The Investment Column: Bid war is best bet for handsome Cairn payday


Cairn Energy

By Alistair Dawber

Our view: Hold

Share price: 2834p (+32p)

If you had bought Cairn Energy shares in 1992 when they were trading at 27p, you would have made a lot of money in the last 16 years. It is this growth record that Sir Bill Gammell, the firm's chairman, would like investors to contemplate in the future.

Sir Bill has several reasons to be cheerful. The company has upgraded production estimations at its main Indian site in Rajasthan to 175,000 barrels a day by 2009, and reckons that there is about 10 years' worth of the black stuff at the site.

On the other hand, a number of analysts are not so sure about the company. They agree that the news on reserves from Rajasthan is good, but several are worried about the cost of the project, which watchers at Oriel Securities describe as being "significantly above expectations. The shares are now trading above our valuation but deserve a premium for potential oil price upside ... However an outright 'buy' recommendation looks a little bullish and we may revisit that," they say.

Other analysts look at the group more favourably, with ABN Amro saying the firm's stock price is likely to get as high as £32.60.

Several watchers see the group as a serious takeover target, and as with any takeover battle, this would push up the stock. According to those at Oriel, there is a 25 to 50 per cent chance that the group will be bought; "they are the most credible takeover candidate [in the industry]," they say, adding that the likes of Shell and Talisman are said to have already had private talks.

Sir Bill refused to be drawn on the likelihood of a buyout, while analysts at Seymour Pierce reckon that the group's share price has very little room to grow. They believe instead that Cairn's subsidiary Capricorn is likely to be spun off, and that that group would be a better buy.

The firm published its full-year results yesterday, showing a pre-tax profit of $1.53m, but most analysts ignored the numbers, preferring to comment on activities in Rajasthan.

If the oil price stays as high as it is, Cairn will be a safe bet for investors, but any significant gains are likely to come from a bidding war, and that could provide a handsome payday. Hold.

YouGov

Our view: Buy

Share price: 149.75p (-4.25p)

YouGov might be in the opinions business, but the facts speak for themselves. Despite the polling and market research group being characterised as a media stock, the company is booming, with 2008 expected to be another bumper year.

Last year was seminal for the company, which made three acquisitions, in Scandinavia, Germany and the United States, all of which contributed to a trebling of first-half revenues to £18.8m.

The company's chief executive, Nadhim Zahawi, reckons this year will one of consolidation, and seems relieved that the firm was not judged to have "bitten off more than it could chew," with the three takeovers.

Unlike many firms toiling in credit crunch, particularly in the media sector, he says YouGov's research business will benefit from firms relying more on strategic market research. According to the group, it has just contracted with "a top four UK supermarket" after being overlooked by the same company two years ago.

It is also pretty hard to find challenges for the group. True, they are a media stock and generally that sector has been much troubled, but they are helped by the fact that their polls are online, where advertising is expected to be up 21 per cent in 2008, compared with the whole industry, which will see just a 4 per cent rise, according to watchers at Numis.

The longer the economic downturn continues, the harder the sector will feel its effects, but YouGov has so far ridden out that particular storm, with organic growth up 43 per cent. Likewise, acquisitions also provide obstacles, but the firm is likely to work on integrating last year's add-ons for a while before entering the market again. Buy.

Neville Porter

Our view: Sell

Share price: 0.35p (-0.05p)

Some industries are seen as defensive options during a period of economic decline, others are seen as being downright toxic. Bookmakers are generally seen in the second category, as people worried about job security cut back on things like gambling, especially when fuel and food inflation is soaring.

All this is very bad news for Neville Porter, which reported results for the six months to 31 December yesterday. While the numbers, at a loss of £300,000, were an improvement on the previous half-year, the future by the group's own admission is likely to be very tough.

"We struggled with margins due to payouts to customers at well above budgeted levels," said the chairman, David Soley, in yesterday's statement.

It is arguable that the group has done the right things. It has improved turnover, has a new call centre to take bets over the phone, and reports that 40 new internet accounts are set up every week, but that will not be enough for the group to enjoy the immediate future.

There is usually something good to say about a firm's prospects, and while Neville Porter has stepped back into what it describes as its core markets of horse and greyhound racing and football, it is very difficult to imagine the company in the winner's enclosure any time soon. Sell.

PROMOTED VIDEO
Arts and Entertainment
From Mean Girls to Mamet: Lindsay Lohan
theatre
Sport
Nathaniel Clyne (No 2) drives home his side's second goal past Arsenal’s David Ospina at the Emirates
footballArsenal 1 Southampton 2: Arsène Wenger pays the price for picking reserve side in Capital One Cup
News
Mike Tyson has led an appalling and sad life, but are we not a country that gives second chances?
peopleFormer boxer 'watched over' crash victim until ambulance arrived
Arts and Entertainment
Geena Davis, founder and chair of the Geena Davis Institute on Gender in Media
tv
News
i100
Travel
travelGallery And yes, it is indoors
News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
tech
Arts and Entertainment
The Tiger Who Came To Tea
booksJudith Kerr on what inspired her latest animal intruder - 'The Crocodile Under the Bed'
News
i100
Arts and Entertainment
British actor Idris Elba is also a DJ and rapper who played Ibiza last summer
film
News
Alan Bennett criticised the lack of fairness in British society encapsulated by the private school system
peopleBut he does like Stewart Lee
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

IT Project manager - Web E-commerce

£65000 Per Annum Benefits + bonus: Clearwater People Solutions Ltd: If you are...

Trainee / Experienced Recruitment Consultants

£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Day In a Page

Syria air strikes: ‘Peace President’ Obama had to take stronger action against Isis after beheadings

Robert Fisk on Syria air strikes

‘Peace President’ Obama had to take stronger action against Isis after beheadings
Will Lindsay Lohan's West End debut be a turnaround moment for her career?

Lindsay Lohan's West End debut

Will this be a turnaround moment for her career?
'The Crocodile Under the Bed': Judith Kerr's follow-up to 'The Tiger Who Came to Tea'

The follow-up to 'The Tiger Who Came to Tea'

Judith Kerr on what inspired her latest animal intruder - 'The Crocodile Under the Bed' - which has taken 46 years to get into print
BBC Television Centre: A nostalgic wander through the sets, studios and ghosts of programmes past

BBC Television Centre

A nostalgic wander through the sets, studios and ghosts of programmes past
Lonesome George: Custody battle in Galapagos over tortoise remains

My George!

Custody battle in Galapagos over tortoise remains
10 best rucksacks for backpackers

Pack up your troubles: 10 best rucksacks for backpackers

Off on an intrepid trip? Experts from student trip specialists Real Gap and Quest Overseas recommend luggage for travellers on the move
Secret politics of the weekly shop

The politics of the weekly shop

New app reveals political leanings of food companies
Beam me up, Scottie!

Beam me up, Scottie!

Celebrity Trekkies from Alex Salmond to Barack Obama
Beware Wet Paint: The ICA's latest ambitious exhibition

Beware Wet Paint

The ICA's latest ambitious exhibition
Pink Floyd have produced some of rock's greatest ever album covers

Pink Floyd have produced some of rock's greatest ever album covers

Can 'The Endless River' carry on the tradition?
Sanctuary for the suicidal

Sanctuary for the suicidal

One mother's story of how London charity Maytree helped her son with his depression
A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world