Polypipe digs for victory : CITY FILE

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The Independent Online
FIVE FOR '95 is going to be a popular rallying cry among the more hucksterish brokers as they try to peddle their wares around the turn of the year. So well done to the first-class UBS for getting in first.

Mark Hake, the UBS building materials oracle, highlights Anglian Group, British Dredging, Graham Group, Polypipe and Spring Ram - which, as our chart shows, has spent most of 1994 on the slide since its founder, Bill Rooney, quit. The Rooney stake is nowon offer, putting the company in play as a bid candidate. That adds spice to what is becoming a classic management turnround story.

The best yielder of the quintet is Anglian, the windows group, which yields 7.5 per cent at the current price of 175p. Hake sees that rising to 9.7 per cent by 1997, as early double glazing needs to be replaced.

The pick of the bunch, for City File's humble money, is Polypipe, which receives the Hake golden gong for its "ability to buck sector trends and outperform the industry". He sees profits rising from £20.6m to £37.5m in the next three years, as Polypipe moves on to the Continent and the UK gas and water supply markets. Something has to go down all those holes in the road.

At 141p, the shares are on an attractive prospective earnings multiple of just 14 for the year to next June.

THE annual review of the FT-SE index constituents often highlights companies on the way up or down. The removal from the SmallCap index of Jeyes Group, the Wet Ones wipes and Parazone bleach group, ends a year in which it plunged into the red and its chief executive, Jimmy Moir, was forced to step down from day-to-day control.

In 1992 the group was valued at more than £100m and had dreams of attaining mini-blue chip status. But supermarket price wars put paid to that. Now, near its 1994 low of 163p, it is worth £36m and the 6 per cent yield is in dire danger. Avoid, at least until Moir's replacement, David Callear, unveils a fresh strategy.

ANYONE wanting to bet on a revival in world trade could do worse than nibble the shares of More O'Ferrall, the poster site owner. It is already gaining from the revival of demand in the UK, and it should be able to expect similar upturns in France and Belgium in the next two years. The group is flung as far afield as Taiwan, giving it a stake in the exciting Asian economic engine.

Stockbrokers Beeson Gregory see that adding up to pre-tax profits growth from £7m to £11.9m between last year and next. That should take the earnings multiple at 359p from 24.2 to 14.6, while there is a 4.6 per cent yield to fall back on. Buy.

SELL shares in Royal Bank of Scotland, say Scotland's Bell Lawrie White and Japan's Nomura Equity Research - or, as the Nomura analysts Michael Lever and David Raye put it, more delicately, "look to lighten".

They reckon the market is starting to recognise that the group is in two cyclical businesses, banking and insurance, and that growth is starting to slow in the ragingly successful Direct Line insurance business.

Even though the Nomura pair see Royal Bank's profits growing from £532m to £668m in the next two years, they warn: "The scope for some disappointment remains.''

Bell Lawrie's bank team argues that the 1994 figures were no better than expected, and that other banks offer higher yields and better cover.

A stern judgement, but a possible early warning that the City's honeymoon with Royal Bank and Direct Line is ending.

KEEP buying shares in the brewer and pub operator Greene King, says NatWest Securities ahead of the interim results on Thursday. The shares have outperformed by 16 per cent since the annual results in July, thanks partly to relief at the group's sale of its stake in the Morland brewing group. "The outlook for regional brewers remains bright," says NatWest's Michelle Proud, "and whilst trading should have been reasonably buoyant in the first half, investors will be looking for signs of management action to justify the board changes in early October."

The shares, at 534p, sell on an historic p/e ratio of under 15, which should fall to not much over 13 for the year to April. That should enable the shares to shrug off the mini-Budget's penny-a-pint increase.

CONCERN at Hoare Govett over Allied Colloids. The chemical group has had a strong run since late 1990, with a pause in 1992. The question is whether it can maintain the momentum, given that raw materials costs are set to rise substantially in the rest ofthe year to April. "Bide your time," says Hoare's analyst, Martin Evans.

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