Investment Column: Strong yield makes Filtrona a certain bet

Harvey Nash; RPC Group


Our view: Buy

Share price: 222.5p (+26.4p)

It was undoubtedly a good day for investors in Filtrona yesterday as the group surprised the City by saying it was doing better than expected.

The cigarette filter maker's shares put on 13.5 per cent after it said that trading in the first half of the year would be materially ahead of previous guidance. The good news from the company comes after a strong performance from each of its three divisions: its protection and finishing products unit, the porous technologies business and the coated products arm.

Yesterday's upbeat market update comes after a similar announcement in April and led to a series of upgrades among the industry analysts.

On the face of it, Filtrona seems to have everything an investor might wish for; a dividend giving a yield of more than 4 per cent, a solid commercial performance and a share price that most of the analysts say is still undervalued by the market.

Trading on a December 2010 price to earnings ratio of 10 times, the stock is "far too low given the quality of businesses in the portfolio," say the experts at RBS.

If we had one concern (and given the yield, it is not strong enough to dissuade us from recommending the stock), it would be that perhaps the share price is approaching fair value, especially after yesterday's hike. The analysts at Altium joined in the cheering of Filtrona yesterday and raised its target price for the group. But the increase was worth just 7p, suggesting that there may not be an awful lot of juice left in the share price for those that don't yet own it.

Nonetheless, we would be backers of the stock. The dividend yield alone justifies a buy recommendation and yesterday's share price jump shows that Filtrona is now on the market's radar.

The case for buying shares in Filtrona is compelling and investors should fill their boots. Buy.

Harvey Nash

Our view: Buy

Share price: 43.24p (+0.24p)

It has been an arduous two years for recruiters but the worst appears to be over.

Harvey Nash, which specialises in IT recruitment, provided further evidence of this yesterday by revealing that its net fees in the first quarter were up 6 per cent on the fourth quarter. This momentum was driven by a 19 per cent uplift for permanent staffing in the UK and Nordic regions, with key sectors being the telecoms, technology and financial industries.

That said, Harvey Nash, which also provides IT sourcing and HR recruitment, is not yet cracking open the champagne and the group's first-quarter revenues and gross profits were 4 per cent and 6 per cent lower, respectively, on the same period last year. The group also noted that the recovery in demand for its services remains uncertain, particularly in the eurozone, as well as citing risks to macroeconomic growth.

However, there is plenty to recommend in Harvey Nash's shares, not least its progressive dividend policy, which in 2009 delivered a 10 per cent increase in the total divi. Furthermore, shares in Harvey Nash, which trade on a 2011 price to earnings ratio of 9.6, now look good value and are at a substantial discount to rivals Michael Page and Hays, according to analysts at Numis. We say buy.

RPC Group

Our view: Buy

Share price: 243p (+2p)

During a scene in The Graduate, Dustin Hoffman is accosted by a fellow guest at a house party. "I've got one word for you," he says. "Just one word: plastics. There's a great future in plastics."

While there might not be the same euphoria around the sector as in late Sixties cinema, one company that specialises in plastics may be worth a look. RPC is Europe's leading supplier of "rigid plastic packaging".

About 59 per cent of its operations involve packaging for foods, from yoghurt pots to ketchup containers. Its Bramlage Kork site processes natural corks for the champagne and sparkling wine industry. It also provides packaging for drugs and cosmetics.

The group released strong full-year numbers yesterday. While sales were down, its cost-cutting drive hit £14m by the end of March, with more expected this year.

While there are question-marks over the volatile polymer price, the recovery in sales in Europe should help to drive volume growth. Analysts expect sales to rise next year. At a price of 9.1 times estimated 2010 earnings and expectations of a 4.4 per cent dividend yield next year, this looks worth a pop. Buy.

Start your day with The Independent, sign up for daily news emails
Sport
Bafetibis Gomis of Swansea City is stretchered off at White Hart Lane
football
News
Jerry Seinfeld Comedians in Cars Getting Coffee
peopleSitcom star urges men to be more supportive of women than ever
Life and Style
Living for the moment: Julianne Moore playing Alzheimer’s sufferer Alice
health
News
Jay Z
businessJay-Z's bid for Spotify rival could be blocked
Sport
Louis van Gaal is watching a different Manchester United and Wenger can still spring a surprise
News
The spider makes its break for freedom
VIDEO
ebooks
ebooksA special investigation by Andy McSmith
Voices
A propaganda video shows Isis forces near Tikrit
voicesAdam Walker: The Koran has violent passages, but it also has others that explicitly tells us how to interpret them
Arts and Entertainment
books
News
people
Sport
Ashley Young celebrates the winner for Manchester United against Newcastle
footballNewcastle v United player ratings
Life and Style
love + sex
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

Ashdown Group: Graduate Application Support Analyst

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Reach Volunteering: External Finance Trustee Needed!

Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...

Christine McCleave: FP&A Analyst

£36,000 - £40,000: Christine McCleave: Are you looking for a new opportunity a...

Recruitment Genius: Sales Executive - OTE £40,000

£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...

Day In a Page

War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

Baghdad fights to win back Tikrit from Isis – but then what?

Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable
Living with Alzheimer's: What is it really like to be diagnosed with early-onset dementia?

What is it like to live with Alzheimer's?

Depicting early-onset Alzheimer's, the film 'Still Alice' had a profound effect on Joy Watson, who lives with the illness. She tells Kate Hilpern how she's coped with the diagnosis
The Internet of Things: Meet the British salesman who gave real-world items a virtual life

Setting in motion the Internet of Things

British salesman Kevin Ashton gave real-world items a virtual life
Election 2015: Latest polling reveals Tories and Labour on course to win the same number of seats - with the SNP holding the balance of power

Election 2015: A dead heat between Mr Bean and Dick Dastardly!

Lord Ashcroft reveals latest polling – and which character voters associate with each leader
Audiences queue up for 'true stories told live' as cult competition The Moth goes global

Cult competition The Moth goes global

The non-profit 'slam storytelling' competition was founded in 1997 by the novelist George Dawes Green and has seen Malcolm Gladwell, Salman Rushdie and Molly Ringwald all take their turn at the mic
Pakistani women come out fighting: A hard-hitting play focuses on female Muslim boxers

Pakistani women come out fighting

Hard-hitting new play 'No Guts, No Heart, No Glory' focuses on female Muslim boxers
Leonora Carrington transcended her stolid background to become an avant garde star

Surreal deal: Leonora Carrington

The artist transcended her stolid background to become an avant garde star
LGBT History Month: Pupils discuss topics from Sappho to same-sex marriage

Education: LGBT History Month

Pupils have been discussing topics from Sappho to same-sex marriage
11 best gel eyeliners

Go bold this season: 11 best gel eyeliners

Use an ink pot eyeliner to go bold on the eyes with this season's feline flicked winged liner
Cricket World Cup 2015: Tournament runs riot to make the event more hit than miss...

Cricket World Cup runs riot to make the event more hit than miss...

The tournament has reached its halfway mark and scores of 300 and amazing catches abound. One thing never changes, though – everyone loves beating England
Katarina Johnson-Thompson: Heptathlete ready to jump at first major title

Katarina Johnson-Thompson: Ready to jump at first major title

After her 2014 was ruined by injury, 21-year-old Briton is leading pentathlete going into this week’s European Indoors. Now she intends to turn form into gold
Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot