Investment Column: SABMiller shares have proven resilience

Halfords Group; Aggreko


Our view: Hold

Share price: 1079p (+16p)

Two days ago, the drinks and pubs industry warmly welcomed Marston's news that sales in the last two months were up. Nothing to get too excited about, but good news nonetheless.

SABMiller, the brewer of drinks such as Castle and Peroni, which has the advantage of operating in the fast-growing emerging markets, somewhat dampened spirits yesterday, however, saying that it missed volume targets with a 1 per cent fall in the fourth quarter. The last three months of the group's year spoiled what would otherwise have been a good 12 months, with the company blaming the deterioration in economic conditions.

Despite the disappointing update, shareholders have been in clover with SABMiller stock in the past year: the shares are pretty much flat compared to the level of 12 months ago and have charged up 10 per cent in the past month. Indeed, the stock was up slightly yesterday, suggesting that existing investors were not overly concerned about the volume figures.

The investment case, says the company, is that it will hit market expectations on revenue and profit growth, despite the fact that there does not seem to be an end in sight to the poor economic conditions. Furthermore, with other companies in the sector taking on debt for top-of-the-market acquisitions in recent years, SABMiller is comparatively underleveraged, giving it the opportunity for investment.

Six months ago, we said sell, arguing that the consumer markets were becoming increasingly soft. While the share price has risen since last October, we still harbour concerns, and the fact that the stock trades at a premium to the sector, according to watchers at UBS, only makes us more nervous.

Investors could take the opportunity to take profits from SABMiller and forget the worry about the economy. However, the group has shown itself adept at outperforming the market and the shares have a history of resilience, which makes us reluctant to sell. Hold.

Halfords Group

Our view: Buy

Share price: 317.5p (+3.5p)

Those of us who still have jobs are increasingly cycling to work, according to yesterday's pre-close trading update from the bicycle and car parts retailer Halfords.

The group reported a sales increase in cycling and car maintenance products, despite an overall drop in sales last year. Full-year profits will be up after a round of cost-saving job cuts, and the dividend will give a yield of 5 per cent, say Killik Capital analysts.

Generally all pretty good, and with a share price up nearly 20 per cent in the last year, Halfords is undoubtedly a recession winner, out of which investors have done very nicely indeed.

Now might be the time to look elsewhere, however, according to the watchers at Killik, who reckon the share-price charge might be running out of steam: "The shares have had a great run from the 235p level of our note of early January 2009, but at 322p, and 10 times 2010 earnings, we are not inclined to chase them from here."

Those at Investec agree with the recommendation to hold, but point out that the stock still trades at a discount of about 30 per cent to the sector.

We like Halfords, and, despite softer sales numbers, earnings per share will continue growing in the high single digits, says chief executive David Wild, adding he wants to cut more costs.

The company has been a top choice for punters in the recession, and while we do not expect the stock to continue growing at the rate it has over the last few months, we regard Halfords as a defensive pick in what is still a woeful market. Buy.

Aggreko

Our view: Buy

Share price: 533.5p (+7p)

Some accuse the management of the power provider Aggreko of being overcautious. In these markets, that is no bad thing, and it should not bother investors, especially with the shares up nearly 30 per cent in the last quarter.

The company, which provides emergency power and cooling systems, as well as power supplies to major projects in the emerging markets, said yesterday that first-quarter revenues are up 42 per cent on last year, and 17 per cent on a constant currency basis. While still typically cautious about the future, the group says that it expects steady trading throughout the rest of the year.

The experts at Royal Bank of Scotland say that the impressive recent gains made by the stock put the group on a "more appropriate" price earnings rating of around 10 times. They say that the shares may tread water for a time, but with traditionally higher profits in the second half of the year, and with better visibility of earnings, we would buy now and wait for what we think will be a good year for the stock. Buy.

News
peopleHowards' Way actress, and former mistress of Jeffrey Archer, was 60
Sport
Romelu Lukaku puts pen to paper
sport
News
Robyn Lawley
people
Arts and Entertainment
Unhappy days: Resistance spy turned Nobel prize winner Samuel Beckett
books
PROMOTED VIDEO
News
people
Life and Style
Troy Baker and Ashley Johnson voice the show’s heroes
gamingOnce stilted and melodramatic, Hollywood is giving acting in video games a makeover
News
i100
Life and Style
Phones will be able to monitor your health, from blood pressure to heart rate, and even book a doctor’s appointment for you
techCould our smartphones soon be diagnosing diseases via Health Kit and Google Fit?
News
people
Extras
indybest
Travel
Ryan taming: the Celtic Tiger carrier has been trying to improve its image
travelRyanair has turned on the 'charm offensive' but can we learn to love the cut-price carrier again?
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Sport
Usain Bolt confirms he will run in both the heats and the finals of the men's relay at the Commonwealth Games
commonwealth games
Life and Style
Slim pickings: Spanx premium denim collection
fashionBillionaire founder of Spanx launches range of jeans that offers 'thigh-trimming construction'
News
Sabina Altynbekova has said she wants to be famous for playing volleyball, not her looks
people
News
i100
Life and Style
tech'World's first man-made leaves' could use photosynthesis to help astronauts breathe
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Senior Investment Accounting Change Manager

£600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...

BA/PM,EMIR/Dodd-Frank,London,£450-650P/D

£450 - £650 per day + competitive: Orgtel: My client, a leading bank, is curre...

Senior Analyst - ALM Data - Banking - Halifax

£350 - £400 per day + competitive: Orgtel: Senior Analyst, ALM Data, Halifax, ...

Java developer - Banking - London - Up to £600/day

£500 - £600 per day: Orgtel: Java developer - Banking - London - Up to £600/d...

Day In a Page

Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

The day America’s love of backyard tigers led to a horrific bloodbath

With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

How Samuel Beckett became a French Resistance spy

As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
We will remember them: relatives still honour those who fought in the Great War

We will remember them

Relatives still honour those who fought in the Great War
Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

Kodak's last-ditch bid to keep celluloid alive

Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

Acting in video games gets a makeover

David Crookes meets two of the genre's most popular voices
Could our smartphones soon be diagnosing diseases via Health Kit and Google Fit?

Could smartphones soon be diagnosing diseases?

Health Kit and Google Fit have been described as "the beginning of a health revolution"
Ryanair has turned on the 'charm offensive' but can we learn to love the cut-price carrier again?

Can we learn to love Ryanair again?

Four recent travellers give their verdicts on the carrier's improved customer service
Billionaire founder of Spanx launches range of jeans that offers

Spanx launches range of jeans

The jeans come in two styles, multiple cuts and three washes and will go on sale in the UK in October
10 best over-ear headphones

Aural pleasure: 10 best over-ear headphones

Listen to your favourite tracks with this selection, offering everything from lambskin earmuffs to stainless steel
Commonwealth Games 2014: David Millar ready to serve up gold for his beloved Scotland in the end

Commonwealth Games

David Millar ready to serve up gold for his beloved Scotland in the end
UCI Mountain Bike World Cup 2014: Downhill all the way to the top for the Atherton siblings

UCI Mountain Bike World Cup

Downhill all the way to the top for the Atherton siblings
Save the tiger: The animals bred for bones on China’s tiger farms

The animals bred for bones on China’s tiger farms

The big cats kept in captivity to perform for paying audiences and then, when dead, their bodies used to fortify wine
A former custard factory, a Midlands bog and a Leeds cemetery all included in top 50 hidden spots in the UK

A former custard factory, a Midlands bog and a Leeds cemetery

Introducing the top 50 hidden spots in Britain
Ebola epidemic: Plagued by fear

Ebola epidemic: Plagued by fear

How a disease that has claimed fewer than 2,000 victims in its history has earned a place in the darkest corner of the public's imagination
Chris Pratt: From 'Parks and Recreation' to 'Guardians of the Galaxy'

From 'Parks and Recreation' to 'Guardians of the Galaxy'

He was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star