View from City Road: Whiff of a deal bolsters NFC

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THE market knows a good deal when it smells one. NatWest Markets' report that NFC was about to sell its waste disposal business for pounds 100m sent the transport group's shares up 10p to 271p.

Enthusiasm relates both to the price, which looks very good for NFC, and to the strategic sense of a sale for a company in the midst of well-managed change.

If ever there were an example of a well- timed non-core disposal, this would be it. NFC has been reshaping its business into two main divisions - transport and logistics (dedicated distribution for the likes of Sainsbury and relocation).

It has also made acquisitions, notably in the US, with a view to exporting its skills. Continental Europe is next for this transfer of expertise.

But with gearing historically high at 55 per cent, the group looks a little stretched. Disposing of waste disposal would give the continuing group room for manoeuvre and alleviate any concerns that NFC would need to increase investment in waste disposal to keep the business competitive.

It is also a seller's market for such businesses - despite recession - as there are heavily regulated water companies falling over themselves to expand into waste management, beyond the reaches of Ofwat.

That is why Wessex Waste Management is reportedly prepared to pay pounds 100m for a business that made operating profits of about pounds 4m last year, according to Robert Miller- Bakewell, the NatWest Markets analyst.

Despite the rise yesterday, NFC's shares are still not expensive at 18.4 times prospective earnings of pounds 104m. Buy them, because this is a transport company with a good record that is still going places.