Friday tips round-up: Debenhams, Pennon

17th Apr 2015 16:56

Debenhams has always traded at a discount to the retail sector due to the belief that department stores will struggle to compete with other retailers. News at the start of 2015 that sales had struggled in the fall in the face of cold weather placed a further drag on the stock. However, markets seem to be taking an increasingly favourable view on the company's performance. Indeed, it seems to be doing well out of the rise in UK consumer spending. The firm has been streamlining its range of products and reducing its dependency on discounting.Sales at its online "click and collect" online service grew by almost 22%. The fact that like-for-like sales may have risen by approximately 3% over the last seven weeks of the first half would seem to indicate its headed in the right direction. Hence, that discount to the wider sector should narrow, buy, says The Times's Tempus.Given Ofwat's blessing to further consolidation in the English and Welsh water industry, Pennon Group's takeover of Bournemouth Water is like to be replicated by peers soon enough. There are now 18 water suppliers in the United Kingdom. That comes ahead of the 2017 target to liberalise the sector by allowing companies free reign to bid for corporate customers. When the free-for-all ensues the purchase may not afford any real advantage over rivals and its rivals will follow suit. Nonetheless, the company promises the highest dividend growth - inflation plus 4% - and at 3.9% sports the highest dividend. The upside looks limited but the deal is a good one, so hold, Tempus says.