Investment Column: Imperial Tobacco tipped as a safe haven

Ricardo; Energybuild

Our view: Buy

Share price: 1818p (+60p)

Investors searching for a company to add a little spark to their portfolios might well be having a long look at the cigarette-maker Imperial Tobacco, which put out a steady-as-she-goes trading update yesterday.

The usual health warnings apply: Imperial makes products that kill people and its biggest growth area is the Middle East, where it is not compelled to go to the lengths it has to in Europe to caution customers about the dangers of smoking. However, for investors who consider such issues a mere smokescreen, Imperial is a compelling option.

Not surprisingly, the group said that it expected its full-year earnings to hit targets. More importantly, perhaps, was the bullish update on its integration with the Franco-Spanish tobacco giant Altadis, for which it paid $11.3bn last year. Consultation on jobs in France will be concluded by November.

The tobacco industry has largely escaped the equity market terrors of the past few months, so investors can assume it is a safe haven. On the flip side, they can also assume that stocks in the sector are pretty pricy.

But this is another reason to buy into Imperial. According to its own broker, Morgan Stanley, the shares look good compared to others. "Imperial Tobacco has gained about 8 per cent in the last week in a very volatile market, but is still trading at only 10.5 times 2009 [price earnings ratio], while offering in excess of 16 per cent earning per share compound annual growth rate and close to 5 per cent dividend yield. The stock looks cheap relative to global tobacco and consumer staples peers (British American Tobacco is on 13 times 2009 P/E)."

With share prices bombing, investors need safe places for their cash apart from under the mattress. Imperial is one such place and buyers should get in now before the discount to others in the sector disappears. Buy.


Our view: Buy

Share price: 304.75 (+5.75p)

Investors should always take a second look at companies that perform better than the experts predict. The engineering consultancy Ricardo, which advises Ford, Toyota and Formula One teams on fuel efficiency, did just that yesterday when it announced forecast-busting full-year results, with a 20 per cent increase in pre-tax profits and an order book ahead of where it was this time last year.

The group stressed that it was not directly subject to credit crunch worries – its stock has outperformed the FTSE 250 by 20 per cent this year – and argued that it had deliberately expanded overseas and added as many clients as possible to mitigate risks. Its biggest customer now accounts for just 12 per cent of revenues. Investors may think this is all too good to be true, especially as much of Ricardo's work comes from companies trying to keep up with environmental legislation.

Ricardo's shares are costly and even analysts at Royal Bank of Scotland admit: "The rating can no longer be described at cheap in today's de-rated market." The shares rose by 2 per cent yesterday, lending weight to RBS's other observation that "Ricardo is a unique play on technical solutions to reduce emissions and improve fuel efficiency – both highly topical themes and strong growth drivers". The stock will grow to 365p, its highest point in the last 12 months, the RBS experts added.

Investors should not necessarily jump at shares on the back of good results, especially when there are few obvious indicators of how the shares will grow. However, Ricardo is likely to be a safe bet in times of turbulence and some will be happy with that for the time being. Buy.


Our view: Buy

Share price: 22p (+2.5p)

Here is a story to warm the cockles of every Welshman's heart: coal mining in the principality is thriving. Yes, you read it correctly, coal coal mining is flourishing – at least if Energybuild's full-year results, published yesterday, are anything to go by.

The Neath-based group posted a pre-tax profit of £954,000, an improvement on last year's loss, and the stock jumped by 12.8 per cent after the announcement. It is true that burning coal for power is one of the worst ways you can pollute the environment but, for investors without such qualms, the group could well be a banker.

The Government is increasingly keen on securing Britain's energy supplies and coal is the cheapest and most plentiful way of doing it, which cannot be bad for Energybuild and its investors.

Analysts at house broker Panmure Gordon are keen: they argue that the next year is an "exciting" time for the company. They suggest that its net profit will rise to £3.5m and its share price will leap to 41p, just about double yesterday's opening level.

There are more established coal groups such as UK Coal and AHT, both of which are bigger and therefore safer. However, the sector is on the up and with production targets of 750,000 tonnes by 2011, Energybuild is a decent bet for those looking for a growth story. Buy.

Start your day with The Independent, sign up for daily news emails
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

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

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Business Analyst - Financial Services - City, London

£50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...

SThree: Trainee Recruitment Consultant

£18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is the o...

Day In a Page

General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence
Public relations as 'art'? Surely not

Confessions of a former PR man

The 'art' of public relations is being celebrated by the V&A museum, triggering some happy memories for DJ Taylor
Bill Granger recipes: Our chef succumbs to his sugar cravings with super-luxurious sweet treats

Bill Granger's luxurious sweet treats

Our chef loves to stop for 30 minutes to catch up on the day's gossip, while nibbling on something sweet
London Marathon 2015: Paula Radcliffe and the mother of all goodbyes

The mother of all goodbyes

Paula Radcliffe's farewell to the London Marathon will be a family affair
Everton vs Manchester United: Steven Naismith demands 'better' if Toffees are to upset the odds against United

Steven Naismith: 'We know we must do better'

The Everton forward explains the reasons behind club's decline this season
Arsenal vs Chelsea: Praise to Arsene Wenger for having the courage of his convictions

Michael Calvin's Last Word

Praise to Wenger for having the courage of his convictions