The Investment Column: Hazard detection firm Halma looks a safe bet but rivals are cheaper

Premium Bars and Restaurants; Park Group
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Our view: Hold

Share price: 210.5p (+6p)

Investors looking for asafe place to park their money while the credit crunch does its worst would do well to have a look at the hazard detection group Halma, which is doing rather nicely.

The company, which manufacturers a range of safety systems, including smoke detectors, posted impressive numbers yesterday, showing an 11 per cent hike in profits to £72.8m. Analysts at Investec say of the company that they are "more positive at this point than at any time over the last three years".

Sadly, for investors wanting a little more than a safe haven, Halma is not the group they are looking for. Despite Investec's upbeat outlook, the watchers have the group on a hold recommendation, saying that the share price will only manage to get to 218p in the next 12 months. Others agree, and the general consensus is that Halma is already trading at a strong premium to its peer group.

Indeed, analysts at Landsbanki say that at 205p the shares are valued at 14.2 times 2008 earnings, "a very notable premium" with the sector average at 11 times, they say. Investors wanting stock in the sector would be best off considering cheaper rival Spectris.

Frankly, buying now would be a waste of time. Yesterday's numbers, which if anything were at the better end of expectations, barely caused ripple in the market, with the stock up just 2.9 per cent on the day.

Some analysts do disagree. Those at Arbuthnot say the group is trading on sector-average price earnings ratio and deserves better. They reckon that the stock will reach 250p; even more ambitious than the house broker, Dresdner Kleinwort, which expects a more conservative 240p.

There is nothing wrong with the company, indeed it is very strong, and as a defensive pick there cannot be many better candidates. The group's sales are driven largely by health and safety requirements, and with only 3 per cent of revenues coming from new build projects there are few credit crunch concerns. Moreover, existing stock holders will be delighted with the group's record dividend, up 5 per cent to 7.55p. If only the stock was not already fully priced. Hold.

Premium Bars and Restaurants

Our view: Sell

Share price: 104.5p (-23p)

For some time now, those in a number of sectors, and particularly the restaurant industry, have argued that some consumer markets are less affected by the credit crunch. If that is true, and a decline in restaurants signals the onset of a real economic downturn, then we are all in trouble if yesterday's statement from Premium Bars and Restaurants (PBR) is anything to go by.

The top end bar, pub, restaurant and hotel group, which includes the Living Room chain, warned that the market continues to be "very challenging". Annual like-for-like sales are down 5 per cent.

The company said it expects full-year numbers, to be published in September, to come in under previous expectations, and the executive chairman, Mark Jones, adds that the firm has switched from trying to maximise revenues, to cost control. The group is also trying to increase its food sales, with Mr Jones saying that things could soon be getting quite serious for bars just offering drinks.

Investors reacted as though the group had contracted plague, with the stock falling 18 per cent.

Sadly for buyers, this is not a golden buying opportunity. The shares have crashed through the previous year low, and with a constant flow of bad economic news the price will continue to fall.

Experts at KBC point out that new Living Room openings in Milton Keynes and Bristol will help profitability, and that the share price should hold up to some extent because the group owns the freehold on much of its estate. Indeed, far better to be with PBR than a group without the safety net of a property base.

However, frankly, this is papering over the cracks. The watchers predict that earnings per share will fall to 3.9p next year, from 5.7p. Investors should heed this as a warning: a punt now will lead to losses. Sell.

Park Group

Our view: Buy

Share price: 16.5p (+0.25p)

Chief executive Chris Houghton reckons that Park Group is flying and that Landsbanki's prediction that the share price willhit 28p in the next 12 months is a little on the understated side.

The Christmas savings group has had a tough last couple of years, due largely to the collapse of its main rival, Farepak, in 2006, which left more than 100,000 people £40m worse off. Understandably, consumers abandoned Park too, and that led to awful full-year figures being announced yesterday, with pre-tax profits falling from £6.2m a year ago, to £4.5m.

It is not just the group's profits that have taken a pounding in the Farepak fallout. The stock was trading at its year lows in anticipation of the bad numbers.

However, investors would now be wise to back the group. The Government has introduced a scheme whereby customers' money will be held in trust and is therefore protected, meaning that those saving with Park, typically on low incomes, have risk free deposits.

This is already gaining traction; savings orders for Christmas this year are already up 17 per cent on last year, and Mr Houghton says that the group's move to offering internet services is liked, with 1.6 million hits on the group's website in the last year.

Park has no bank debt and, according to Shore Capital, the balance sheet is ungeared. They say that the group will trade at just 6.2 times earnings next year.

The shares hardly moved yesterday, with the stock gaining just 1.5 per cent. Investors would be well advised to buy and benefit from what is likely to be a strong performance in the next 12 months.

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