Roll up, roll up, now Punch show has started

Doubts over current trading take shine off Peacock's plumage; IQE still not for the fainthearted; And finally, a small plug for GET

If Mr Punch himself had been watching the débâcle of Punch Taverns' initial public offering his cries of "That's not the way to do it" would have echoed around the City. Rarely in the history of public offerings has a company stumbled so embarrassingly to find its stock market footing.

After being beaten almost to a pulp by institutional investors, shares in Punch began conditional trading yesterday. Forced to pull the float last week because the institutions played hard-ball over price, the pubs group's shares were issued at the cut price of 230p, where previously they had been offered at 250p-300p. Even by yesterday the group had failed to print enough prospectuses to distribute beyond a select few friends in the City, summing up the programme of disasters.

It's no wonder City opinion is divided about the group's prospects. Independent analysts were cast as silent spectators while the shares were being marketed – prompting scepticism from many. This contrasts with Punch's sponsors who had access to all the documents and naturally view the stock more favourably.

The Punch line is that it offers a solid, safe business based on its portfolio of 4,250 pubs, built from scratch by serial entrepreneur Hugh Osmond, of Pizza Express fame. Its tenanted model – where the individual publicans rent the pubs from Punch and run them as separate businesses – offers low-risk growth from strong and predictable cashflows. This contrasts with the centrally managed pubs model, now out of stock market favour, where costs, such as managers' wages, can soar.

Punch's friends predict it can get high double-digit earnings growth by improving profits from its core estate and replacing dud pubs with better ones. On settling down to life in front of an audience as a quoted company, Punch can chase growth by snapping up extra pub estates, such as those owned by the venture-capital backed Pubmaster. A simple enough story but not necessarily a long-term one. Punch, like its larger quoted rival Enterprise Inns, is patched together out of cast-offs from the big brewers such as Allied Domecq and Whitbread. They were happy to sell because the pubs market is in decline. Once acquisitions dry up, so does the growth.

For now, Punch is priced at a 12 per cent discount to Enterprise, which has clear growth prospects after two massive acquisitions recently. Punch shares, up 12p yesterday to 242p, trade on an undemanding price-earnings ratio of 8 times. Worth a look.

Doubts over current trading take shine off Peacock's plumage

Peacock Group is a funny old bird. A cheap and cheerful discount clothing chain, the company is in a section of the retail market that has grown strongly over the past decade. Yet the early calls from the company, on flying on to the stock market in 1999, alerted investors to disappointing profits. The shares are still below their 163p flotation price.

The group grew strongly in the year to March, but even yesterday, when it reported annual profits up a quarter to £16m, the news was not unequivocally good. Like-for-like sales since the start of last month are down 2 per cent.

The chief executive, Richard Kirk, spent yesterday trying to persuade investors not to get too hung up on a few weeks' trading. The week before last looked awful because it compared to a red hot week's trading in May last year. Last week, sales got back nearer their recent trend. The shares fell 8.5p to 133.5p nonetheless, as investors worried about the sheer volatility in trading and the lack of clarity on what will happen as the financial year progresses. With interest rate rises likely to dampen consumer spending before long, the outlook for high street retailers is unclear.

Peacock has a point in arguing that it could withstand a consumer slowdown well, since it supplies the lower end of the market with their clothing essentials, while cash-strapped fashion shoppers may "trade down".

In the meanwhile, it has got a grip on margins, which are rising, and is refitting up to 40 of its 345 shops. New store openings could take the chain to 700 outlets before the end of the decade. Peacock is also extending its lucrative deal to sell clothes through Woolworths.

Peacock shares trade on 10 times Investec's forecast earnings for the current year, which is relatively modest but reflects the City's caution since the profit warning. The doubts over current trading raised yesterday – and the question mark over the likely investor appetite for stocks in the retail sector once consumer spending slows – are enough to justify passing on Peacock for now.

IQE still not for the fainthearted

The chip component maker IQE has called the bottom of the chip market and predicts trading will get better during the second half of the year.

Brave talk for a company whose first quarter figures made miserable reading. Pre-tax losses came in at £5.8m compared with profits of £1.1m in the same quarter a year earlier. Sales were £5.7m, 26 per cent beneath the previous quarter and 56 per cent below the same three months a year earlier after customers like Nortel cut back on spending.

While the company says the first half will be the bottom of the downturn, it admits it has limited visibility and relies on discussions with customers – which have increased – to convert into orders. It also bases its optimism on improved conditions in the industry in general, and on hopes the investment made in its product portfolio will see its kit taken up among a wider audience. Burnt-fingered investors may prefer to wait to see real evidence.

Analysts predict another year of losses in 2002 on sales of around £30m. IQE expects to return to profitability during the course of 2003. At least the group has financial headroom, predicting it will end the year with cash of £15m-£20m.

While analysts at Equityinvestigator lifted their recommendation on the stock to a "buy" yesterday, they also pointed out that the shares remain expensive by traditional measures. Given the lack of order visibility, the shares, which were down 7.75p to 81.25p yesterday, are not for the fainthearted.

And finally, a small plug for GET

You might think that there are few companies more boring than GET Group, which sells electrical wiring, plugs, sockets, switches, fans and heaters. John Joseph, founder and chairman, begs to disagree. The company has developed a new range of cheap, ultra-thin sockets and light switches that barely stick out from the wall. Revolutionary, in its own small way.

Mr Joseph reckons this range will be enough to rewire the company after a grim period. Poor weather last spring meant housebuilding ground to a halt and wiring jobs were delayed, which hit GET's sales last summer. The company made a good recovery in the half-year to 28 February, but profit before tax of £2.0m was still 13 per cent down on the same period the previous year.

The group supplies their products to the wholesale market and DIY stores – increasinly so, now that Britons have developed a firm desire to do-it-themselves.

GET is divesting a rivets business it got as part of its last acquisition, and promises to pay down debt. That will ensure it still has the financial scope for a few more buys.

Investors get a nice little dividend; at 149p yesterday, the yield this year is forecast to be 4.6 per cent. The shares offer modest growth on a modest p/e of 9. Get some.