Liberty dividend still an attraction

Pig breeder Sygen shares worth hogging; Smartnav steers Trafficmaster in the right direction
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The Independent Online

Liberty International provides "a pleasurable social experience, core to modern lifestyles". Yet you won't find its shares listed in the leisure sector. Rather, it owns nine giant shopping centres around the country, including Lakeside in Essex and - the UK's largest - Gateshead's MetroCentre.

You may disagree that they are a great day out, but they are a great investment. Liberty's centres recorded 175 million customer visits last year, and most of the major retailers pay up to get prime locations. Rental yields of 6 per cent compare favourably with equities, bonds and anything you can get at the bank. Interest rate rises and equity market recovery notwithstanding, property continues to attract institutional investment that is keeping prices high.

Liberty enjoyed what it immodestly but correctly described as a "massive" £341m uplift in the valuation of its centres last year. This is a 10 per cent increase. In part it reflects the continuing high occupancy rate (just 79 tenancies out of 1,400 are going begging right now) and some modest rental increases. But it has also been swollen by Braehead in Glasgow, which was opened in 1999 and has only just started replacing early tenants with new ones paying 21st century rents.

In all, the shopping centres are worth £3.8bn, Liberty said yesterday, while its rag-bag of other office and retail property in the UK and the US takes the total up to £4.6bn. The only downward revaluations were to Liberty's properties in the West End of London, but office rents there seem close to stabilising.

The looming departure of Donald Gordon, who has built Liberty up over 25 years at the helm, need not affect the shares, since there is a business- as-usual mentality among management. In particular, uplifts to come from redevelopment and expansion work at Gateshead this year and Norwich next should keep the stock buoyant.

We said the shares were attractive at 532p last year, and with a dividend yield of just under 4 per cent likely this year, that remains the case.

Pig breeder Sygen shares worth hogging

Sygen International is the stock market descendant of the old Dalgety food conglomerate. It is a pig breeder, but has become a more exciting business in recent years as innovative genetic screening techniques have allowed it to produce fatter, fitter and more fecund sows, for which it can charge more.

We were rasher than we should have been when we tipped the shares back in the summer. We said they would bring home the bacon, but so far they have done no such thing, falling 14 per cent per cent. So were we talking hogwash?

No, but the slide in the dollar has been a problem, and it will lop £1.5m off profits this year. It has also taken US pig farmers longer than hoped to pick themselves up from the industry downturn and start replenishing their herds. Hog prices are better now, though, as BSE and bird flu scare people into pork.

Sygen has also moved into shrimp farming in Mexico and Brazil, which should turn a profit for the full year and which, from late 2005, will benefit from the company's genetic screening techniques, which will allow it to breed meatier and disease resistant animals.

The highlight of yesterday's interims was news that Sygen has now identified more than 2,000 genetic markers to improve other species including chickens and cows. It should be possible to commercialise the technology in the medium term.

Sygen shares, up 1.5p to 47p, trade on more than 20 times this year's earnings, which looks a bit porky, but the multiple falls to something like 13 next year, assuming hog prices pick up.

Worth a punt.

Smartnav steers Trafficmaster in the right direction

Trafficmaster was one of the many go-go stocks of the technology boom that never got as far as fast as its following of private punters hoped.

Yet it continues to make progress. The main product is Smartnav, an in-car satellite navigation system without a screen, and it also makes Trackstar, for tracking stolen vehicles.

Yesterday, Trafficmaster said it has done a deal with MG Rover to establish its kit as a "factory fit option" in the Rover 75 range. That means buyers will be able to specify Smartnav when they order their car and the unit will be fitted on the production line for about £500 extra. It differs from Trafficmaster's other contracts, where the system is offered as an "approved accessory" added on at the last minute. Embedding Smartnav at an earlier stage in production is a vote of confidence in the technology by Rover. About 20,000 Rover 75s were sold in the UK last year, and Smartnav might be fitted on 10 per cent of new cars, analysts hope.

We haven't written on Trafficmaster since warning in 2002 that the market for its products was developing slowly. The shares halved in the following months, but the run of contract wins has sent them much higher since. It is wise to be cautious, especially now they trade on 44 times this year's earnings. But with momentum gathering for the business - and for the tech sector as a whole - it is worth being a holder.

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