Sunday share tips: Associated British Foods, Telford Homes, Gulf Keystone

20th Apr 2014 20:05

Research from Redburn Partners shows that markets have new-found faith in Primark, the retail arm of Associated British Foods. Yet investors may have cause to be wary. The company's stock price has risen by 50 per cent over the last twelve months, in reaction to plans to expand its budget fashion chain Primark across the Continent. However, and amongst several other factors to contend with, that business segment is now valued at 36 times' its earnings. That is astronomical no matter how one does the maths. It is also far in excess of the valuation afforded by markets to the likes of Marks&Spencer, the UK's largest clothing retailer, which generates twice as much turnover and profit. Hence, the stock may be primed for a fall, writes The Sunday Times' Danny Fortson. As if the boost to property prices in the east of London from the 2012 Olympics were not enough, Telford Homes is also benefitting from the introduction of the Help-to-Buy scheme. Updating ahead of its annual results, the firm said it expects profits to more than double and to so do again by 2018. True, the stock is at the mercy of the London housing market, but to expect such a large increase in profits is not ridiculous. As of March 31st the firm was 98% sold for the next year, 70% sold for 2016 and 25% sold for 2017. The shares are trading on a price-to-earnings ratio of approximately 14.3 times' forecast profits, falling to 12.3 times for next year and 10 times for March 2010, which begins to look cheap. For now, the London housing market looks well supported, so buy, says The Sunday Telegraph's Questor column. Contrary to the usual pattern, far from benefiting from its passage to a full listing oil explorer Gulf Keystone has seen a sharp drop in its share price over the last month. Then again, and by the company's own admission, had it not been able to secure a $250m debt deal, eleven days ago, then it would have run out of money by May. Indeed, the investment case for the stock has always been one of 'jam tomorrow'. "The day when it finally delivers still feels a long way off," writes Danny Fortson. 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