There is a bit of a bid play but the main reason for tipping Close is its
Posted in General on 12. Aug, 2010
There is a bit of a bid play, but the main reason for tipping Close is its good run of earnings growth, driven by the Winterflood stockbroking arm and the ex- Hill Samuel corporate finance team. The shares are at a premium to the rest of the construction sector but cheap against the market.In investment banking we have gone for Close Brothers – that rarest of endangered species, an independent British merchant bank. The company has built everything from multiplex cinemas and supermarkets to hospitals and roads under the private finance initiative. It has thrived while most construction companies have struggled, and now has a market capitalisation of pounds 220m.
None the less Sky remains supremely well placed to exploit the opportunities of pay-per-view and interactive TV.With independence for the UK’s regions high on the political agenda, our “devolution stock” for 1998 is the Scottish-based Morrison Construction The shares are up from 235p this time last year to 325.5p. Growing competition and regulatory pressure mean it cannot hope to enjoy the same monopoly of subscription TV in the digital age that it had with analogue. Sky faces a couple of years of flat or falling profits as it invests in its digital future. The strategy of selling off superfluous assets and concentrating on its core engineering capabilities is undoubtedly the right one, however, and its long term prospects are excellent.Another index stock to tuck away for the new year is BSkyB Its shares didn’t do much better than BTR’s last year. It had a dreadful time of it in 1997 with repeated profit warnings and was the worst performing FTSE 100 stock.
Its engineering consultancy division is pursuing overseas business, while Atkins also has a pounds 43m cash pile to spend on acquisitions.This year we have largely steered clear of industrial stocks with heavy exposure to sterling But one stock that ought to be on the way up is BTR. At 363.5p its shares trade at 18 times forecast earnings – modest compared to the sky-high ratings enjoyed by more established outsourcing groups. That gap should narrow this year as the group brings in new contracts. Tamaris’ management has achieved returns of more than 25 per cent and average occupancy of almost 90 per cent.