Sunday tips round-up: IMI, Aggreko, Zetar, Monitise

4th Sep 2011 14:02

"The recent market rout has hit shares in good companies hard," says the Questor team at the Sunday Telegraph today, and in their judgement engineering group IMI is one such company. In the six months to June the manufacturer of industrial air- conditioning units, engineering for hydraulic systems and products for beverage and food dispensing reported a 12% rise in revenues. Also, the dividend to be paid on the next 14th of October will be 22% higher than last time around, at 11p. Furthermore, and according to J.P.Morgan, the group showed resilience in the last recession, with operating margins down by just 90 basis points despite a 16% fall in revenues. The average price of 15 analysts monitored by Bloomberg is £11.02 and its shares are trading at 11.1 times earnings with a prospective yield of 3.4%. For all of the above reasons Questor now says Buy. In its Annual Energy Outlook 2011 the US Energy Information Administration forecast a near-50% increase in global energy use by 2035. Most of this growth is expected to occur in emerging markets - exactly where temporary energy provider Aggreko's international business is focused, the Sunday Telegraph's Questor team points out. In fact, Aggreko's key growth business, International Power Projects (IPP), finished the period with a record order book. The group signed 25 new contracts in the first half, for 730 megawatts of power. These included major new projects in Japan, Argentina and Tanzania, leading the group to increase its expectations for the full year. For the six months to June "trading profits", which represent operating profit before gain on sale of property, plant and equipment, jumped by 17%, and the interim dividend to be paid on the 10th of October was raised by 10%, to 7.2p. Aggreko shares, nonetheless, are trading at a multiple of 22.2 times earnings, while the prospective yield is 1.1%. For Questor the shares remain a hold for now, but the company has proved that its business model works and should any market volatility cause a pullback that would be a good time to buy. Confectionery and snack products Zetar is poised to make a comeback, according to the Mail on Sunday's Midas column. Having learnt several hard lessons following an ill-timed acquisition in 2008, which contributed to considerable volatility in its share price in the past, the chocolates maker has implemented cost discipline, invested in R&D, established new distribution channels, won a reputation for innovation and even made some small acquisitions. More recently, the company has announced a maiden dividend of 2.25p for the year to April 30. The above after delivering a 6% increase in pretax profits to £6.7m. Brokers expect profits to rise to at least £7.1m, while the dividend is forecast at 2.5p. Furthermore, chief executive officer Ian Blackburn is optimistic, hoping to boost market share in Britain and expand gradually on the Continent. For Midas shares of Zetar are cheap and, at 250p, are a buy. Mobile banking technology provider Monitise is benefitting from several trends. The first is the advent of smart phones, such as the Iphone and Android models, which have revolutionised what can be done on a mobile. The second is that the banking sector, having almost collapsed, is trying to save costs and enhance service wherever possible. Turnover for the year to June 30 more than doubled, from £6m to £14m. Chief executive Alastair Lukies expects turnover to double again in the current year. The group is not profitable now, as it is investing in development, but it is expected to go into the black in 2013, writes the Mail on Sunday's Midas column. Midas also points out the company's fast growth in emerging markets, where mobile banking has enormous potential. All of the above helps to explain why if in 2008 the shares were 12p today they are at 36 1/2p, and why brokers believe they are worth closer to 45p. In Midas' opinion, shareholders who bought three years ago should retain at least 50% of their stock. New investors may even wish to take a punt on any short-term weakness. 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.