Sainsbury's faces uphill battle

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The Independent Online
J Sainsbury has, again, failed to deliver, with a profits warning on Friday, and lacklustre Christmas trading completing a dismal picture. Fund managers were dismayed, although there are no cries yet for the head of David Sainsbury. Most accept that it will take at least a year to return the former superstar to the top of the table. With little sign of a short-term bounce or revival, the shares - down to 341p from 399p - are best avoided.

RADIO First, an Ofex-listed firm mentioned here in October when it raised pounds 2m to build up its Mellow Radio business, has bought three AM stations from GWR Group - sold because of the latter's purchase of Classic FM. The price is pounds 225,000, with a deferred final payment of up to a further pounds 500,000 in two years. Radio First says Mellow, based in Colchester, is now profitable and has been granted permission to double its area from 120,000 to 260,000 potential listeners. We tipped the shares as an each- way bet at 6.5p. On Friday, they closed at 7.5p, and remain interesting for a niche media player.

WHO knows whether shareholders of Newman Tonks will be smiling when the takeover bid from FKI is finally decided? One winner already, however, looks to be Williams Holdings (333.5p), which has purchased Tesa, the leading Spanish company in commercial and residential security products, in which Tonks had a one-third stake. Williams has paid pounds 101m and brokers are applauding. After the sale of its UK building products arm for a full price, says BZW, much low-growth business has been removed. Fire- protection and security products will account for 66 per cent of estimated profits for this year of pounds 250m - down from an estimated pounds 327.8m in 1996. The shares, on a decent yield of 5.8 per cent, and an undemanding price multiple of 13.5 times 1996 earnings, are a buy.

ROXBORO (183p), the electronics group which issued a profits warning in November, has seen the departure from its share register of TT, the mini-conglomerate that has made a speciality of acquiring holding in undervalued companies and then selling out at a profit. That happened on Friday, when TT sold its 8.46 per cent stake for a tidy profit on its average buying price of 139p. Investors could take the view that TT saw no further upside now. However, the sale also removes the uncertainty of when TT would sell its stake - holding back the scope for further gains.

Either way, analysts flew back shortly before the TT move from a visit to the Dialight site in the US, the cause of the November profits warning. They are understood to be reassured, seeing it as a one-off occurrence. The shares look to have further upside and have the makings of a sensible long-term buy.

HANSON gears up for the last stage of its restructuring on Tuesday, with publication of the listing particulars for The Energy Group, due to be spun off on the London and New York exchanges at the end of February.

Energy takes in Eastern Electricity and Peabody, the biggest coal miner in the US, leaving Hanson a rump building materials and equipment group. Of the two, Energy looks more attractive, with bid speculation still surrounding Eastern, despite the poison pill of Peabody. Hanson, now 923/4p, had an awful 1996 as the worst-performing FT-SE stock but has recovered some ground on US buying this year. Brokers put a value of 37-45p on Hanson and 50-60p on Energy, making the shares currently a hold, at least.

A 10 for one consolidation of Energy shares and probable five for one of Hanson will also add to marketability when the shares start trading on 24 February.