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
Life and Style
Arts and Entertainment
Up my street: The residents of the elegant Moray Place in Edinburgh's Georgian New Town
tvBBC's The Secret History of Our Streets reveals a fascinating window into Britain's past
Arts and Entertainment
Southern charm: Nicolas Cage and Tye Sheridan in ‘Joe’
filmReview: Actor delivers astonishing performance in low budget drama
Arts and Entertainment
While many films were released, few managed to match the success of James Bond blockbuster 'Skyfall'
Albus Dumbledore, the headmaster of Hogwarts School of Witchcraft and Wizardry has been the teaching profession's favourite teacher
ebookA unique anthology of reporting and analysis of a crucial period of history
Luis Suarez looks towards the crowd during the 2-1 victory over England
Life and Style
Cheesecake frozen yoghurt by Constance and Mathilde Lorenzi
food + drinkThink outside the cool box for this summer’s frozen treats
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
Sir Bradley Wiggins removes his silver medal after the podium ceremony for the men’s 4,000m team pursuit in Glasgow yesterday
Commonwealth games Disappointment for Sir Bradley in team pursuit final as England are forced to settle for silver
Alistair Brownlee (right) celebrates with his gold medal after winning the men’s triathlon alongside brother Jonny (left), who got silver
England's Jodie Stimpson won the women’s triathlon in the morning
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

Junior Research Analyst - Recruitment Resourcer

£18000 - £20000 per annum + OTE £25K: SThree: SThree Group has been well estab...

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...

Day In a Page

Backhanders, bribery and abuses of power have soared in China as economy surges

Bribery and abuses of power soar in China

The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

Highland terriers steal the show at opening ceremony

Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
German art world rocked as artists use renowned fat sculpture to distil schnapps

Brewing the fat from artwork angers widow of sculptor

Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

BBC takes viewers back down memory lane

The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

Nicolas Cage shines in low-budget drama Joe

Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

Make your own ice lollies and frozen yoghurt

Think outside the cool box for this summer's tempting frozen treats
Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

Fiesta is UK's most popular car of all-time

Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
10 best reed diffusers

Heaven scent: 10 best reed diffusers

Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
Commonwealth Games 2014: Female boxers set to compete for first time

Female boxers set to compete at Commonwealth Games for first time

There’s no favourites and with no headguards anything could happen
Five things we’ve learned so far about Manchester United under Louis van Gaal

Five things we’ve learned so far about United under Van Gaal

It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little
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