Sunday share tips: Aggreko, Dechra, Optos

21st Oct 2012 10:42

Friday's trading statement from temporary power group Aggreko indicated a robust third quarter, with revenues up 22%. However, the shares tumbled by 7% as a number of headwinds emerged. Similarly, Rupert Soames, Aggreko's chief executive, was cautious about economic prospects for next year. He is right to be so. Nevertheless, and despite lower capital investment, he still expects to be able to meet demand because the group's fleet of equipment is mobile. Yet the most important thing to keep in mind is that there is a global shortage of power all over the world and Aggreko is ideally positioned to take advantage over the next few years. The Sunday Telegraph´s Questor team has had a hold rating on the shares since December last year when they hit 18.48 pounds. Because of the level of growth and size of the opportunity, the shares have been highly rated. Even after recent falls, the 2012 earnings multiple is 20, falling to 18.3 this year, and the shares have recently traded as high as 24 pounds. At such a valuation, the market prices in perfection. Any temporary stumble, which is how the market interpreted Friday's statement, is always punished harshly. However, the shares are still worth holding for future growth, Questor says. Veterinary medicine group Dechra Pharmaceuticals has managed itself into an excellent position. It has made strategic acquisitions in key markets and now has an impressive global footprint to exploit. However, fully exploiting this will need a significant amount of investment. The shares have soared recently, on evidence that the group's strategy is paying off. Friday's first-quarter trading update showed its key US pharmaceuticals business keeping its impressive growth rate of more than 20%. It has been so successful in fact that the shares are now trading at a 40% premium to the European health-care sector on a June 2013 earnings multiple of 15.2 times, falling to 13.4 next year. The future is bright for Dechra, but on valuation terms Questor says sell.Dunfermline-based Optos makes devices that show up certain forms of eye disease, including those caused by diabetes, earlier than rival technology. Prospects for the next few years are strong, chief executive Roy Davis is ambitious and at 2071/2p, the shares look attractive. Until this year, the group's devices were extremely large and rather unwieldy, particularly for small surgeries or opticians. Now Optos has started selling a desktop machine, Daytona, which looks sleeker, works more effectively than older models and is expected to prompt a surge in sales. Analysts expect that Optos will have sold at least 6,000 devices by the end of next year, including Daytona and older machines. Profits are expected to rise from £14.9m this year to about £16.1m in 2013 and £21.7m the following year. Optos shares are 2071/2p and should increase materially over the next two years. By 2020, 75m people will be blind worldwide unless preventative measures are taken. Optos machines can reduce the chance of blindness and the new Daytona devices should prove particularly popular to eye specialists the world over. This is a Scottish company with a world-beating technology. Buy, The Financial Mail on Sunday´s Midas column says. AB