Pet City poised to be the lizard kings
Sunday 03 March 1996
Geckos range in price from pounds 10 or so, up to pounds 100 and over for the rarer species. However, as anybody who has bought one of these for a child knows, the real cost comes with the accessories. You'll be lucky to get away with much change from pounds 200, unless you are a keen DIY enthusiast. Which is where the pet shop makes most of its money. The purpose of this little preamble? Shares in Pet City continue to march forward. Pet City is promoting the more exotic species, and moving away from trusty hamsters and guinea pigs.
Launched at 300p last November, the shares have since climbed to 375p. Although the group is yet to make a profit, news that broker Smith New Court, now part of Merrill Lynch, started to make a market in the shares last week, coupled with takeover prospects, make the shares attractive. A gamble, but more upside than downside at present.
THE HIGHER and quicker the rise, the steeper the fall. Could that be the fate of Cairn Energy, whose shares have more than doubled since December, from 100p to 209p? Broker Charles Stanley has taken a long hard look at the company, and is worried about the political situation in Bangladesh, where most of Cairn's recent reserves are located. A turbulent political climate has seen violence erupt on the streets. The state company PetroBangla may be unable to fund its commitment to take up production from the Sangu field when it enters into production in 1998.
PetroBangla is obliged to pay Cairn $2 for every 1000 cubic feet of gas - although the price in the local gas market is only $1 per 100/cubic feet. The shares, says analyst Richard Slape, may be overvalued by as much as 20 per cent. Sell.
AS THE dust settles on the bank reporting season, what evidence have we already of winners and losers? Clearly, Barclays' giant profits of pounds 2.1 billion were a record achievement, but the market failed to warm to the idea, with most of the increase coming from a write-back of Third- World debt. The shares however, at 782p, remain on a low-rating. And boss Martin Taylor's mantra of maintaining high quality lending at the expense of market share, must at the very least limit the downside risk. Buy.
Meanwhile, Standard Chartered (640p), small in the UK, but big overseas looks somewhat overdone on takeover speculation: sell.
A PRICE earnings ratio of 10 times, for a company which has doubled sales in the last five years, with profits rising fourfold, may sound cheap. To followers of the engineering sector, which trades on an average PE of 17.36, however, small companies, and new issues in particular, are out of favour.
Stadium Group comes to the market this month to raise pounds 14.5m via a placing. Of the new money, pounds 4.3m goes to the company, the rest to management and existing shareholders. At the issue price of 120p, the shares yield 4 per cent, against 3.21 per cent for the sector. The reason for the possible largess is, of course, market forces. Fund managers have had their fill of flotation disasters, while a huge number of small placings and the like, coupled with the pending offer of Orange to raise pounds 2bn plus, have dampened institutions' appetites. Stadium's order books however are extremely healthy. Although private investors can only buy when dealings begin on March 11, this is one to tuck away.
WHEN Burford (the property company headed by new Saracens rugby magnate Nigel Wray) was last tipped in this column, the value of its Trocadero leisure business was just becoming apparent. Last week, the prime leisure complex in the heart of London's Piccadilly, produced its 1995 results, which showed a slight gain in operating profits to pounds 13.2m, from pounds 13m. Pre-tax profits fell to pounds 11.7m from pounds 14.7m; however, the headline figures disguised the underlying trend in the business. Assets acquired for pounds 120m over the last 18 months are now worth pounds 300m. This year may not be as exciting as last, but the shares, currently at 107p, still deserve their premium rating. Buy.
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