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.

Start your day with The Independent, sign up for daily news emails
Life and Style
Steve Shaw shows Kate how to get wet behind the ears and how to align her neck
healthSteven Shaw - the 'Buddha of Breaststroke' - applies Alexander Technique to the watery sport
News
A poster by Durham Constabulary
news
Sport
Cameron Jerome
footballCanaries beat Boro to gain promotion to the Premier League
Arts and Entertainment
Performers drink tea at the Glastonbury festival in 2010
music
News
ebookA unique anthology of reporting and analysis of a crucial period of history
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

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Abuse - and the hell that came afterwards

Abuse - and the hell that follows

James Rhodes on the extraordinary legal battle to publish his memoir
Why we need a 'tranquility map' of England, according to campaigners

It's oh so quiet!

The case for a 'tranquility map' of England
'Timeless fashion': It may be a paradox, but the industry loves it

'Timeless fashion'

It may be a paradox, but the industry loves it
If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

Could have done with Osama bin Laden staying alive?

Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
New exhibition celebrates the evolution of swimwear

Evolution of swimwear

From bathing dresses in the twenties to modern bikinis
Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine