Investment Column: Robert Wiseman shares are gold-topped

Mouchel Group; Bloomsbury Publishing
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The Independent Online

Our view: Buy

Share price: 498p (-17p)

Robert Wiseman Dairies drank to a profits upgrade yesterday after a surge in the value of bulk cream in the second half.

The rise in bulk cream, a by-product of its milk processing, gave its revenues an £8m shot in the arm for the second half ending on 3 April, which enabled Robert Wiseman to boast it will deliver profits ahead of expectations.

After the release, some City scribblers marked up their forecasts for the company's full-year profits to £45.5m, compared with £32.6m a year ago.

While it said this benefit on cream prices was "unlikely" to repeat itself in coming year, there was plenty of other refreshing news for investors. Above all, Wiseman, which supplies Tesco and Sainsbury's, boasted that overall volumes this year would reach a total of 1.77 billion litres. This is, in part, driven by the company picking up the majority of the Dairy Farmers of Britain's business after it collapsed last year. To accommodate its growth, Wiseman is in the final phase of extending its Bridgwater dairy, which will complete in October 2010 and will increase capacity from 375 million to 500 million litres at the facility.

However, there were some warnings that soured Wiseman's results yesterday, particularly on rising commodity prices. The dairy company said that oil-related costs continued to spike in the second half of the year and the City expects them to remain on an upward trend.

It will take a further hit from a 1p rise per litre in diesel duty from 1 April. Other dark price clouds have emerged in the continued price rises of hydro polyethylene, which it uses for making its plastic cartons. Despite these headwinds, we think that at a fairly valued 2010 price-earnings ratio of 11.5, Wiseman is a healthy choice for long-term shoppers. Buy.

Mouchel Group

Our view: Hold

Share price: 193p (-14.75p)

In about five weeks' time we are all going to the polls to choose our next government. And one thing that is for certain, whether we go for Labour or the Tories, there will be cuts in public spending, although the parties seem unable to tell us where the cuts will come.

The outsourcing industry says, at least publicly, that this is good thing, and that it will benefit as government looks to save costs. Mouchel, which maintains the motorway network, among other things, reckons it will be in clover as, it says, it will be capital programmes that will be axed rather than spending on maintenance.

There is probably some truth in that, but until we get firm plans for government, we cannot possibly know.

Until we do know more, betting on groups like Mouchel is something of a lottery. The company said yesterday that it was selling its Middle East business, after reporting a first-half profit fall of 28 per cent to £15m, blaming write-offs including late debt repayments from Dubai World.

But despite the charges, we do think that Mouchel is probably right in its political guesswork and that the company is generally heading in the right direction. However, we would argue that investors should wait until after the election before buying.

Those tempted to jump in early might think that the 20 per cent fall in the stock represents a good opportunity, but they should not forget that this is largely because of VT Group's abortive attempts to buy the group.

Mouchel reckons it is a good long to medium-term bet, and we don't disagree, but would wait to back them. Hold.

Bloomsbury Publishing

Our view: Buy

Share price: 115p (+1.5p)

When it comes to books, the pessimists say that we are reading less and less and that in any case, Gutenberg's innovations are set to be trumped by the trinity of bits and bytes and smart tech-savvy businessmen.

So, before we render our verdict on Bloomsbury, which issued better-than-forecast full-year figures yesterday, let us make clear that we think the threat to the printed word is overstated.

We're yet to come across a convincing alternative – whether in the form of a new product or a concept – when it comes to books.

That's the first reason to invest in Bloomsbury. The second is that the publisher of the Harry Potter series has been expanding its reach into the resilient academic and professional publishing sectors, which will be a defensive buffer against the volatile trade publishing side of the business.

The third reason is that the shares are yielding around 4 per cent. At the same time, they trade on an affordable multiple of 13.8 times KBC Peel Hunt's forecasts for 2010. Buy.

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