Sunday share tips: Melrose, Raven Russia, Consort Medical

2nd Sep 2012 19:02

Melrose, the industrial turnaround group, saw profits fall in the first half, but this was down to costs involved in a big acquisition. The company has a model similar to private equity - it buys struggling businesses and improves them, before selling them on at a profit. The current order book stands at a healthy £920m. This is only a 2% fall since December 2011 and, with the group highlighting a slowdown in the Middle East, this looked fairly positive, given the tough backdrop. For 2013, £307m of work has been secured, which is on track for this stage of the year. The last profit warning related to a slowdown in Australia, where there had been high hopes that Cape could win significant contracts for liquefied natural gas (LNG) projects. This is still a possibility, but should not be taken for granted. The company is currently reviewing its Far East business, which should help with costs. Trading on a December 2012 earnings multiple of 8.8, falling to 6, the shares are undoubtedly cheap. The new management has to tighten up the controls - and win more contracts. But, since the bad news appears to be all out, the shares are a buy again, The Sunday Telegraph´s Questor team says. Property group Raven Russia might seem rather exotic at first glance. But look a little closer and the company offers a compelling investment opportunity, combining a healthy annual income with the potential for strong capital appreciation. Searching for a venture that would provide stable, attractive rental income and some capital growth, the company´s founders hit on warehouses in Russia. Situated outside Moscow, St Petersburg and other large cities, these huge sheds act as staging posts for everyday goods that are brought into the country and then transported to shops. When the firm was set up, there were virtually no independent warehouses in Russia. Interim figures released last week were promising. The group moved from an underlying loss of $5.8m (£3.7m) to $14.3m profits, an independent valuation of the portfolio rose by $42m to $1.4bn and the warehouses are 94% let, a figure expected to rise over the next year (the group reports in dollars because Russian business is conducted almost entirely in the US currency). Brokers expect strong profit growth over the next three years, accompanied by steady increases in the ordinary shares dividend. Russian property may not be universally attractive but Raven's assets are solid, sensible and rented to big, respectable companies. The group is now in the FTSE 250 index too, adding a further layer of respectability. For investors in search of income, the preference shares are appealing. For those who want capital growth as well, the ordinary shares have plenty of potential. Buy, says The Financial Mail on Sunday´s Midas column.Shares in inhaler maker Consort Medical have almost doubled since Midas Extra, the online subscription column, tipped them in June 2010 at 380p. Following an upbeat trading statement last week, they closed on Friday at 740p. The company has two divisions, UK-based Bespak, which makes inhalers for asthma sufferers, and US based King Systems, which makes equipment used in the delivery of anaesthetics. Bespak has gone from strength to strength but King Systems has had a tough time as surgery is expensive in America and people are trying to avoid it if they possibly can. Even so, Bespak's success has driven Consort's results to record levels and profits for the year to April 30 were up 12% at £19.4m. The company is confident about its prospects and has new products in the pipeline, including a nicotine inhaler for smokers trying to quit. Consort is making impressive progress but investors who bought in 2010 have had a good run and could sell up to a third of their stock. They might even consider putting surplus funds in Vectura, which makes respiratory drugs. The shares, tipped by Midas last month at 72p, are now 84p and encouraging news is expected in the coming months, The Financial Mail on Sunday´s Midas column says. ABPlease 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.