Investment Column: Prizes all round for Booker shareholders

Laura Ashley Holdings; Aminex
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The Independent Online

Our view: Buy

Share price: 45.49p (+1.65p)

We've been fans of Booker, the cash and carry group which issued a trading statement yesterday, for a while. Management has proved prudent, cutting debt before the financial crisis savaged the economy, and steering the ship deftly through the storm.

The fruits of their labour were evident in the update, with final quarter sales rising by 3.8 per cent on the same period last year. That was despite the cold snap, which kept many consumers indoors. Like-for-like sales over the 52 weeks to the end of March were up by a healthy 6.5 per cent.

Booker's passage to India – the company opened its first overseas branch in Mumbai last year – is also paying off, with the company reporting an "encouraging" performance.

The shares have been reacting in kind. Occasional bumps aside, they've been firming up nicely, though they remain slightly off the recent highs struck in mid-November. Ordinarily, this would make us pause and take profits; with a recovery on the horizon, it would seem safe to assume Booker may ease as punters pile into more cyclical plays.

We think not, however. The reasons are twofold. First, despite its strength, Booker is far from expensive. At 14.9 times Collins Stewart's forecasts for 2010, the shares, which yield upwards of 2 per cent, remain affordable. The second reason is our caution about the recovery. Consumer sentiment remains fragile and though some cyclical plays may appear attractive in the very short term, in the medium term, with the election around the corner and the grim spectre of sharp budgetary cuts thereafter, we think investors will continue to side with relatively more defensive names such as Booker.

The fragmented nature of the UK wholesaling market is also worth bearing in mind. As Collins Stewart points out, this leaves scope for consolidation activity, which in turn could support the Booker share price. Yep, we're not giving up our membership of the fan club just yet. Buy.

Laura Ashley Holdings

Our view: Buy

Share price: 14.5p (+1.5p)

Flower power is back if yesterday's full-year results at Laura Ashley are anything to go by.

On paper, the 7.8 per cent rise in pre-tax profits to £11m for the year to 30 January was not that dramatic, but it actually included a £6m hit from the weakness of sterling.

Arguably, the most impressive aspect of Laura Ashley's performance was that it delivered growth in like-for-like sales across all its categories of furniture, home accessories, decorating and fashion.

Of these, furniture was the star performer with underlying sales higher by 13.8 per cent, driven by expanded ranges, updates of best-sellers and improved stock management. This was closely followed by a 9.8 per cent uplift at its sizeable clothing business, boosted by its traditional floral offeriings and new products, such as the all-in-one trouser suit.

On a new front, Laura Ashley plans to roll out more specialist gift stores after a successful trial in London. In addition to a strong balance sheet, which boasted net cash of £17.4m at the year end, the 2011 price-earnings ratio of shares in Laura Ashley now looks quite rosy at 9.5 times.

However, it's total dividend of 1p for 2010 was down on last year's 1.25p. Retailers expect this coming year to be another tough. Despite this, we believe that Laura Ashley has momentum again and believe, based on its p/e, it's worth a shopping trip. Buy.

Aminex

Our view: Buy

Share price: 15p (unchanged)

The Aim-listed exploration company Aminex published annual results yesterday showing gross revenues of $7.8m (£5.1m) and net losses of $2.9m. Although pressure on oil and gas prices pushed revenues down slightly from 2008, the group's losses shrunk from $9.7m.

Aminex has decent prospects. It is planning for commercial gas development thanks to independent evaluation of its Kiliwani North and Nyuni prospects in Tanzania, plus the imminent go-ahead for plans to expand its gas plant at Songo Songo Island. Early drilling at Shoats Creek in Louisiana looks promising and Aminex has bought more land adjacent to the site.

It was a bad day yesterday, however, as Tullow Oil pulled out of a joint venture in the Ruvuma Basin in Tanzania, which had looked like a decent prospect. But, while the Ruvuma Basin news is unfortunate, the price drop makes Aminex's stock cheaper and more attractive.

Taken together with a licence extension for further drilling at South Malak-1 in Egypt and a resumption of progress in Aminex's North Korean activities, 2010 could still be an active year for the company. Buy.

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