One-off gain flatters Fisher's figures
Sunday 27 August 1995
But despite moving away from commodity foods under new chairman Stephen Walls, earnings quality remains low. Even Albert Fisher's own broker, de Zoete and Bevan, thinks further share price performance will be constrained. The shares have risen from as low as 38p in April to 55p, as investors realised the thinly covered dividend, yielding 8.6 per cent, was safe. But doubts about a maintained payout next year must remain if, as forecast, cash flow is no more than neutral. Best watched from the sidelines.
UNLIKE Albert Fisher, defence engineering group GKN is beating even the most optimistic market forecasts. Recent interim results prompted a spate of upgrades and left analysts purring at Westland Helicopter's pounds 4bn order book. According to stockbroker Albert E Sharp, aerospace profits may even surpass automotive contributions by the end of the century. That makes GKN (763p) more resilient in a cyclical sector and justifies a p/e ratio of 14 times 1995 earnings.
THE superstore chains are squealing less about price competition these days, notes broker Henderson Crosthwaite. Smart marketing moves and the onset of price inflation have created comfortable trading conditions. The easing of price pressure is particularly helpful to the Argyll-owned Safeway, undergoing a radical overhaul. At 349p, the underperforming shares are the cheapest in the sector, argues Henderson, based on a 1996 p/e of less than 14 and a gross yield of 4.7 per cent.
INVESTORS call the turn in Reuters at their peril and a two-way pull is again being exerted on the shares. The bounce in the US dollar augurs well, while the demand for suppliers of information is stronger than ever. But many of Reuters operations are in a state of upheaval as the banking industry consolidates. The board's warning that revenue growth would be slower in the second half confirms broker Charles Stanley's bearish stance. Although dividend payments are set to increase above the rate of earnings growth, the forecast 2 per cent gross yield is not enough to give the shares, at 289p, much support.
SHARES in Unipalm (474p) received another boost last week when Europe's leading commercial Internet service provider revealed it was in talks that might lead to a bid in the coming weeks. Telephone giants BT and AT&T of the US are favourites to swoop. Unipalm shares have risen by 159 per cent in just two months. Yet Net- scape, the US Internet software company, was floated on over 40 times annualised sales, implying a share price for Unipalm of pounds 38. But don't worry if you have missed out on the excitement. Several other UK-based Internet providers being lined up for a stock market flotation should give investors opportunity to join in the fun.
It looks very much as though 2015 will be a good year for the world economy, after all – and, if it is, that will be thanks to the fall in the oil price. It won't be good for everyone and we have already seen the pressure it puts on the Russian leadership – though, before you conclude that sometimes there is natural justice in the world, remember that the people who are hurt are not leaders such as Vladimir Putin. Other oil- and gas-exporting countries are damaged, too, and I think we will see further fallout in unpredictable ways. But the net impact is strongly positive, more so than most commentators at present acknowledge. The winners far outnumber the losers.
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