Thursday tips round-up: Booker Group, Ashtead

4th Sep 2014 08:54

Somewhat perversely, shares of food wholesaler Booker Group have been weighed down by the souring in market sentiment towards the big grocers, despite not having any exposure to them. Much like Bunzl however the company has long been considered a dull operation but a reliable generator of cash and income for investors. Hence, investors were fortunate when after the close on Tuesday night a nine per cent stake in the company was put on the market, as Metro of Germany cashed out of what was never seen as a strategic investment. In part that was the result of the recent crisis in Ukraine, which dashed the German outfit's plans to float its cash-and?carry business in Russia. Nevertheless, what matters is that Booker's recent improved trading should continue apace. For that reason, yesterday's fall looks like a good entry point. 'Buy' says The Times' Tempus. Tool and construction equipment rental group Ashtead is using the cash it generates and debt to drive investment in its rental fleet, primarily in the US. The company raised its guidance for capital expenditure to £875m, versus £700m beforehand. That comes as a recovery in non-residential construction Stateside drove a 21% increase in pre-tax profits as rental revenue was up by almost a fifth. Management, in essence, is faced with the choice of going for growth or returning cash to shareholders. However, borrowing for growth means the company could be left exposed to even just a marginal slowdown in the rate of expansion in the US economy, which would see profits drop sharply. The company's retort is that it could cut capital expenditure and sell equipment at the first sign of trouble in order to protect itself. Even so, with the shares already trading on a price-to-earnings multiple of 17.6 and at all-time highs the shares are no better than a 'hold', says The Daily Telegraph's Questor column. 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.AB