Thursday tips round-up: easyJet, Facebook, Close Brothers

25th Jul 2013 06:41

easyJet issued a bullish statement on Wednesday with a guidance a 50 per cent hike in profits for the year to September. It came after analysts at HSBC downgraded its forecast arguing that the heatwave would mean people were less likely to book holiday flights. The Times Tempus column, however, believes "these are golden times for easyJet" as the low-cost carrier expands its network, benefiting from the capacity cuts of rival airlines while at the same time lifting average seat prices by 6.7 per cent in the June quarter. Costs are rising as airports lift charges and disruption from strikes add to expenses but it is being offset by savings in ground operations and fuel. Passengers have also already booked 73 per cent of all seats for the second half. However, the airline is subject to unforeseen circumstances such as terrorism and weather disruptions. Tempus thinks there will be more opportune times to buy the shares than now when the skies are blue. Facebook has surprisingly created a mobile advertising business with serious revenue growth, the Financial Times' Lex column muses. Second-quarter revenue from ads on phones and tablets climbed 75% from the first quarter. While the rest of the results are trivial, other figures leave little for critics to tear apart as overall revenues were up more than half from last year. Facebook management deserves credit for blocking out the botched IPO last May and focusing on building the business. The company highlighted several key operational metrics that are bearing fruit: 5.0m Instagram videos were uploaded on the first day it was available following the acquisition, and it has potentially outshone Twitter's video application, Vine. Its stock is up 20% for the year. "Earnings estimates have stayed flat, but they will be revised upward now. Add multiple expansion and who knows, Facebook may soon reach its $38 initial public offering price," Lex added. Close Brothers has seen its shares rise higher today than just before the banking crisis, unlike the many of its peers. Over ten years, it has performed almost exactly in line with the FTSE 100. "For a bank, that's impressive," Tempus said. The company's trading update on Wednesday showed steady progress, driven by its core banking division. Winterflood, the securities division, which has been stagnant for years, reported a pick-up in volumes. The asset management division looks to be turning the corner after three years in the red. Analysts are forecasting adjusted group operating profits of about £162m for the full year, putting the firm on a price/earnings multiple of 12.8 times. An expected 44.50p full-year dividend would give an attractive yield of 4.2%. The shares, which rose 16p higher to 1072p on Wednesday, should do well amid the general rehabilitation of bank stocks. Tempus recommends a 'buy' for the patient investor. RDPlease 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.