Investment Column: Unemployment pain can be Regus's gain

Cairn Energy; Admiral


Our view: Buy

Share price: 96p (+12.5p)

The recession appears to be moderating – we can all argue about what shape the recovery might take, and how strong it will be, but by the end of this quarter more than half the globe should be back into positive growth.

Less happily, unemployment, a lag indicator, is still forecast to rise in advanced economies such as the UK and the US. This appears to bode ill for Regus, which provides serviced offices. Surely, more people out of work equals slacker demand for workplaces? Not quite.

In the City of London, for example, where occupancy levels remain high, the company is benefiting from the ingenuity of highly skilled professionals who now find themselves out of work. Start-ups and those suddenly forced to work from home are opting for its products, which are cheaper than the alternative. Setting up your own office from scratch, with all the attendant bills, is pricier than paying Regus to do the heavy lifting.

In the US, to capitalise on the trend towards flexible working, the company has set up shop deep in the suburbs and shopping malls, enticing home workers from their bedrooms or living rooms down the street.

This is not to say that Regus hasn't been affected by the travails of the economy. It has seen a higher rate of churn, as clients downsize or go out of business. But at the same time, it has also attracted the interest of companies seeking to reduce fixed costs.

This, moreover, is only half the story. With operations around the world, Regus is well-positioned to capitalise on the strength in emerging markets. Cash generation is strong, and after a period of modest growth it wants to use the resources to expand. And although it remains cautious on the outlook, its decision yesterday to hike its interim dividend by 33.3 per cent is a sure sign of confidence. Buy.

Cairn Energy

Our view: Buy

Share price: 2586p (-37p)

Five years after discovering the Mangla oil field in the north-west of India, Cairn Energy will commence production this week. That's the good news. Less positively, the end-of-year target for completing the second processing train and an associated pipeline at the site looks, says the company, "increasingly challenging".

The outlook undermined sentiment when Cairn issued its interim results, revealing a first-half loss, yesterday. The shares duly relaxed, albeit in a weak market. Notwithstanding the cautious statement, worry warts should note the clarification from the chief executive, Bill Gammell, who added: "If there is any delay it will be a matter of weeks rather than months".

Moreover, beyond India, the group has built up a strategic position offshore of Greenland. The first exploration drilling campaign is some way off, with 2011 as a target, but the size of the opportunity is "growing increasingly difficult to ignore", according to RBS analysts.

The share price, although strong compared to the lows struck in the fourth quarter of 2008, is still some way off its peak. It should rise further as the Rajasthan resource base is exploited. Given its leverage, higher oil prices – a distinct prospect if a recovery takes root in the world economy – will only smooth the path upwards. Buy.

Admiral

Our view: Hold

Share price: 1044p (-28p)

Henry Engelhardt, chief executive of Admiral, summed up yesterday's half-year results in one word in a missive to staff. "Wow," he said. And to be fair to him, the interims were impressive, with strong growth in profits, record dividend payments and rising sales. Some 3,000 staff will each get free shares in the insurer worth £1,500 each.

The results were all the more impressive given the environment in which they were achieved. In the current economic climate, it has been difficult to raise premiums, but Admiral has been able to do so. Its Confused.com price comparison business, meanwhile, faces stiff competition, but is holding its own. And the investment income that Admiral earns on premiums banked has fallen as interest rates have tumbled.

Why then, did Admiral shares fall back yesterday, even after the unexpectedly generous dividend hike? The short answer is valuation. The stock has strongly outperformed its peers in recent months, and on 19 times 2010 forecast earnings, its rating fully reflects Admiral's premium status.

On that basis – and given the ongoing pressures it faces – it is difficult to recommend adding to a holding in Admiral. Some profit-taking was in evidence yesterday, but the shares remain a very solid hold.

Voices
Mosul dam was retaken with the help of the US
voicesRobert Fisk: Barack Obama is following the jihadists’ script
Arts and Entertainment
Loaded weapon: drugs have surprise side effects for Scarlett Johansson in Luc Besson’s ‘Lucy’
filmReview: Lucy, Luc Besson's complex thriller
Arts and Entertainment
tvExecutive says content is not 'without any purpose'
News
A cleaner prepares the red carpet for the opening night during the 59th International Cannes Film Festival May 17, 2006 in Cannes, France.
newsPowerful vacuum cleaners to be banned under EU regulations
PROMOTED VIDEO
Sport
sportLeague Managers' Association had described Malky Mackay texts as 'friendly banter'
News
A polar bear’s diet is rich in seal blubber and half of its own body weight is composed of fat
i100
News
peopleCareer spanned 70 years, including work with Holocaust survivors
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
News
people
Travel
Flocking round: Beyoncé, Madame Tussauds' latest waxwork, looking fierce in the park
travelIn a digital age when we have more access than ever to the stars, why are waxworks still pulling in crowds?
News
London is the most expensive city in Europe for cultural activities such as ballet
arts
Arts and Entertainment
Jeremy Clarkson has rejected criticisms of his language, according to BBC director of television Danny Cohen
tv
Extras
indybest
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

Application Support - Enterprise Java, SQL, Oracle, SQL Server

£45000 - £55000 per annum: Harrington Starr: A well-established financial soft...

Service Desk Analyst (Graduate, Helpdesk, Desktop, Surrey)

Negotiable: Harrington Starr: Service Desk Analyst (Graduate, Helpdesk, Deskto...

Service Desk Analyst (Graduate, Helpdesk, Desktop, Surrey)

Negotiable: Harrington Starr: Service Desk Analyst (Graduate, Helpdesk, Deskto...

Junior Quant Analyst - C++, Boost, Data Mining

£25000 - £35000 per annum: Harrington Starr: Junior Quant Analyst - C++, Boost...

Day In a Page

Air strikes? Talk of God? Obama is following the jihadists’ script

Air strikes? Talk of God? Obama is following the jihadists’ script

The President came the nearest he has come yet to rivalling George W Bush’s gormless reaction to 9/11 , says Robert Fisk
Ebola outbreak: Billy Graham’s son declares righteous war on the virus

Billy Graham’s son declares righteous war on Ebola

A Christian charity’s efforts to save missionaries trapped in Africa by the crisis have been justifiably praised. But doubts remain about its evangelical motives
Jeremy Clarkson 'does not see a problem' with his racist language on Top Gear, says BBC

Not even Jeremy Clarkson is bigger than the BBC, says TV boss

Corporation’s head of television confirms ‘Top Gear’ host was warned about racist language
Nick Clegg the movie: Channel 4 to air Coalition drama showing Lib Dem leader's rise

Nick Clegg the movie

Channel 4 to air Coalition drama showing Lib Dem leader's rise
Philip Larkin: Misogynist, racist, miserable? Or caring, playful man who lived for others?

Philip Larkin: What will survive of him?

Larkin's reputation has taken a knocking. But a new book by James Booth argues that the poet was affectionate, witty, entertaining and kind, as hitherto unseen letters, sketches and 'selfies' reveal
Madame Tussauds has shown off its Beyoncé waxwork in Regent's Park - but why is the tourist attraction still pulling in the crowds?

Waxing lyrical

Madame Tussauds has shown off its Beyoncé waxwork in Regent's Park - but why is the tourist attraction still pulling in the crowds?
Texas forensic astronomer finally pinpoints the exact birth of impressionism

Revealed (to the minute)

The precise time when impressionism was born
From slow-roasted to sugar-cured: how to make the most of the British tomato season

Make the most of British tomatoes

The British crop is at its tastiest and most abundant. Sudi Pigott shares her favourite recipes
10 best men's skincare products

Face it: 10 best men's skincare products

Oscar Quine cleanses, tones and moisturises to find skin-savers blokes will be proud to display on the bathroom shelf
Malky Mackay allegations: Malky Mackay, Iain Moody and another grim day for English football

Mackay, Moody and another grim day for English football

The latest shocking claims do nothing to dispel the image that some in the game on these shores exist in a time warp, laments Sam Wallace
La Liga analysis: Will Barcelona's hopes go out of the window?

Will Barcelona's hopes go out of the window?

Pete Jenson starts his preview of the Spanish season, which begins on Saturday, by explaining how Fifa’s transfer ban will affect the Catalans
Middle East crisis: We know all too much about the cruelty of Isis – but all too little about who they are

We know all too much about the cruelty of Isis – but all too little about who they are

Now Obama has seen the next US reporter to be threatened with beheading, will he blink, asks Robert Fisk
Neanderthals lived alongside humans for centuries, latest study shows

Final resting place of our Neanderthal neighbours revealed

Bones dated to 40,000 years ago show species may have died out in Belgium species co-existed
Scottish independence: The new Scots who hold fate of the UK in their hands

The new Scots who hold fate of the UK in their hands

Scotland’s immigrants are as passionate about the future of their adopted nation as anyone else
Britain's ugliest buildings: Which monstrosities should be nominated for the Dead Prize?

Blight club: Britain's ugliest buildings

Following the architect Cameron Sinclair's introduction of the Dead Prize, an award for ugly buildings, John Rentoul reflects on some of the biggest blots on the UK landscape