Sunday newspaper tips round-up: IMI, RPC Group, eServGlobal

9th Oct 2011 17:10

A little over a month after going to a 'buy' stance on engineering group IMI the Questor team at The Sunday Telegraph finds it surprising that the company´s shares have continued to slide. That when the shares are now trading on a single-digit earnings multiple which it considers too low for a growth stock. In particular, Questor points out the company´s possession of various core fluids technologies which it applies in niche, high margin business lines. Furthermore, the long-term drivers of these look solid; they are: climate change, resource scarcity, urbanisation and an ageing population. For Questor the shares of IMI, trading at a December 2011 earnings multiple of 9.6, and yielding 4%, remain a buy. Things are going well at plastic packaging company RPC Group, a firm which was first recommended on July 26 2009 by the Questor team at the Sunday Telegraph. Adjusting for last year's rights issue, the entry price was 240p. The shares are now 38% higher. In fact, RPC recently said that profits in the first half of this year would be "significantly" higher than last year. Several factors explain the improvement seen, such as the consolidation of recently acquired (and strategic) Superfos, an improvement in like for like sales, a successful cost cutting programme, the easing in polymer prices and the company´s "pricing power" (ability to pass on higher raw material costs). As if all of the above were not enough, shares are trading at a March 2011 earnings multiple of 9.3, falling to 8.2 next year. In Questor´s own words, "this looks cheap considering that the company is expected to post a growth in earnings of 16% this year and 14% next year. Also, many of its end markets are defensive." Lastly, the prospective yield is 3.9%, rising to 4.3% next year. For all of the above reasons Questor says Buy. "In less developed countries all customers pay for their mobile phone use through top-up cards and eServGlobal is one of the pioneers of the technology that allows them to do this," says the Financial Mail on Sunday´s Midas column. The group provides many services but the area with greatest potential is the use of mobile phones for money transfer. As well, the company works with many mobile phone operators but talks are underway with other groups, including 'heavy-weights' Vodafone and Telefónica. Additionally, the group is expected to move from losses to core profits of £2.4m in the year to June 2012, so it is moving in the right direction and operates in fast-growing markets. Midas says 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.