The Week In Review: Swell prospects at Forth Ports

Bid hopes have swollen valuations of port operators and there is good reason for all the talk of consolidation. In the past six months, P&O and PD Ports have been swallowed by foreign buyers. Many in the City believe Forth Ports could be next. But even without a bid the company looks a good bet.

Its annual results were sparkling. Forth, which operates seven commercial ports in the UK, boasted of an 8 per cent rise in operating profits to £63m and an 8 per cent jump in its dividend to 43p per share thanks to a particularly strong performance by its Scottish sites.

The fact that Forth has so little debt on its balance sheet makes it an attractive prospect for private equity and trade players. Analysts suggest a bid would have to be pitched at more than 2,000p if it is to be successful. But with or without a bid, the shares are a buy.

WOLSELEY

Wolseley is keen to play down concerns about a slowing US housing market yesterday. Given North America accounts for 65 per cent of total sales at the plumbing supplies and building materials group, and has been largely behind the profit growth in recent years, this is no surprise. Interim results revealed a 40 per cent jump in turnover at the division to £4.3bn and a 39 per cent increase in profits to£270m. Hold

HMV

Now Permira has walked away from a bid for HMV there seems little reason for holding the shares. The music retailer is without doubt in decline and a fresh offer is highly unlikely. It is expected to post a £100m profit this year, falling to about £90m in 2007, but there is a serious danger these forecasts will have to be downgraded. Sell.

RAB CAPITAL

RAB Capital, the London-based hedge fund, seems to be going from strength to strength. It has reported a 46 per cent rise in annual pre-tax profits to £25.6m and analysts expect this to increase to £37m by the end of 2006. Funds under management rose by 50 per cent to $2.6bn (£1.5bn) for the year to December 2005 and have since risen further. Buy.

CERES POWER

Ceres Power shares have already shot up over the past few months. Key to the company's future is its combined heat and power (CHP) fuel cell. If it becomes a mass market product, Ceres should turn into a billion pound-plus business. The fuel cell, to be fitted into consumers' homes, turns natural gas into heat and electricity. Hold.

IQE

Back in August this column highlighted the turnaround under way at IQE, the Cardiff-based maker of silicon wafers that microchips are made of. Annual results from the company showed that the recovery is on track. Sooner or later the market will come to appreciate the radical reforms at the company and its stock will motor. Buy.

F&C ASSET MGT

F&C Asset Management has had a rough couple of years, struggling to keep its head above water ever since its reverse takeover by Isis in the summer of 2004. Having lost a number of mandates in the wake of the merger, things went from bad to worse last year when it lost the contract to manage £25bn of Resolution Life's assets. The next year will be crucial. Wait.

EVOLUTION GROUP

2005 was not an easy year for Evolution Group. The stockbroker was hit by a deluge of bad publicity surrounding cash it raised for a number of companies. But going by the group's results, it has come through well. Evolution posted a 30 per cent rise in pre-tax profits to £30m. Take profits.

PREMIER OIL

2006 is shaping up to be one of the most exciting years in Premier Oil's history. The drilling programme the group has in place, in far away places like Pakistan, Vietnam and Guinea Bissau, has the potential to double the value of the company if successful. Last year profits soared to $126m from $59m and Premier bought back large amounts of its shares. Buy.

UNIQ

Uniq, the maker of convenience foods for supermarkets, has issued its third profit warning in just over a year. Uniq is sandwiched between powerful supermarkets and rising energy costs. A weak balance sheet does not help matters. The company has a pension fund deficit of £103m, debt of around £50m, and too high a rating at over 30 times forecast earnings for 2006. Sell.

AUGEAN

Handling hazardous waste may not be the most pleasant business in the world but it is certainly a very profitable one. Results from Augean, the UK's largest operator in the field, highlighted this. The company revealed a full year profit of £3.7m on sales of £26m. Brokers forecast this to rise to £5.1m by the end of the current financial year. Buy.

Safe as houses? Budget boost for investors in property

Shares in the property sector were set alight on Wednesday as Gordon Brown revised his plans for the introduction of Real Estate Investment Trusts (Reits). Slough Estates, which posted solid full-year results, saw its stock register one of the biggest gains in the sector, up 13 per cent.

So why all the excitement? Quite simply, if a property company turns itself into a Reit it no longer has to pay corporation tax. This means more profit for shareholders. The Chancellor says his plans to introduce Reits in 2007 are on track. He got applause from investors by setting the conversion charge companies have to pay to qualify for the new status at 2 per cent of their assets - in line with industry expectations.

As for Slough's results, they beat expectations, reflecting a better than expected performance from the group's UK and US portfolio. The shares have underperformed the sector recently so it was no surprise to see them do so well on the back of the Chancellor's news. In the short term they are likely to come under pressure. On a longer-term view they will go higher. Buy.

m.jivkov@independent.co.uk

The above recommendations are taken from the daily Investment Column.