TV stardom beckons for Carlton

CITY TALK

CARLTON Communications, the London weektime TV franchisee, will be a star performer in 1996, according to US investment bank Morgan Stanley. The shares are boosted by the company's ability to generate cash. Last year, it generated free cash flow of pounds 143m, and now has pounds 91.4m in net cash. Analyst Rebecca Winnington-Ingram estimates the shares are trading at just below the market average but, on her forecasts, are set to deliver twice the average growth over the next two years. She believes the shares, currently 1,051p, should reach 1,145p. Carlton shares trade at 12.8 times 1996 earnings per share of 77.1p, and a mere 11.1 times 88.4p the following year.

ESSO'S move to abandon its Tiger Tokens promotion in the current petrol price war is bad news for Applied Distribution (188p). Applied stores all the glasses, television sets and other merchandise that motorists can gain in exchange for their Tiger Tokens.

The Esso promotional scheme ends in May, leaving a large hole to fill at one of Applied Distribution's eight warehouses. A company insider vows that Applied's profits for 1995 will be untouched. Charterhouse Tilney expects pounds 5m for 1995 but as yet the broker has not revised its forecast for 1996 of pounds 6.3m, in light of Esso's move. Static at 188p this past week, expect downward pressure on the price.

BANK OF IRELAND offers good value, on a lowly p/e ratio of less than 10 times 1996 forecast earnings of pounds 385m. A high yield reflects market caution over its recent acquisition of First New Hampshire. But the deal should be a boost, and there is no reason why the dividend cannot continue to match the remarkable 20 per cent growth of recent years.

The board has also gained approval to buy back shares. At these levels, the shares look to be a steal. Buy.

RECOVERY stocks are among the most sought after by investors. Look at Next among retailers, or British Aerospace. If you bought in at the bottom, the returns were huge. Which is what makes wire-rope maker Bridon tempting. Its margins have been shot to pieces in a business suffering from severe over-capacity. Management have been trying to restore profitability, cutting costs and investing in more efficient wire drawing machinery.

If the group can restore margins to more respectable levels, say 6 per cent, from current levels of around 2.4 per cent, then the returns will be fabulous. Pre-tax profit is likely to fall this year to around pounds 4m, from pounds 10.1m last year. The company's Project 360, a comprehensive turnaround plan, has been under way for the best part of two years now. Its next task is to improve customer service, which should allow competition on factors other than price alone. The shares, at 111p, are on a toppy p/e ratio of around 20 times this year's earnings, but fall to nine times 1997 earnings. Expect a bumpy ride if recovery is slower than anticipated. But there could be a lucrative payback. For speculative investors.

THIS Wednesday, Fyffes (112p), the Irish domiciled banana and fresh food distributor, reports preliminary figures. These will be the first set of results since it acquired the Geest banana business for pounds 147.5m a few weeks ago. Last week, it continued its path along the acquisition trail, with the purchase of a 50 per cent stake in Anaco International, the Dutch fresh produce business, for an undisclosed sum. Panmure Gordon has just released a strong buy note, and sees a 21 per cent jump in sales to over IRpounds 1300m, with pre-tax profits up 13 per cent to IRpounds 44.5m. One to watch.

COLORVISION, the national TV and electronics goods retailer, has run into a spot of bother with the Office of Fair Trading, which has revoked its Consumer Credit Licence. The company is appealing the decision, and argues strongly that it is being unfairly treated. However, it concedes it has been guilty of 20 offences since 1984, or almost two a year. However, it says the last one was in May 1994. If the company cannot provide credit for its customers, it will be a major blow. After all, think of the other high street retailers, and how important a part credit plays in their business. Whatever the merits of Colorvision's case, an essential of sound investment is to avoid any company where there is even so much as a hint of dodgy practice. The shares, down 9p to 30p on Friday, are a sell.