higher than the previous year". Hornby's broker reckons the sales are up a whopping 20 per cent. The reason the group was being coy is that it doesn't want to let the shares get ahead of themselves. At 1,117.5p, on 18 times the current year's likely earnings, the stock looks expensive and any operational wobbles could be severely punished.
While we were premature to advise readers to lock in some of their profits this time last year, it is even more tempting now. Keep some shares in the toy box, though.
- 1 Nokia no more: Microsoft drops once-ubiquitous mobile name in favour of its Lumia brand
- 2 Renee Zellweger on plastic surgery reports: 'I'm living a fulfilling life and I'm thrilled that perhaps it shows'
- 3 Banksy not arrested: Internet duped by fake report claiming artist's identity revealed
- 4 Australian café owner sparks debate after saying 'No' to having unruly children on premises
- 5 Couple die within 28 hours of each other after being married for 73 years
Ottawa shooting: Canadian soldier dies after being shot at National War Memorial – with one gunman killed inside parliament
Renee Zellweger on plastic surgery reports: 'I'm living a fulfilling life and I'm thrilled that perhaps it shows'
Isis releases first video showing stoning of woman accused of committing adultery as her father shouts 'don't call me Dad'
Banksy not arrested: Internet duped by fake report claiming artist's identity revealed
Diwali 2014: What is the festival of lights and how is it celebrated?
Cameron is warned 'no possibility' of UK reducing immigration and that bid to bring in quota on migrant workers would be illegal
Of course, teenage girls need role models – but not like beauty vlogger Zoella
Residents should throw a street party and mix with immigrant neighbours, councils told
Russell Brand threatened with arrest after filming outside Fox News headquarters
London bus driver 'kicks gay couple off for kissing'
Support for EU membership 'at highest level since 1991 with most Brits wanting to stay in'
iJobs Money & Business
£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...
£18000 - £23000 per annum + Commission: SThree: The SThree group is a world le...
£18000 - £23000 per annum + Comission: SThree: The SThree group is a world lea...
£20000 - £25000 per annum + OTE £Competitive: SThree: SThree Group and have be...