Investment Column: Finals show that fund manager Aberdeen is a safe bet in volatile times

Stagecoach; Petroceltic International

Our view: Hold

Share price: 212.1p (+1.1p)

It's a mark of Aberdeen Asset Management's resilience that the fund manager's shares, which we advised holding at 228.9p in July, are still very close to that level. The intervening period has seen a sharp escalation in the European sovereign debt crisis. As a result, stock markets have resembled a rollercoaster ride on Blackpool Pleasure Beach.

Many people will now be wondering whether keeping money under the bed isn't the best option. With volatility showing no signs of going away, fund managers don't exactly look like the most clever places to put money.

But (yes, there is a but) Aberdeen still has a lot going for it. The firm's results for the year to 30 September showed a 44 per cent rise in underlying pre-tax profits to £302m, on revenues of £784m (£638m). What's more, the company has a chunky net cash pile of £127.5m, even after buying back shares to reduce the dilution caused by paying its fund managers' bonuses in stock.

This will keep Aberdeen in the regulators' good books, and facilitate continued returns to shareholders, whose dividends were increased by nearly 30 per cent this year.

The company suffered a small net outflow of funds (£1.7bn) but the bald figure does not tell the whole story. Money has poured out of fixed-income funds; however, it has been replaced by new business in higher-margin equity-based products. And, given the prevailing market conditions, a £1.7bn outflow isn't too bad. Total assets under management stood at £170bn.

Turning to the shares, we said "buy" Aberdeen in March 2010 when they were trading at 126.7p before moving our recommendation to "hold". The company trades on a full-year 2012 multiple of about 10.5 times forecast earnings, in line with its peers, with a very healthy prospective yield of 5 per cent. There don't appear to be any reasons to doubt the company's ability to grow its dividend, so the yield is solid.

With stable management and a diversified business profile, we would continue holding Aberdeen for now. However, we would not think twice before buying on any signs of weakness.

Stagecoach

Our view: Buy

Share price: 265.4p (+16.8p)

We've been backing Stagecoach for some time – and the fact that its stock is up since our last "buy" recommendation in April illustrates the transport group's strengths. There have been no shortage of challenges. In addition to the market factors similar to those affecting Aberdeen AM, Stagecoach has also overcome rising fuel prices.

Yesterday's strong half-year results suggest this trend is likely to persist, as its East Midlands rail arm returns to profitability. The division weighed on earnings in the six months to the end of October, so a positive change there will be welcome.

The fact that Stagecoach announced plans to invest £44m in its Megabus business alongside its results only adds to its attraction. The budget coach division is perfectly placed to reap dividends in the current, slow-growth economic environment.

The extra money will bolster it both here and in the US and Canada, which should enhance the group as whole. Megabus offers a cheaper alternative to more established coach networks – and being cheap helps when consumer spending is coming under increasing pressure.

At about 10 times forward earnings, with a healthy dividend yield of more than 3 per cent, the stock is also affordable at current levels.

Petroceltic International

Our view: Buy

Share price: 7.4p (+10.45p)

Shares in the Aim-listed Petroceltic International soared yesterday after the North Africa-focused oil and gas explorer announced positive drilling results that should remove lingering uncertainty about the commerciality of the Ain Tsila field in Algeria.

In a statement that sent Petroceltic's shares higher, the group said its AT-9 well produced gas at a combined rate of 52.8 million cubic feet per day during the test. The well has now been suspended for future production use and the chief executive, Brian O'Cathain, believes it could eventually yield up to 60 million cubic feet a day.

The positive test results gave Petroceltic a well-needed boost (even with yesterday's share price jump, the stock remains down more than 40 per cent since the start of the year). Much of the decline is based on concerns about instability in North Africa and the Middle East in the wake of the changes wrought by the Arab Spring of protests against repressive regimes.

However, Petroceltic's share price decline appears to have been overdone – a point the market seems to accept, given the uptick in its shares since the the low point at the end of September and beginning of October. But with a joint venture with America's Hess in the works – in the great new hope of Kurdistan – Petroceltic's share price still has the room to expand.

Arts and Entertainment
TVShow's twee, safe facade smashed by ice cream melting scandal
News
newsVideo for No campaign was meant to get women voting
Sport
Wayne Rooney talks to the media during a press conference
sport
Arts and Entertainment
tv
PROMOTED VIDEO
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Sport
Alexis Sanchez celebrates after scoring his first goal for Arsenal in the Champions League qualifier against Besiktas
sportChilean's first goal for the club secures place in draw for Champions League group stages
News
i100
News
Down time: an employee of Google uses the slide to get to the canteen
scienceBosses are inventing surprising ways of making us work harder
Arts and Entertainment
Amis: 'The racial situation in the US is as bad as it’s been since the Civil War'
booksAuthor says he might come back across Atlantic after all
Extras
indybest
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

PMO Analyst - Risk - Banking - London - £350-£400

£350 - £400 per day: Orgtel: PMO Analyst - Risk - Banking - London - £350 - £4...

C# Developer (C#, ASP.NET Developer, SQL, MVC, WPF, Real-Time F

£40000 - £48000 per annum + benefits+bonus+package: Harrington Starr: C# Devel...

C# Swift Payment Developer (C#, ASP.NET, .NET, MVC, Authorize.N

£45000 - £60000 per annum + benefits+bonus+package: Harrington Starr: C# Swift...

DevOps Engineer - Linux, Shell, Bash, Solaris, UNIX, Salt-Stack

Negotiable: Harrington Starr: A fast growing Financial Services organisation b...

Day In a Page

Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

Robert Fisk: No victory for Israel despite weeks of devastation

Palestinians have won: they are still in Gaza, and Hamas is still there
Mary Beard writes character reference for Twitter troll who called her a 'slut'

Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

The Cambridge University classicist even wrote the student a character reference
America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

America’s new apartheid

Prosperous white districts are choosing to break away from black cities and go it alone
Amazon is buying Twitch for £600m - but why do people want to watch others playing Xbox?

What is the appeal of Twitch?

Amazon is buying the video-game-themed online streaming site for £600m - but why do people want to watch others playing Xbox?
Tip-tapping typewriters, ripe pongs and slides in the office: Bosses are inventing surprising ways of making us work harder

How bosses are making us work harder

As it is revealed that one newspaper office pumps out the sound of typewriters to increase productivity, Gillian Orr explores the other devices designed to motivate staff
Manufacturers are struggling to keep up with the resurgence in vinyl records

Hard pressed: Resurgence in vinyl records

As the resurgence in vinyl records continues, manufacturers and their outdated machinery are struggling to keep up with the demand
Tony Jordan: 'I turned down the chance to research Charles Dickens for a TV series nine times ... then I found a kindred spirit'

A tale of two writers

Offered the chance to research Charles Dickens for a TV series, Tony Jordan turned it down. Nine times. The man behind EastEnders and Life on Mars didn’t feel right for the job. Finally, he gave in - and found an unexpected kindred spirit
Could a later start to the school day be the most useful educational reform of all?

Should pupils get a lie in?

Doctors want a later start to the school day so that pupils can sleep later. Not because teenagers are lazy, explains Simon Usborne - it's all down to their circadian rhythms
Prepare for Jewish jokes – as Jewish comedians get their own festival

Prepare for Jewish jokes...

... as Jewish comedians get their own festival
SJ Watson: 'I still can't quite believe that Before I Go to Sleep started in my head'

A dream come true for SJ Watson

Watson was working part time in the NHS when his debut novel, Before I Go to Sleep, became a bestseller. Now it's a Hollywood movie, too. Here he recalls the whirlwind journey from children’s ward to A-list film set
10 best cycling bags for commuters

10 best cycling bags for commuters

Gear up for next week’s National Cycle to Work day with one of these practical backpacks and messenger bags
Paul Scholes: Three at the back isn’t working yet but given time I’m hopeful Louis van Gaal can rebuild Manchester United

Paul Scholes column

Three at the back isn’t working yet but given time I’m hopeful Louis van Gaal can rebuild Manchester United
Kate Bush, Hammersmith Apollo music review: A preamble, then a coup de théâtre - and suddenly the long wait felt worth it

Kate Bush shows a voice untroubled by time

A preamble, then a coup de théâtre - and suddenly the long wait felt worth it
Robot sheepdog technology could be used to save people from burning buildings

The science of herding is cracked

Mathematical model would allow robots to be programmed to control crowds and save people from burning buildings
Tyrant: Is the world ready for a Middle Eastern 'Dallas'?

This tyrant doesn’t rule

It’s billed as a Middle Eastern ‘Dallas’, so why does Fox’s new drama have a white British star?