Thursday tips round-up: Great Portland Estates, Amec and Sainsbury

15th Nov 2012 06:42

Tempus in The Times writes that anyone who supported Great Portland Estates' last fundraising, an eight-for-eleven rights issue to raise £166m in May 2009, will not be complaining. The issue was at 133p; the shares closed last night at 458p. The company spent £644m, at a time when its Chief Executive Toby Courtauld was convinced that the London property market represented a once-in-a-lifetime opportunity; this has since generated an annual rate of return of approaching 18 per cent.Great Portland's approach is to buy less valuable, second-tier property, which may be let on low rents, be in need of refurbishment or be subject to a complicated ownership structure and so is unattractive to those trophy buyers. There is little bank lending available for such investments, so that market is less competitive. The company, therefore, went back to the market to place new shares equivalent to about 10% of the issued capital, to raise almost £141m to invest in such properties. The placing went through the market like a dream, at a price of 450p a share. Great Portland also issued its halfway trading statement, which showed a 4% rise in the value of the portfolio and a good performance against the rest of the London market. The shares are on an 8% premium to net assets, but it would be a brave investor to bet against Courtauld and his team. Tempus writes that there were two views on Amec's trading statement yesterday. One was relief that it did not contain bad news. Amec has been the subject of recent profits downgrades amid fears that the global economic slowdown may hit the projects it is working on. In the event, the update was reassuring.The second view is one of continuing unease over the recent resignations of two key executives. Amec says that with its new corporate structure, which focusses on key geographies rather than areas of operations and allows it to grow further in emerging markets, there was simply no space for them. The shares, off by 10% since the start of October, rose 23p to £10.56. At this level, they sell on a little over 13 times' earnings, which looks about right for now. Questor in The Telegraph writes that J Sainsbury, the UK's third-largest supermarket group, has posted a good set of interim numbers. In the first half of the year, Sainsbury outperformed the wider sector and increased its market share to 16.7% - the highest in almost 10 years. Same-store sales also rose 1.7%, the 31st consecutive quarter of like-for-like growth. In the first six months of the year, group revenues rose 4% to £12.2bn, with pre-tax profits up 2.5% to £405m. The interim dividend is 4.8p, up 6.7%, and it will be paid on January 4th. It is reassuring to note that, despite the discounting, margins have not fallen. The operating margin was flat year-on-year at 3.4%. Sainsbury shares are now trading on a 2013 earnings multiple of 11.6, a premium to Tesco, which trades at 10.1 times forecasts. The shares were recommended essentially as a yield play at 283½p, 297.6p, and 302.1p earlier this year. At the lower end of this range investors have locked in a prospective yield of between 5.8% and 6.1% in the year ending March 2014. These yields are attractive given the low-interest-rate environment, so the rating is now a hold but the valuation looks full given the uncertain backdrop. CMPlease 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.