Sunday share tips: Glaxo, Shell, Ladbrokes, Pennon

4th Aug 2013 16:02

Investors should look beyond bribery allegations against GlaxoSmithKline in China to the pharma giant's wider prospects, the Mail on Sunday's Midas column said. China accounts for less than 4% of Glaxo's sales and elsewhere its business is thriving. Glaxo's current profit growth looks unexciting but Chief Executive Sir Andrew Whitty's plan to overhaul the business should bear fruit in the next few years. Witty has expanded into emerging markets, backed consumer brands such as Sensodyne and Horlicks and given his research division more freedom. With new drugs approved and in the pipeline, the shares are a good buying opportunity, Midas said.Royal Dutch Shell is still a buy despite a disappointing second quarter, the Telegraph's Questor said. The column argues that Shell's dividend is secure despite the need to spend on replenishing hydrocarbon reserves. Its operating cash flow fell 10% in the first half, prompting concerns about the dividend, but Questor says cash flows will rise strongly in the next few years and that investors should not be alarmed by one set of figures. A 5% increase in the second-quarter dividend indicated management's confidence. Shell's strong balance sheet means it can borrow to pay the dividend in the short term if it needs to.Be wary of betting on Ladbrokes was the message from the Sunday Times's Danny Fortson. The bookmaker's shares have held up well but Chief Executive Richard Glynn could have gloomy news when the company announces first-half numbers. Ladbrokes is making progress with its online offering after hooking up with Playtech, the internet gaming company. Its core betting shop business is the problem with Morgan Stanley analysts penciling in earnings down by as much as 20% in the first half. That could prompt Glynn to guide profit expectations down by about 5% for the full year. There are more bumps in the road to come, Fortson writes.Pennon, the waste and water company, is a long-term buy, the Sunday Times' Danny Fortson wrote. Pennon's veteran chairman, Ken Harvey, may be preparing to leave, removing an impediment for a break-up of the two divisions. Profits more than halved last year but in 2015 Pennon will almost have finished investing in incinerators that will put it ahead of rivals such as Shanks. The shares have further to rise, Fortson says.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.