Friday tips round-up: Capita, AstraZeneca, Colt

22nd Jul 2011 06:52

The market has well and truly fallen out of love with the support services sector, and with the sector leader Capita Group. Some acceptable interim figures from the company were greeted with a sharp price fall yesterday. The rate of dividend growth is a little lower than it has been historically because the company wants to conserve cash for acquisitions. There is also the prospect, with the shares at their current level, of share buybacks. The shares sell on about 14 times earnings and look set to recover by the end of the year, says the Times.But the Scotsman thinks the share price fall presents a buying opportunity and would be looking to add to weightings at this point. We believe the high levels of attrition that characterised the first six months will temper from here, while both the contract pipeline and win rate are strong, it says. Capita trades at a 2012E PE of around 12x. We believe this is extremely good value in the context of Capita's history but also in relation to its growth prospects over the next two years, says the newspaper.Crunch week for AstraZeneca, our second-biggest pharmaceutical company, and this is only the start of the hard work ahead. On Tuesday night Astra's treatment for type 2 diabetes was given the thumbs down by an advisory committee of the US Food and Drug Administration. A day later, the heart attack treatment Brilinta was approved by the FDA, albeit with a fair few caveats. Astra shares, up 2% on the latest news from the FDA, are on a discount to the rest of the sector, about seven times this year's earnings, while yielding about 6%. That discount looks justified until prospects for Brilinta are clearer, says the Times.There are signs that the market is losing patience with Colt, the former City of London Telecoms. "Jam still tomorrow" says a negative note from Numis Securities, which points out that half-year figures were at the bottom end of expectations. The business has been reorganised into three divisions, and of these, data and managed services inched towards slight rises in revenues while voice income continued to fall. Data centres take longer to provide a return than the company's voice and data services. Colt is also heavily exposed to the economy on the Continent, about which enough has been said. The shares lost almost 14 per cent of their value yesterday and sell on about 13 times this year's earnings, but there seems little reason to buy, says the Times.Great Portland Estates issued its valuations for the quarter to the end of June. And the result, once again, was encouraging, with the portfolio valuation up a healthy 3.8% since the end of March. That works out to a nice uplift of nearly 15% since the end of June last year. Evolution Securities has a net asset value forecast of 400p for March next year, and 432p for 2013. But before the bears start grumbling, we'd point out that Great Portland boasts an enviable portfolio of prime London property, which, along with the prevailing demand trends, more than warrants the premium rating. Buy, says the Independent.The online gaming firm 888 looks set to increase annual profits on the back of strong performances from its casino and poker businesses. Yesterday, it delivered an encouraging second quarter trading performance with revenue climbing 29 per cent year on year to $79m from £61m in the same period last year. There remain concerns that it could be a big loser from moves to introduce a remote gaming tax in the UK in 2013 but, despite that, its positive prospects make it a buy, according to the Independent.Ever since it changed its name from Galiform last September, Howden Joinery has been a steady winner. A major component of the group's success has been the fact that it only supplies kitchens to builders rather than being involved directly in the retail market, something which has helped it through the recession. So, hold for now, as economy is weak, but we would happily buy on weakness, says the Independent.Please note: Digital Look provides a round-up of news, tips and information that is impacting share prices and the market. Digital Look cannot take any responsibility for information provided by third parties. This is for your general information only as not intended to be relied upon by users in making an investment decision or any other decision. Please obtain a copy of the relevant publication and carry out your own research before considering acting on any of this information.