Intelligent move to raise pounds 6m on AIM
Sunday 16 June 1996
Securicor is one of the growth stocks on the market - not because of its security business, but because of its stake in Cellnet, the mobile telephone network. Since March, when the company announced details of a capital reconstruction, its shares have outperformed the market by a hefty 21 per cent. According to stockbroker BZW, that represents a 13 per cent premium to the business's asset value of 275p a share. The broker has also trimmed its forecasts for 1996, from pounds 126.5m pre-tax profit to pounds 118m to reflect higher marketing and subscriber costs. At 24 times current-year earnings, the shares are overvalued. Sell.
Floated at 133p last December, shares in Unicorn International, now 153p, have performed reasonably well. Valued at pounds 50m, the company is a specialist engineer that produces abrasives, mainly for the automotive industry but some 15 per cent goes into the aerospace and power generation industries. The abrasives are used for grinding engine components and turbine blades. Analyst Roger Brocklebank, of stockbroker Albert E Sharp, sees the group lifting profits by 20 per cent to pounds 7.2m, which translates into earnings per share of 13.9p. The resulting multiple of 10.9 is significantly below the sector, while the yield is a healthy 5.1 per cent. Buy.
Will Celsis become one of the first biotech stocks to produce profits? It will be an irony if it does, as its shares are among the lowest rated in the sector. That is partly because its business is concentrated on the low-tech end. It produces bacteria detection kits for blue-chip companies like Colgate Palmolive, using a technique called bioluminscence, based on the firefly enzyme. It is much more accurate than conventional methods. The company is confident it can reach break-even by the end of 1997, with profits thereafter beginning to flow in earnest in 1998. With pounds 10m cash in the bank, it has no immediate funding needs on the horizon. If you want biotech with less risk than elsewhere in the sector, the shares (111p) are a buy.
Quarto, a co-edition book publisher and packager, last week announced the acquisition of a 75 per cent stake in Design Eye Holdings for up to pounds 5m. Design Eye made pounds 313,000 on sales of pounds 7.3m in 1995, and should be, says Laurence Orbach, Quarto's chairman, earnings enhancing in the current year. It will also allow Quarto (306p) to branch out from co-edition publishing for children to adult books in arts, crafts and hobbies. Broker Merrill Lynch expects pre-tax profits to rise to pounds 8.3m this year, from pounds 7m in 1995. Buy.
Results due tomorrow from Wagon, the engineering to car components and storage group, could prove to be make-or-break. NatWest forecasts pre- tax profits of pounds 27m (pounds 24.2m) but argues that the current depressed share price suggests deep-seated problems. The group is struggling to bring its new automotive business up to speed, and is finding that car makers are tough taskmasters. In engineering, loss-making units have been sold off, but the remaining ones must take up the slack left from retail systems and storage. A strong balance sheet, however, suggests the dividend should be safe, but the shares (374p) are not ones to over-enthuse about.
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