Sunday tips round-up: SSE, Afren, Diploma, Chi-Med

22nd May 2011 12:14

Utilities are traditionally favourite choices of cautious investors looking for income, and Scottish and Southern Energy (SSE) is no exception. Questor in the Sunday Telegraph notes the current prospective yield is 5.8%, rising to 6.1% next year. The company aims to make a full-year dividend increase of at least 2% more than the retail price index (RPI) in the financial year just started and next year as well. After that, the group targets an increase in the payout of "RPI-plus". The group reckons it can achieve these targets while maintaining a dividend cover around its established range. Revenue from new customers and generation projects due to come online this year and next will underpin dividend payouts, said Ian Marchant, chief executive. The shares are trading on a current-year earnings multiple of 11.8 times, falling to 10.7 next year. Buy for the income, Questor suggests.Hutchison China MediTech, known as Chi-Med, a company specialising in healthcare and consumer products in China. is set to benefit from the roll-out of a nationwide medical insurance system in China, reckons Midas in the Mail on Sunday.Analysts expect the Chinese health market to grow by at least 20% a year for the next five to ten years and Chi-Med's healthcare arm should grow even faster.Chi-Med is loss-making, reflecting heavy investment, but it should move into profit next year and the long-term outlook is very healthy, Midas believes. The shares are at 447,5p and many brokers believe they should rise to at least 550p this year. The company is well run and there should be some encouraging news over the summer, underlining Midas's "buy" recommendation.Things seem to be going well for African-focused oil group Afren, as seen in this week's first-quarter update - but the next few months will be critical, predicts Questor in the Sunday Telegraph.The group plans to drill 10 exploration and appraisal wells, so the next two quarters will see some important news flow. A number of the wells are in East Africa, where exploration has been minimal. Only about 480 wells have been drilled in East Africa, compared with 14,500 in the west of the continent and 19,000 wells in central and North Africa, according to data from the company. The second-half drilling programme is exciting - but the company's current operations are performing better than expected as well. Buy, says Questor.Diploma is an unusual but highly successful company, supplying hundreds of specialist items to customers including oil producers, hospitals and contractors. Brokers expect full-year profits up by nearly 40% to about £45m and a total dividend of 9p against 7.8p last year, notes Midas in the Mail on Sunday.The dividend is progressive and the shares should increase as economic recovery gathers momentum. Existing investors should hold on. New investors could buy on weakness, Midas suggests.---jhPlease note: Digital Look provides a round-up of news, tips and information that is affecting share prices and the market. Digital Look cannot take any responsibility for information provided by third parties. This is for your general information only, and is 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.