The Investment Column : No news is bad news for Lonrho as shares struggle

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The Independent Online
Lonrho has proved a graveyard for the reputations of its chief executives, if not their pockets. After the Tiny Rowland years, the arrival of Dieter Bock in the hot seat four years ago was hailed by investors as the catalyst which would unlock the potential of the sprawling mining to hotels conglomerate.

As it happened, most of the value was unlocked by Mr Bock himself when he sold his 18.5 per cent stake to the South African mining giant Anglo American in October for 180p a share, netting him a profit of around pounds 100m. Yesterday the shares were up 1p at 129p, having underperformed the market by 50 per cent since peaking at 217p in February 1996.

News of the results for the half-year to March showing pre-tax profits slashed from pounds 60m to pounds 22m did little to advance analysts' knowledge. The figures were in line with expectations already adjusted sharply downwards following a profit warning in March days after Mr Bock left the board.

So nothing new there, but what people had really been hoping for yesterday was further news of the various break-up moves initiated by Mr Bock and being continued by Sir John Craven, chairman. Again, there was little to add to what the market already knew.

The merger talks announced last month between Lonrho and JCI, the black- controlled South African mining group, apparently remain at a tentative stage. Lonrho's emphasis yesterday that it was not keen to sell its 33 per cent holding in Ashanti may have reduced the chances of a deal over the next couple of months, given the key role of Anglo, which was previously said to covet the stake.

Again there was little to report on the demerger of the African trading operations, which will not happen until next year. Elsewhere, the sale of the Princess Hotels to Prince al-Waleed, the Saudi billionaire, is said to be imminent but investors should not hold their breath. The rumoured knock-down price of pounds 270m is more easily explained after the news that operating profits are down pounds 2m to pounds 10m in the latest six months.

Meanwhile, it remains unclear why a private investor should want a stake in Lonrho Africa when it is spun off. Comprising a rag-bag of interests, profits were sharply lower. That said, the group does contain gems: May's sale of the South African sugar operations threw up a profit of pounds 129m and Dutton-Forshaw, the British motor dealer which saw profits grow by pounds 1m to pounds 6m, looks a valuable asset.

Profit forecasts of pounds 110m for the full year would put the shares onto a forward p/e of 26. Of more interest perhaps is the net asset value, put at 163p by Lonrho if all the quoted investments are included. Hold.

TBI prepares for take-off

TBI has transformed itself from a pure property group to a regional airport operator over the past few years. It now owns Cardiff and Belfast airports and last month made its first foray overseas, paying pounds 4.3m for an airport in Orlando, Florida. More acquisitions are in the pipeline.

"We would expect to have bought at least one more airport within the next 18 months," says the chief executive, Keith Brooks. Newcastle, Luton, Bristol or Coventry are the likely candidates.

The diversification looks a shrewd one. World-wide, aircraft traffic is growing strongly and there are plenty of bargains to be had as there are a host of cash-strapped local authorities keen to attract private funds to revamp airports.

Profits before tax rose 89 per cent to pounds 19.1m in the year to March, chiefly due to an increase in airport earnings from pounds 2.9m to pounds 8.3m. TBI is pushing up passenger spend per head by revamping the retailing facilities at its airports.

Unfortunately passenger numbers were flat last year due to a slump in the UK charter market as tour operators cut back on excess capacity. That said, prospects this year look much brighter, with demand stronger and the number of holidays on offer up by around 15 per cent. TBI is looking to open up its airports to more destinations.

TBI is also planning to beef up its property portfolio after rooting out some of its poorer sites. Schemes such as the redevelopment of an office and retail estate off Tottenham Court Road, in London's West End, look encouraging.

Credit Lyonnais Laing (CLL) forecasts current year profits of pounds 21m, putting the shares, up 0.5p at 88p, on a prospective p/e ratio of 20.

With its substantial property portfolio, however, it is unfair to value TBI on earnings alone. A better way is to look at how much its airports and properties are currently worth. CLL reckons TBI's assets are worth at least 100p a share and probably more than 110p. On that reckoning the shares look cheap.

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