Friday tips round-up: Royal Dutch Shell, BTG, Cranswick

1st Feb 2013 07:07

Royal Dutch Shell's fourth-quarter results were a mixed bag. In the final quarter of last year, profits on a current cost of supply basis - which strip out the effect of movements in the oil price on inventories - rose 15 per cent to 5.58bn dollars (3.5bn pounds), lower than a consensus view of 6.2bn dollars. This was down to weaker US fuel prices and higher production costs. Europe's largest oil group also said it would spend more than expected in its capital investment programme in 2013, at 33bn dollars compared with 30bn dollars in 2012. Longer term, the reserve replacement ratio of just 44 per cent is also a slight concern. Shareholders can look forward to an improved dividend payout over coming months after the fourth-quarter payout was increased by 4.7 per cent to 43 cents. The group's cash flow, which hit 42.7bn dollars in the full year, should continue to grow. The shares are trading on a 2013 earnings multiple of 8.4, falling to 8.3 next year. The prospective yield is an attractive 4.8 per cent rising to 5per cent. The income is good, but Questor feels a buy rating after such a sharp rally in the shares and the wider market is not appropriate. The shares are now a hold, down from buy, The Telegraph´s Questor team says."BTG was one of my tips for the year as offering, in the biotech area, a good spread of proven compounds and drugs under development," The Times´s Tempus begins by telling readers this morning. The company eschews large-scale and expensive R&D, preferring to buy in promising smaller businesses and take their discoveries to market.Yesterday's positive trading statement, which forecast revenues for the year to end-March at the top end of guidance at about £215 million, shunted the shares up 11½p to 332p, but they are still where they were at the start of the year. The danger with the BTGs of this world is some catastrophic failure of one of its key compounds under trial. There are no obvious candidates for this, though, and on that basis the shares still look undervalued, Tempus adds.The discovery of horse meat in supermarket beefburgers is likely to make consumers think twice about buying cheap meat. This can only be good for quality pork producer Cranswick. It now supplies some of the major UK supermarkets; it has recently been awarded an export licence to China; and it is on the verge of being given approval to sell its offerings in Australia. Cranswick also sells ribs into the US market. On top of this, the company recently struck a £30m-a-year deal to be Asda's main pork supplier.The shares are currently trading on a 2013 earnings multiple 12.4, falling to 11.5 next year. The prospective yield is 3.2%. Questor is getting concerned about market valuations after the recent strong run in equities. It is probably a good time for investors to consider taking profits in some of their holdings by selling a proportion of their shares - or bank gains in cyclicals. However, despite the strong run in Cranswick shares Questor does not feel inclined to recommend taking profits in this case, given the export outlook and Asda contract, so keeps a hold rating.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.AB