Investment Column: Galliford Try stock is too cheap to ignore

Galliford Try

Our view: Buy

Share price: 46.25p (-0.75p)

Galliford Try has spent the past 12 months or so reminding investors that more than 90 per cent of its business comes from public-sector construction work, just as the market for its other arm, housebuilding, has struggled.

Yesterday's announcement that the group has won the contract to redevelop Kent College will help its public sector contracting credentials and, with Galliford's stock up by more than a third in the past year at a time when ordinary housebuilders have struggled, the message is clearly starting to get through.

We last looked at the company in January, when the shares traded at 35p. At that point, many of the analysts said the shares were cheap, but some warned that the stock would tread water during the recession. Those in the latter group may not have anticipated the recent share price rises but, according to those at KBC Peel Hunt, the shares are still undervalued. They say: "The construction and social housing businesses, even if valued on an aggressively low price-earnings ratio, still show a valuation greater than the current share price ... these parts of the group alone are worth more than 50p. Treat infrastructure as being at a cyclical low and meriting a 'recovery rating,' this rises well above 60p. These valuation models exclude housing, which is looking increasingly interesting and, even as the cycle still turns down, it adds some 22p to the above numbers."

We think any housebuilder, no matter how small the business, will naturally be discounted, but we do agree that the stock is cheap and at these levels it is still worth a bet.



Ten Alps

Our view: Hold

Share price: 26.75p (+1p)

When Sir Bob Geldof is one of your biggest shareholders, it is not tricky to get attention, but the television production group Ten Alps reckons it has the strategy to hit headlines for reasons other than having a celebrity backer.

Investors may well agree, judging by the group's full-year numbers, published yesterday, when it announced a small increase in annual pre-tax profits.

The chief executive, Alex Connock, lauds the company's decision to move more of its operations online and to concentrate its efforts on business-to-business broadcasts in more defensive sectors. Mr Connock also claims that demand for its documentaries, which in the past year have covered topics such as international diplomacy, social dislocation caused by the recession and the leadership of Gordon Brown, has risen: the rise of reality TV, which was much predicted (and feared in some quarters) a few years ago, has not materialised, claims Mr Connock.

Ordinarily we would be quite sceptical about media companies in recession, and even though Mr Connock says he is concerned about a downturn in advertising, we are impressed by moves the company has made to guard against trickier conditions.

Sadly for punters, we are not the only ones, and after a 20 per cent hike in the share price in the past month, even before yesterday's jump, the stock is already fairly priced, say the watchers at Oriel Securities. They add: "Trading on six times 2010 [earnings] versus Informa and UBM on about seven times, [which have] greater visibility, geographic exposure and scale, the shares look fully rated."

We do like Ten Alps and would encourage investors to back the group, but we would monitor the share price and look to get in at a cheaper level.



Webis Holding

Our view: Hold

Share price: 2.75p (unchanged)

One interesting aspect of this recession is that the online gambling groups have managed to keep their heads above water, despite being utterly reliant on discretionary spending.

There were those that feared the industry would suffer, and given that online gaming did not exist the last time we had a downturn, initially there was a sell-off in the shares when things started getting hairy a few months ago.

Webis Holding, the group that operates betinternet.com, issued its full-year trading statement yesterday, saying that it has "generated strong year-on-year growth". That is all very well, and we applaud the group for doing well in what is a tough market, but we would not buy the shares.

The stock spiked at the time of its interim results, when news of strong profits gave the group a shot in the arm. Webis has a market capitalisation of less than £6m, and as such we see the share price as being news driven: there was no indication that the full-year numbers will be anything less then in-line with previous announcements, suggesting that the good performance is already priced into the stock. No doubt Webis is a good company, but we think potential shareholders have missed the boat.

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