Thursday newspaper share tips: Balfour Beatty, Admiral

18th Aug 2016 17:39

(ShareCast News) - Things are looking up for Balfour Beatty but it's too soon to put up the bunting just yet, the Financial Times's Lex column said. Following a protracted drop in the shares after the acquisition spree which the company embarked upon in 2010, under its new management a real turnaround did seem to be taking place.The contractor managed to turn an underlying profit at its UK arm at the half-year stage.There was little room for error given the sector's typically razor-thin operating margins of between 2.0% to 3.0%.Hence, Brexit might easily throw a spanner into the works, with political risk making planning harder and the threat of immigration curbs a potential spoiler as well.Indeed, its equity was valued at just £1.8bn; strip-out its £1.25bn portfolio of private finance initiative projects and the core business is being assessed by markets at just £500m.Nonetheless, at £500m the value assigned to the core construction business was cheap, given it had over £7bn in sales annually, the positive impact of lower rates on its project portfolio and it was winning orders in areas where it had money.Its legacy contracts were also a diminishing drag, Lex said. Admiral's new chief, David Stevens, would be right to be miffed by the markets' reaction to the company's latest interims, The Times's Tempus said.In particular, the concerns around the decline in the insurer's solvency seem overdone.A drop from 206% to 180% as a result of the cut to interest rates was nothing to be worried about, according to the tipster, who added: "this, for insurers generally, is as good as it gets."Its UK car insurance business meanwhile was continuing to move ahead, with both turnover and customer numbers up by double figures.The firm also enjoyed one of the lowest cost bases around, meaning it could put up with any future volatility in premiums.Likewise, its price comparison site, Confused.com, was growing its audience further.Furthermore, at just over 80% the group's combined ratio - the key metric for an insurer - was "comfortable enough"."The concerns over the solvency ratio seem overdone, given that it is among the best in the insurance sector, while the yield is attractive."So 'Buy', Tempus said.