Investment Column: Wincanton can drive returns for investors

Low & Bonar; Synergy Health


Our view: Buy

Share price: 181p (+14p)

We have never met a company that claims to have anything other than great relationships with its customers.

Wincanton, the haulier, is no different, with chief executive Graeme McFaull saying it is strong client relationships that are key to the group emerging fitter and leaner from the recession. Maybe, but from an investment point of view, we would instead applaud the company for its cost-cutting and efficiency efforts to counter the downturn, which have helped the group to maintain its dividend despite the falling profits that were announced in yesterday's preliminary results.

And the real reason, in our opinion, for the nearly 50 per cent rise in the stock over the last three months is that Wincanton has acted to bring down its debt and reduce its pension deficit. The experts at Arden Partners were so encouraged yesterday that they started advising clients to buy the shares.

We would agree that there is plenty of juice left in the shares, but certainly think Wincanton would be at the riskier end of any portfolio: the company itself expects volumes to continue to fall, until at least the financial year end next March, and while it is right to start renegotiating its debt facilities, which expire next November, a deal is yet to be done with the banks.

The fact that the shares, which trade on a forward price-earnings ratio of nearly eight times, are at an undemanding level would convince us to buy, so long as the company continues to look for more efficiency (maintaining good relationships with clients is an absolute minimum investors should expect). We do still see Wincanton as vulnerable, however, and punters should be prepared to sell on future signs of weakness. Buy.

Low & Bonar

Our view: Hold for now

Share price: 29p (-0.25p)

Nearly a year ago, when we last wrote about Low & Bonar, its chief executive, Paul Forman, said he had no idea why the group's share price was not reflecting its genuinely impressive performance.

In truth, little has changed in the last 12 months and the head-scratching continues. The specialist materials group which supplies fabric and fibres to a variety of industries, including the still buoyant civil engineering sector, issued its half-year trading update yesterday: performance is in line with expectations, the group says, and there is a real kicker from lower raw material costs and tighter cost controls. The shares, argue the experts at Evolution, trade at a discount, and buyers can expect a level of 40p before too long.

All that is very well indeed, but there is no point buying even the most robust company in the world if its shares continue to flounder. We argued that readers should buy last year as the shares looked ludicrously cheap. While the stock suffered, as did most, in the nuclear winter that followed the collapse of Lehman Brothers last September, it is still, for whatever reason, underperforming the market.

True, the wider market may regard the group as being too closely aligned with the still toxic construction sector, even though it is not in practice.

Mr Forman concedes that current shareholders are frustrated by the group's share price performance. We see no reason why those not already on the register should risk the agitation, and although Low & Bonar is a successful and well-run company, we would wait on the stock, until it shows more signs of life.

Synergy Health

Our view: Buy

Share price: 470p (+55.25p)

There are a number of so-called, and often self-proclaimed, experts doing cerebral battle over what shape the economic recovery will be. Notions of W, V, U, and bizarrely enough, hippopotamus-shaped returns to financial health have all had their 15 minutes of fame recently.

Those holding shares in the healthcare services provider Synergy know exactly what shape best represents the fall in their investment in the last few months: L. Last October the group, which frankly should be as secure as Fort Knox, issued a profits warning after being hit with a rise in energy and currency costs. The share price dropped from nearly 700p to about 400p overnight, and has not recovered since.

The problems are behind the group, says its chief executive, Richard Steeves, who argues that only further unexpected economic strife worries him. The company issued in-line annual numbers yesterday, prompting Dr Stevens to argue that the shares are at depressed levels; if Synergy can maintain its performance, the stock's 10 per cent discount to others in the sector will soon be eroded, he says.

The stock was up 13.3 per cent yesterday, showing that it has its supporters. We think there is more to come and would back the shares now. Buy.

PROMOTED VIDEO
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
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

AIFMD Business Analyst / Consultant - Investment Management

£450 - £600 per day: Harrington Starr: AIFMD Business Analyst / Consultant - I...

Business Analyst Solvency II SME (Pillar 1, 2 & 3) Insurance

£450 - £600 per day: Harrington Starr: Business Analyst Solvency II SME (Pilla...

Manager - SAS - Data Warehouse - Banking

£350 - £365 per day: Orgtel: Manager, SAS, Data Warehouse, Banking, Bristol - ...

SQL DBA/Developer

£500 per day: Harrington Starr: SQL DBA/Developer
 SQL, C#, VBA, Linux, SQL Se...

Day In a Page

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
Ferguson: In the heartlands of America, a descent into madness

A descent into madness in America's heartlands

David Usborne arrived in Ferguson, Missouri to be greeted by a scene more redolent of Gaza and Afghanistan
BBC’s filming of raid at Sir Cliff’s home ‘may be result of corruption’

BBC faces corruption allegation over its Sir Cliff police raid coverage

Reporter’s relationship with police under scrutiny as DG is summoned by MPs to explain extensive live broadcast of swoop on singer’s home
Lauded therapist Harley Mille still in limbo as battle to stay in Britain drags on

Lauded therapist still in limbo as battle to stay in Britain drags on

Australian Harley Miller is as frustrated by court delays as she is with the idiosyncrasies of immigration law
Lewis Fry Richardson's weather forecasts changed the world. But could his predictions of war do the same?

Lewis Fry Richardson's weather forecasts changed the world...

But could his predictions of war do the same?
Kate Bush asks fans not to take photos at her London gigs: 'I want to have contact with the audience, not iPhones'

'I want to have contact with the audience, not iPhones'

Kate Bush asks fans not to take photos at her London gigs
Under-35s have rated gardening in their top five favourite leisure activities, but why?

Young at hort

Under-35s have rated gardening in their top five favourite leisure activities. But why are so many people are swapping sweaty clubs for leafy shrubs?
Tim Vine, winner of the Funniest Joke of the Fringe award: 'making a quip as funny as possible is an art'

Beyond a joke

Tim Vine, winner of the Funniest Joke of the Fringe award, has nigh-on 200 in his act. So how are they conceived?
The late Peter O'Toole shines in 'Katherine of Alexandria' despite illness

The late Peter O'Toole shines in 'Katherine of Alexandria' despite illness

Sadly though, the Lawrence of Arabia star is not around to lend his own critique
Wicken Fen in Cambridgeshire: The joy of camping in a wetland nature reserve and sleeping under the stars

A wild night out

Wicken Fen in Cambridgeshire offers a rare chance to camp in a wetland nature reserve
Comic Sans for Cancer exhibition: It’s the font that’s openly ridiculed for its jaunty style, but figures of fun have their fans

Comic Sans for Cancer exhibition

It’s the font that’s openly ridiculed for its jaunty style, but figures of fun have their fans
Besiktas vs Arsenal: Five things we learnt from the Champions League first-leg tie

Besiktas vs Arsenal

Five things we learnt from the Champions League first-leg tie
Rory McIlroy a smash hit on the US talk show circuit

Rory McIlroy a smash hit on the US talk show circuit

As the Northern Irishman prepares for the Barclays, he finds time to appear on TV in the States, where he’s now such a global superstar that he needs no introduction
Boy racer Max Verstappen stays relaxed over step up to Formula One

Boy racer Max Verstappen stays relaxed over step up to F1

The 16-year-old will become the sport’s youngest-ever driver when he makes his debut for Toro Rosso next season
Fear brings the enemies of Isis together at last

Fear brings the enemies of Isis together at last

But belated attempts to unite will be to no avail if the Sunni caliphate remains strong in Syria, says Patrick Cockburn