Investment Column: Back BG Group to keep its foot on the gas

Thomas Cook; Brewin Dolphin


Our view: Buy

Share price: 1,191p (+29.5p)

BG Group is still on a roll. Not content with its unprecedented string of exploration successes in Brazil's promising Santos Basin, the company yesterday announced a gas discovery at its Chewa-1 exploration well in Tanzania.

Chewa is the second of three prospects to be drilled off southern Tanzania, following a deal with Ophir Energy this summer, and there was a similar gas discovery at the first well, Pweza-1, last month.

It is too early to speculate about the size of the reserves, but Frank Chapman, BG's usually sombre chief executive, is almost upbeat. "This is an encouraging start to our campaign in Tanzania," he said yesterday.

Mr Chapman naturally expresses caution, but the two successive finds cannot be anything but good news – not least with rivals' successes nearby – and Chewa and Pweza add a further glow to BG's aura of success.

But Tanzania is not just about the razzle-dazzle of boosting reserves. The discoveries are also important strategically, underlining BG's commitment to exploration even as its growth plans focus on Brazil, US shale gas and Australian liquefied natural gas (LNG) all moving into production.

BG has plenty going on already. Last month's third-quarter results showing pre-tax profits of $1.39bn (£892m) were published alongside a higher estimate of the group's Brazilian reserves. Just days earlier, production started at the flagship Tupi well in Santos Basin, and BG also gave the formal go-ahead to $15bn plans for the world's first coal-bed methane LNG plant in Queensland. Even so, Tanzania helps to show that BG Group is still hunting out new opportunities.

BG shareholders have seen total returns of nearly 420 per cent since Mr Chapman took over as chief executive in 2000, according to Barclays Capital estimates. There are more to come. Keep buying.

Thomas Cook

Our view: Buy

Share price: 178 (-8.3p)

Tour operators will want to forget 2010. Like its rivals, Thomas Cook has had to contend with the Icelandic volcanic ash cloud disruption, subdued travel during the football World Cup, hard-pressed consumers shunning holidays or leaving their booking till the last minute, and big cuts to its winter capacity.

Despite all this, Thomas Cook's full-year pre-tax profits only fell by 7.5 per cent to £41.7m, on revenues lower by 4.1 per cent at £8.89bn for the year to 30 September. Analysts also saluted higher-than-expected UK cost savings of between £40m to £50m to be delivered by 2012, alongside a modernisation programme for its aircraft.

Even better, from existing investors' perspective, the tour operator is holding its total dividend at 10.75p.

That said, Thomas Cook admits that the trading environment in the UK "remains uncertain". Furthermore, the merger between the Thomas Cook and the Co-operative Group's high-street travel agency and foreign exchange businesses, which it unveiled in October, could lead to integration headaches in the year ahead. Still, we believe that shares in Thomas Cook, which have taken a battering this year, now look cheap on an earnings multiple of 7.2 for next year. Buy.

Brewin Dolphin

Our view: Buy

Share price: 148p (+2.25p)

The financial services group Brewin Dolphin trades on pretty thin multiples. Arden Partners puts the shares on less than 10 times forward earnings for next year, which is hardly demanding, especially in light of a forecast yield of more than 5 per cent. Sector peer Rathbone, on the other hand, trades on multiples of more than 18 – yes, 18 – times. Rathbone is a strong business, and deserves a premium rating. But that gap seems far too wide, particularly in the context of yesterday's full-year results.

Brewin posted a healthy 43 per cent rise in pre-tax profits, which jumped from £21.9m to £31.4m. Funds under management were 13 per cent higher at over £23bn, while revenues jumped by 18 per cent to £250.9m. The gains came despite growth in red tape, with Brewin bemoaning a "material rise in the costs" of dealing with regulators.

Looking ahead, the company struck a confident note on outlook and, in an unusually dramatic turn of phrase for a results release, said it was "determined not be thwarted by increasing amounts of regulation". Putting the hyperbole aside, Brewin deserves credit for the strong performance, particularly in light of the weak valuation. Buy.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Lou Reed distorted the truth about his upbringing, and since his death in 2013, biographers and memoirists have added to the myths
musicThe truth about Lou Reed's upbringing beyond the biographers' and memoirists' myths
News
people
News
Ed Miliband received a warm welcome in Chester
election 2015
Life and Style
Apple CEO Tim Cook announces the Apple Watch during an Apple special even
fashionIs the Apple Watch for you? Well, it depends if you want for the fitness tech, or the style
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

UK's Major Tum to blast off on a spice odyssey

Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
John Harrison's 'longitude' clock sets new record - 300 years on

‘Longitude’ clock sets new record - 300 years on

Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

Let the propaganda wars begin - again

'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
Why Japan's incredible long-distance runners will never win the London Marathon

Japan's incredible long-distance runners

Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
Why does Tom Drury remain the greatest writer you've never heard of?

Tom Drury: The quiet American

His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
You should judge a person by how they peel a potato

You should judge a person by how they peel a potato

Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Beige is back: The drab car colours of the 1970s are proving popular again

Beige to the future

Flares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

Bill Granger cooks with fresh cheeses

More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

Shay Given: 'This FA Cup run has been wonderful'

The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
Timeless drama of Championship race in league of its own - Michael Calvin

Michael Calvin's Last Word

Timeless drama of Championship race in league of its own