Worth building up Wimpey stock

TBI takes off due to no-frills popularity; Cuts will now feed Datamonitor profits
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The Independent Online

Buyers of new George Wimpey homes are able to buy in extras such as posh kitchen appliances, extra light fittings, landscaping for the garden, maybe even a greenhouse if they fancy. This scheme - similar to the sort of thing long available for new cars - is called Options. For the buyer it might save 18 months of trips to DIY superstores and hard manual labour. For Wimpey, it means an extra source of revenues and a quick way of improving profit margins. No wonder the company is showing off its first "Options Centre" to analysts in Edinburgh later this week.

To be fair, most builders now do something similar, but Wimpey is taking it furthest with the promise to establish six Options Centres by the end of next year. Okay, this is a move a bit away from the housebuilder's main area of expertise, but not too far away and Wimpey reckons it will add £15m to annual profits. The Edinburgh pilot has generated £1.5m in its first four months, encouraging homebuyers to purchase an extra £10,500 of add-ons. Yesterday's update was part of a wider statement on current trading that echoed Wimpey's sector mates. The UK and US markets are healthy, virtually all of the year's total expected sales are now either completed or reserved, margins will meet or exceed forecasts.

Wimpey is not the best housebuilder whose shares you can buy. Its margins are below the industry average, despite Options, because it has a shorter land bank than rivals (which means it has not enjoyed the valuation uplift you get from sitting on land for a few years in a bull market). It is also more exposed than most - through its Laing Homes acquisition - to the South-east and the more expensive end of the market, where a sales slowdown is most likely. Elsewhere, though, the housing market is set to stay strong as demand continues to exceed supply, while interest rates and unemployment remain low. Wimpey has a 3 per cent dividend yield and every chance of continued capital appreciation. Buy.

TBI takes off due to no-frills popularity

The dramatic switch of air passengers from flag carriers to low-cost, short-haul fliers has transformed prospects at the airport operator TBI.

More evidence this state of affairs will continue came yesterday in updates from both TBI and from its Luton Airport mainstay easyJet, which carried 18.6 per cent more passengers in September than in the same month last year.

TBI seems to have learnt how to turn adversity into progress. Extra low-cost flights from Luton offset the withdrawal of charter flights by the package holiday group MyTravel. While Luton traffic was unchanged in July-September, the arrival of the Italian airline Volare, with flights to Venice, Rimini and Cagliari later this month, should get the momentum rolling again.

Another plus point is that easyJet is committed to expanding its Luton-based aircraft from 12 to at least 14.

Similarly Cardiff has lost full-service flights but has persuaded British Midland's low-cost carrier bmibaby to set up there. Belfast has more than recovered from the loss of British Airways flights. And at TBI's continental airport, Stockholm-Skavska, Ryanair has more than made up for the removal of full-service flights.

Airlines seem to be cutting ticket prices to boost passenger numbers. That's bad for airlines but good for airports.

TBI shares have rallied from 40p in April to a year's high of 65p, although they slipped to 63p yesterday. With solid growth in prospect and the French construction group Vinci still holding a 14.9 per cent stake that could provide the springboard for a bid, TBI is at least a hold and worth buying for the long haul.

Cuts will now feed Datamonitor profits

For a market research company offering "premium business information" to its subscribers, Datamonitor has had a worrying tendency to get its own sales estimates wrong. After a couple of profit warnings on the way down from the peak of the technology bubble, the company's founder, Mike Danson, stepped back into the chief executive role to slash staff numbers, cut costs at the New York office and improve the variety of research products on offer. He got his sales estimates wrong again this year, too, but the market was happy to forgive when yesterday he said that revenues are running ahead of plan and profit before tax for 2003 will be significantly better than market expectations.

The dramatic improvement at the bottom line is the result of further cost controls and, most happily, an increase in the number of subscribers now that Datamonitor has improved its sales techniques. The group is still focused on industries including healthcare and car making and remains heavily into technology, too. Clearly the new found optimism for a recovery in technology spending is encouraging companies to splash out on market research in this area once again.

Mr Danson has eradicated Datamonitor's cash burn and the company now sits on a pile of £17m and there was even suggestions yesterday the company may return to the dividend list earlier or more generously than expected next year. Thanks to the cost cuts, the sales recovery should feed directly to profits. Buy.

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