Investment Column: Big Yellow proves big gamble for investors

Hilton Food Group; Alexon Group


Our view: Hold

Share price: 341p (-7.7p)

On the whole, equity investors have had lots of fun over the past few months as stocks have soared following their hiatus during the credit crunch.

Nonetheless, those with all their eggs in Big Yellow Group's basket have had less to enjoy because its shares have slipped by more than 15 per cent since September. The storage company issued its third-quarter trading statement yesterday, saying that revenues and average rents in the three months to the end of December were marginally higher.

The problem is that there seems to be little on the horizon to suggest the share price will be given some oomph. "While current trading allows us to inch up our optimism, we continue to believe that 2010 will remain a patchy year for most consumer-facing businesses, including this one," said the group's chief executive, James Gibson. With no dividend, Big Yellow shares need to perform and, while the falls in recent months have made the stock more attractive against those of its peers, we cannot see anything on the way that would lead us to think there is likely to be a imminent spike.

That said, Mr Gibson, who steadfastly refuses to comment on the share price yesterday, insisted that the group would reintroduce a dividend in November, adding that while occupancy has fallen in the past two years, the company was well set to take advantage of any growth that might come this year and next.

Our doubts remain, however, and were it not for Mr Gibson's target of paying investors a dividend later this year, we would see little reason to hold on to the shares. The price has stuttered in recent months as alternative potential investments have thrived. However, we are prepared to give the Big Yellow Group the benefit of the doubt, but those holding the stock must be sure the economy is going in the right direction to drive the group's occupancy rate. If the dividend does not materialise, we would sell. Hold.

Hilton Food Group

Our view: Buy

Share price: 203p (+5p)

Hilton Food Group's specialist retail meat-packing business may not be glamorous but it has all the signs of being a real winner for shareholders. The last time we looked at the company – in the spring of 2009 – we tipped it as a "buy" on the basis of the recession-resisting properties of the food industry. We were right, and the company's stock has shot up by 40p.

Now, with the spectre of recession receding, the case is even stronger. Yesterday's trading statement reporting strong performance in line with expectations is just the beginning.

The eye-catching aspect of Hilton Food is its geographical expansion. In 2009 it moved into two new countries, the ninth and tenth on its books, with supplies to Latvia and Lithuania from Hilton Food's factory in Poland.

There was also healthy growth from the company's Irish breakfast meats project and good progress from the spreadables meat project begun in July the Netherlands. Finally, at the end of November, Hilton Food signed a Danish deal with Coop Denmark. Construction is about to start on the £20m facility and Hilton should start to see good growth from the agreement from next year.

Panmure Gordon calculates Hilton's price-to-earnings ratio to be 10.4 times, based on estimates for 2010. And with debt falling to just 0.7 times earnings, there is "substantial room to finance future growth opportunities as they arise," the analyst said in a note. This year's trading environment may remain challenging but Hilton Food is well positioned to carry on the good work. "Hilton remains our top-pick stock in the small and mid-cap food sector," Panmure added. We agree. Buy.

Alexon Group

Our view: Sell

Share price: 36p (-4p)

There was not a lot to like about the womenswear retailer Alexon's trading statement yesterday, which said its same-store sales over the 23 weeks to 9 January fell by 14.3 per cent, largely because of the poor weather. The first three weeks of the period saw like-for-like sales fall by 6.2 per cent.

Of course, you cannot legislate for the snow and ice but, all the same, it was a disappointing result, with margins also sliding because of increased promotional activity that obviously is not working.

Alexon claims the reaction to its spring and summer merchandise has been positive and full-price strike rates across all brands are improving. Efforts are being made to ease the pressure of onerous property leases to help accelerate a turnaround plan.

Before yesterday's fall, the shares were valued at 18 times full-year forecast earnings – a valuation they did noy deserve. Seymour Pierce notes that Jacques Vert has significantly outperformed Alexon in the downturn, and has a stronger balance sheet with a cheaper valuation. We agree. On Tuesday, we said buy Jacques Vert; today we say sell Alexon.

PROMOTED VIDEO
News
video
Life and Style
tech
Sport
Jodie Stimpson crosses the finishing line to win gold in the women's triathlon
Commonwealth games
News
John Barrowman kisses his male “bride” at a mock Gretna Green during the Commonwealth Games opening ceremony
peopleBarrowman's opening ceremony message to Commonwealth countries where he would be sent to prison for being gay
Arts and Entertainment
Jamie Dornan stars as Christian Grey in the Fifty Shades of Grey movie
filmFirst look at Jamie Dornan in Fifty Shades of Grey trailor
Sport
Shinji Kagawa and Reece James celebrate after the latter scores in Manchester United's 7-0 victory over LA Galaxy
football
Life and Style
Phillips Idowu, Stella McCartney and Jessica Ennis
fashionMcCartney to continue designing Team GB Olympics kit until 2016
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Sport
Farah returns to the track with something to prove
Commonwealth games
Voices
voicesGood for Lana Del Rey for helping kill that myth, writes Grace Dent
Life and Style
fashion Designs are part of feminist art project by a British student
Arts and Entertainment
The Tour de France peloton rides over a bridge on the Grinton Moor, Yorkshire, earlier this month
film
News
Very tasty: Vladimir Putin dining alone, perhaps sensibly
news
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

Senior Analyst - Financial Modelling

competitive: Progressive Recruitment: This really is a fantastic chance to joi...

Associate CXL Consultant

£40000 - £60000 per annum + BONUS + BENEFITS: Harrington Starr: CXL, Triple Po...

Business Anaylst

£60000 - £75000 per annum + BONUS + BENEFITS: Harrington Starr: Business Anal...

Market Administrator (1st line Support, Bloomberg, Reuters)

Negotiable: Harrington Starr: Market Administrator (1st line Support, Bloomber...

Day In a Page

Screwing your way to the top? Good for Lana Del Rey for helping kill that myth

Screwing your way to the top?

Good for Lana Del Rey for helping kill that myth, says Grace Dent
Will the young Britons fighting in Syria be allowed to return home and resume their lives?

Will Britons fighting in Syria be able to resume their lives?

Tony Blair's Terrorism Act 2006 has made it an offence to take part in military action abroad with a "political, ideological, religious or racial motive"
Beyoncé poses as Rosie the Riveter, the wartime poster girl who became a feminist pin-up

Beyoncé poses as Rosie the Riveter

The wartime poster girl became the ultimate American symbol of female empowerment
The quest to find the perfect pair of earphones: Are custom, 3D printed earbuds the solution?

The quest to find the perfect pair of earphones

Earphones don't fit properly, offer mediocre audio quality and can even be painful. So the quest to design the perfect pair is music to Seth Stevenson's ears
US Army's shooting star: Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform

Meet the US Army's shooting star

Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform
Climate change threatens to make the antarctic fur seal extinct

Take a good look while you can

How climate change could wipe out this seal
Should emergency hospital weddings be made easier for the terminally ill?

Farewell, my lovely

Should emergency hospital weddings be made easier?
Man Booker Prize 2014 longlist: Crowdfunded novel nominated for first time

Crowdfunded novel nominated for Booker Prize

Paul Kingsnorth's 'The Wake' is in contention for the prestigious award
Vladimir Putin employs a full-time food taster to ensure his meals aren't poisoned

Vladimir Putin employs a full-time food taster

John Walsh salutes those brave souls who have, throughout history, put their knives on the line
Tour de France effect brings Hollywood blockbusters to Yorkshire

Tour de France effect brings Hollywood blockbusters to Yorkshire

A $25m thriller starring Sam Worthington to be made in God's Own Country
Will The Minerva Project - the first 'elite' American university to be launched in a century - change the face of higher learning?

Will The Minerva Project change the face of higher learning?

The university has no lecture halls, no debating societies, no sports teams and no fraternities. Instead, the 33 students who have made the cut at Minerva, will travel the world and change the face of higher learning
The 10 best pedicure products

Feet treat: 10 best pedicure products

Bags packed and all prepped for holidays, but feet in a state? Get them flip-flop-ready with our pick of the items for a DIY treatment
Commonwealth Games 2014: Great Scots! Planes and pipers welcome in Glasgow's Games

Commonwealth Games 2014

Great Scots! Planes and pipers welcome in Glasgow's Games
Jack Pitt-Brooke: Manchester City and Patrick Vieira make the right stand on racism

Jack Pitt-Brooke

Manchester City and Patrick Vieira make the right stand on racism
How Terry Newton tragedy made iron men seek help to tackle their psychological demons

How Newton tragedy made iron men seek help to tackle their psychological demons

Over a hundred rugby league players have contacted clinic to deal with mental challenges of game