Friday tips round-up: CareTech, Premier Farnell and Standard Chartered

7th Dec 2012 07:30

Tempus in The Times writes that one company that has had a difficult couple of years is CareTech Holdings, the AIM-quoted provider of specialist care homes. There was a bizarre row over a policy of capitalising the salaries of members of staff seeking acquisitions. At least one bid and one management buy-out never materialised. Analysts are worried that, in the wake of the collapse of Southern Cross, the company would come under pressure if fees from the public sector started to decline.This never happened. The main business, housing adults with learning disabilities, is a long-term one, unlike the care of older people. Meanwhile, CareTech has been moving into other areas such as residential services for the young and fostering, which are less capital intensive.In the year to the end of September the company grew revenues by 4.5% but this came from the addition of new capacity with fees pretty well static. The other metric to look out for, occupancy rates, remained comfortably over 90%. CareTech grew underlying pre-tax profit by 5% too, to £16.7m. As a measure of confidence a final dividend of 4.29p makes a total up more than 8% to 6.5p. The shares are on a little more than six times this year's earnings, which looks low for the sector. But they have risen almost 40% since May, which suggests that much of the good news may already be in the price. 'Hold'.Tempus writes that when it last looked at Premier Farnell, in the autumn, it suggested that the shares were a straight play on an early economic recovery, but that this recovery might be a way off. Three months later, much the same is true, alas.Premier's revenues were down by 1.6% in the third quarter of its financial year, which ended in October. But this translated into a 10.4% fall in operating profits, to £22m. Sales rose by 0.4% in August, but September and October were disappointing, with sales on the slide again. November, for which figures are just out, showed a slower rate of decline than October, taking out the effects of Storm Sandy, but sales were still off 3.2%.Premier Farnell shares were up 5.5p at 182.75p on the news. Analysts were again cutting their estimates for the year but there was a sense among some that this might be the last downgrade, and that the market might have bottomed out. There are some signs supporting this in industry data coming out of the US. But because Premier and its rivals deliver mainly overnight, there is no clear indicator of what is to come and, frankly, no one knows.The shares have traded in a narrow range since May and sell on about 13 times this year's earnings. They have the support of a decent 5.5% yield and seem unlikely to fall much further, unless we are in even more trouble than anyone thinks. But Tempus is not convinced the omens are yet sufficiently favourable to justify a 'buy'.Questor in The Telegraph says that it looks like Standard Chartered's problems with US regulators will soon be over and it will be back to business as usual. The bank is set to give another $330m (£205m) to US authorities - on top of the $340m fine already paid. The problems related to subsidiaries engaged in "grave violations of law and regulation" in their dealings with Iran. However, a line is likely to be drawn under these events by the end of the year.There has been a sharp slowdown in emerging markets of late with Brazil, for example, on track for its worst year of growth in more than a decade. GDP growth is also slowing in India. But Richard Meddings, the group's Finance Director, was upbeat yesterday, confirming expectations that the group would deliver its 10th consecutive year of profit growth. The bank is expected to increase full-year profit by a "high single-digit rate".Questor has had a hold rating on the shares, but the fact that its Iran sanctions settlement is close at hand is very positive. Indeed, it could be argued that Standard Chartered has got off lightly in this case. Next year is likely to be tough, but as the year progresses a pick-up is likely in the bank's markets. The new Chinese leadership is likely to want to keep growth above 7% - and this should help Hong Kong. Trading on a 2013 earnings multiple of 10.4 and yielding 3.6%, Standard Chartered shares are a 'buy'. 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. CM