Sunday share tips: Balfour Beatty, Smart Metering Systems

14th Aug 2016 15:24

(ShareCast News) - Buy Balfour Beatty shares, was the view in the Sunday Times' Inside the City column. Chief executive Leo Quinn, appointed last year to turn things around at the infrastructure group like he had done at Qinetiq and De La Rue, still has a tough job on his hands as the construction industry was this month confirmed as being in recession. Moreover, the company is still contracted into many unprofitable contracts.However, while interim numbers this week will not be exemplary and the break-even level of the core business is not expected until 2018, the dividend is expected to be reinstated after Quinn put in into deep freeze soon after he arrived. For the full year, one analyst foresees £94m pre-tax profit from £8bn turnover. By the end of the year, Balfour's should have completed most of its least profitable contracts and the turnaround should become more apparent.Smart Metering Systems should reward investors with considerable long-term gains, said Midas in the Mail on Sunday. SMS owns and operates more than 1m smart meters for energy suppliers, including from British Gas, E-on, Scottish Power and SSE, as well as connecting businesses on behalf of industrial energy supplier such as BP, Gazprom and ENI. Roughly a quarter of large firms using its meters but the residential market is less developed. In June SMS won a smart meter deal with First Utility, the largest independent UK-based energy supplier serving electricity, gas and dual fuel customers, as its preferred domestic smart meter asset provider for its circa 1m homes.Of the Big Six energy suppliers, even if some of them outsource to independent suppliers, SMS's unique ownership-connection-operation-maintenance service in the industry is still expected to gain a major market share. Installation of 1m meters is forecast to require roughly £300m of bank loans, though it has facilities in place and is already seeing the drip-drip of a steady annual income stream from existing meters. For the full, revenue and profit should rise 12% to just over £60m and 9% to £19m, and then to £68m and more than £23m in 2017. A dividend of 4.2p is pencilled in this year, with an extra penny on top next year.