Investment Column: Johnson Matthey is a precious investment

Helical Bar; Real Good Food Company

Our view: buy

Share price: 1570p (+15p)

We've been cautious about the platinum refiner Johnson Matthey, which issued full-year figures yesterday, and with the benefit of hindsight, perhaps a little too cautious. Back in January we said hold, advising against buying on account of the fact that the shares had made heady gains over the preceding months. However, they have continued to gain ground.

The company's annual results suggested the faith investors have placed in the shares was not misplaced. Yesterday's update brought news of a 5 per cent fall in pre-tax profits to £254.1m. But that was better than the City's forecasts, and the really good news was in the company's report that this year's first-half profits will be significantly ahead of last year's.

So, is it time to buy? On both our recent notes on JM we have recommended a hold. But recently the shares have slipped back a bit following the best part of a year when the only way was up. And, following this fallback, Johnson's valuation is starting to look attractive. At 15 times forward earnings, the stock is trading at the lower end of its historical range of 15 to 17 times, according to Citi.

Given the combination of increasing volatility on the capital markets and Johnson's defensive characteristics, we think that makes this an attractive investment. But if that wasn't enough, the longer-term outlook for the business is just too promising to miss out on, despite the company's words of caution. New emission control laws promise to drive growth for Johnson, which is the world's largest supplier of catalytic converters.

As Citi points out, the heavy-duty diesel market, though dogged by some uncertainty about the timing of the recovery, offers particular grounds for optimism and all European light-duty diesel cars will have to be fitted with catalysed filters from next year (about 70 per cent have then today).

Putting all this together, we are no longer sitting on the fence. Buy.

Helical Bar

Our view: Buy

Share price: 297p (+3p)

Helical's results, on the face of it, were hardly exciting yesterday. It hasn't been easy for any property companies, to be fair, but the group's shareholders have been accustomed to it significantly outperforming its peers, and that hasn't really happened. The adjusted net asset value per share of 272p was up just 1 per cent from 270.6p at September, at a time when there have been signs of recovery.

Then there's the valuation, which hardly makes Helical Bar look cheap. At 297p, the shares are trading at a moderate premium to next year's forecast net asset value per share of 294p. Other property companies trade at discounts. So, avoid then? That might be foolish, given the record of Mike Slade, who runs the show and also owns a significant slug of the stock. Helical Bar's positioning is unique and it could find some very attractive opportunities coming its way over the next year or so. That's what the company is positioning itself for in both retail and the City.

If the valuation looks pricey, it should be remembered that the shares are at something of a low ebb, having fallen sharply since testing the 360p level in April. Historically, they tend to trade at a much higher premium than today's level, so it could be argued that there is a buying opportunity here.

It's a risk, given the continuing economic uncertainty, but that affects almost any investment decision. We'll back Slade to bounce back. Buy.

Real Good Food Company

Our view: Buy

Share price: 27p (+0.75p)

The Real Good Food Company, which distributes non-refining sugar and makes of bakery products and ingredients, said yesterday that its performance had been ahead of expectations for the first four months of its financial year. This follows a strong overall performance in 2009, when RGFC more than doubled underlying pre-tax profit to £2.15m, grew earnings per share and slashed bank debt to £20.9m.

The group's Napier sugar business has faced a testing three years after the European Union forced production cuts which led to a slump in the "reference" sugar price over the period.

The company said Napier, whose retail customers include Morrisons, was in a "transitional year" but noted that momentum was starting to build ahead of the October contract season.

RGFC is bullish about current growth rates at its baking ingredients businessRenshaw's, and the Hayden's sweet bakery unit that supplies cakes to retailers including Waitrose and M&S. Furthermore, even after the recent share price rises, the group trades on a tasty looking multiple of just 3.9 times 2011 earnings. Based on that, we think RGFC is a solid buy.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooksNow available in paperback
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

Sheridan Maine: Commercial Finance Manager

Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Ashdown Group: Marketing Services Manager - (communications, testing, DM)

£32000 - £35000 per annum + benefits: Ashdown Group: Marketing Services Manage...

Guru Careers: Finance Account Manager

£Neg. (DOE) + Excellent Benefits: Guru Careers: A Finance Account Manager with...

Day In a Page

Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

Paul Scholes column

It's a little-known fact, but I have played one of the seven dwarves
Fifa's travelling circus once again steals limelight from real stars

Fifa's travelling circus once again steals limelight from real stars

Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas