Investment Column: Aggreko has what it takes to power ahead

Bwin.party Digital Entertainment; Cape

Our view: Buy

Share price: 1,939p (+74p)

We have been fans of Aggreko for some time now. Our confidence has been down to the fact that it is well placed to meet the global demand for power. The temporary power provider boasts both the know-how and the reach to meet the needs of its customers, whether it be during crises that knock out conventional supplies, or during big sporting events.

It's success in this area was evident in its update last week. The group – the world's biggest provider of temporary power – posted higher revenues as it saw strong demand from its international power projects division. The momentum means that company is well placed to "deliver a strong second half," as the chief executive Rupert Soames put it.

All this despite the fact that the first half of 2010 was pretty strong, with the company generating nearly £50m in revenues from one-off sporting events. Performing well in the face of such comparatives speaks both of the strength of the international market for temporary power and Aggreko's nous for exploiting it.

The one fly in the ointment, however, is that the Aggreko story is far from secret. The market is very much alive to the growth potential, something that is reflected in the share price, which is up more than 100 per cent since the beginning of last year. And while the stock market has been struggling in recent months, Aggreko remains some 30 per cent ahead of where it began 2011.

You could, in other words, argue that it would be prudent to bank profits. We would disagree. Aggreko may find it harder to notch up share price gains at the same pace, but it will see more gains, in our view.

And although its shares are not cheap, at around 21 times forward earnings for this year, falling to 19 times on the estimates for next year, we think it is still affordable.

Bwin.party Digital Entertainment

Our view: Avoid

Share price: 125.3p (+15.3p)

Investors certainly appear to think that the awkwardly named bwin.party has something to celebrate despite the world's biggest online-gaming group unveiling a 21 per cent fall in earnings before various one-offs, depreciation, amortisation and tax, to €82m (£73m).

Despite the numbers (overall revenues also slipped by 3 per cent to €398m), the shares shot up yesterday. The figures, which admittedly were in line with the expectations in the City, were hit by the closing of the company's French casino, intense competition and tough comparatives with last year, when the World Cup kicked off a gambling binge.

The latter didn't seem to bother Paddy Power much, however, and we remain sceptical about online operations like this one. Regulatory and taxation nets are tightening around the world which adds to their risk profile (Germany could still produce some nasty surprises).

What's more, competition remains intense while brand loyalty is not strong. We also don't like the fact that bwin.party is run by two chief executives, frequently a recipe for disaster.

A valuation of about 8 times forecast 2011 earnings doesn't really tempt either. While the company has paid a maiden dividend, plans a share buyback, and boosted its target for savings from the merger which created the company to €65m from €55m by 2013, our pick of the sector remains William Hill, which trades on similar multiples but is a much, much better bet, in our view.

Cape

Our view: Buy

Share price: 480p (-6.75p)

After eight years in the relative wilderness that is Aim, Cape re-entered the main list in June and now the energy services group expects to be promoted to the FTSE 250 in the next reshuffle of the indices later this month.

The company, which used to produce asbestos, certainly returns in better shape, having tackled its rather large debt pile. Last September it announced its first dividend payment for a decade, and its share price has gained over 80 per cent in the past year.

Yesterday's first-half figures did see a small dip in its adjusted pre-tax profits, but Cape was confident on its prospects for the rest of the year.

Analysts reckon that its bullishness is well-founded, while an increase in the number of energy companies investing in LNG means it looks well set for the future. Investors hoping to take advantage, therefore, might be advised to get involved before the move up to the mid-cap index.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Recruitment Consultant

competitive + incentives + uncapped comms: SThree: Did you know? 98% of our di...

SThree: Trainee Recruitment Consultant

competitive: SThree: Did you know? 98% of our directors started with SThree as...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Are you passionate about sa...

Recruitment Genius: Junior Sales Executive - OTE £28,000

£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...

Day In a Page

Turkey-Kurdish conflict: Obama's deal with Ankara is a betrayal of Syrian Kurds and may not even weaken Isis

US betrayal of old ally brings limited reward

Since the accord, the Turks have only waged war on Kurds while no US bomber has used Incirlik airbase, says Patrick Cockburn
VIPs gather for opening of second Suez Canal - but doubts linger over security

'A gift from Egypt to the rest of the world'

VIPs gather for opening of second Suez Canal - but is it really needed?
Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Fashion editor, Alexander Fury, applauds a man who clearly has more important things on his mind
The male menopause and intimations of mortality

Aches, pains and an inkling of mortality

So the male menopause is real, they say, but what would the Victorians, 'old' at 30, think of that, asks DJ Taylor
Man Booker Prize 2015: Anna Smaill - How can I possibly be on the list with these writers I have idolised?

'How can I possibly be on the list with these writers I have idolised?'

Man Booker Prize nominee Anna Smaill on the rise of Kiwi lit
Bettany Hughes interview: The historian on how Socrates would have solved Greece's problems

Bettany Hughes interview

The historian on how Socrates would have solved Greece's problems
Art of the state: Pyongyang propaganda posters to be exhibited in China

Art of the state

Pyongyang propaganda posters to be exhibited in China
Mildreds and Vanilla Black have given vegetarian food a makeover in new cookbooks

Vegetarian food gets a makeover

Long-time vegetarian Holly Williams tries to recreate some of the inventive recipes in Mildreds and Vanilla Black's new cookbooks
The haunting of Shirley Jackson: Was the gothic author's life really as bleak as her fiction?

The haunting of Shirley Jackson

Was the gothic author's life really as bleak as her fiction?
Bill Granger recipes: Heading off on holiday? Try out our chef's seaside-inspired dishes...

Bill Granger's seaside-inspired recipes

These dishes are so easy to make, our chef is almost embarrassed to call them recipes
Ashes 2015: Tourists are limp, leaderless and distinctly UnAustralian

Tourists are limp, leaderless and distinctly UnAustralian

A woefully out-of-form Michael Clarke embodies his team's fragile Ashes campaign, says Michael Calvin
Blairites be warned, this could be the moment Labour turns into Syriza

Andrew Grice: Inside Westminster

Blairites be warned, this could be the moment Labour turns into Syriza
HMS Victory: The mystery of Britain's worst naval disaster is finally solved - 271 years later

The mystery of Britain's worst naval disaster is finally solved - 271 years later

Exclusive: David Keys reveals the research that finally explains why HMS Victory went down with the loss of 1,100 lives
Survivors of the Nagasaki atomic bomb attack: Japan must not abandon its post-war pacifism

'I saw people so injured you couldn't tell if they were dead or alive'

Nagasaki survivors on why Japan must not abandon its post-war pacifism
Jon Stewart: The voice of Democrats who felt Obama had failed to deliver on his 'Yes We Can' slogan, and the voter he tried hardest to keep onside

The voter Obama tried hardest to keep onside

Outgoing The Daily Show host, Jon Stewart, became the voice of Democrats who felt the President had failed to deliver on his ‘Yes We Can’ slogan. Tim Walker charts the ups and downs of their 10-year relationship on screen