Thursday tips round-up: Petrofac, Bwin.party

28th Feb 2013 06:27

To be fair, order intake of oil service companies is usually volatile and it is hard to forecast when billion-dollar contracts will land. But Petrofac is more exposed than most. Many of its customers are the national oil companies of the Middle East, where bureaucracy and delay seem to be getting worse. Alas, it was unable to mitigate the pain by unveiling new big contract wins yesterday, although it remains confident of boosting its order backlog this year. Petrofac insists there is no read across from the woes of Saipem, who recently forecast an 80% profits slump. It is true that many of the Italian group's problems are self-inflicted, but the two have more in common than Petrofac would like to admit, with both active in Algeria, Iraq and elsewhere in the Middle East. Hence the big disappointment caused by the company's vague guidance for 2013. To meet its 2015 target, it needs to lift net profits by 11% year on year. Analysts had pencilled in double-digit profit growth, but Petrofac was able to promise only "good growth." The company also reported a slight softening in margins in two key markets last year, although it can still boast a healthy group margin of 12%. Petrofac should still do enough to meet its 2015 target, but it's getting harder all the time, The Times´s Tempus argues.Not so long ago, Chris Christie, the Governor of New Jersey, was voted the most popular Republican in America. Now, the roly-poly politician stands a better than evens chance of being named the most popular politician by the internet gambling industry. While the odds of the US Department of Justice reversing its 2006 ban on cross-border gambling are zero, the legalisation of some forms within state borders is encouraging. Given the threadbare nature of many states' finances, it is safe to assume this will presage a wider opening ? over time ? of other states keen to boost taxes. While licences will go to incumbent land-based operators, the need for online expertise has already seen alliances forged with the UK-listed Bwin.party and 888 Holdings. This is a notoriously unpredictable market, but both groups are in pole position to profit from US regulation. Stick, Tempus says. Investors got a bit jittery with Petrofac's outlook statement yesterday, as City analysts regarded its 2013 guidance as too vague. Add to that some analysts' concerns over a proposed $1bn (£660m) outlay on equipment for deep-water operations and a recipe for a sell off was created. Questor thinks the market overreacted. However, Petrofac maintained its long-term guidance to more than double 2010 group earnings by 2015. This would imply an average increase in earnings of more than 11% each year. In the year to December, revenues rose 9% to $6.3bn and pre-tax profits rose 12% to £765m. The final dividend, which will be paid on May 24th, is 43 cents, bringing the total to 64 cents, an increase of 17%. Concerns remain that the stock market is defying gravity. Andrew Garthwaite, Credit Suisse's global equity strategist, said yesterday that he expected a period of "consolidation" was ahead, but was optimistic about the longer term. This means he expects markets to fall in the near term. The shares are trading on a 2013 earnings multiple of 11.1, falling to 9.8 next year. Yesterday's fall looks overdone, so Questor keeps a buy rating despite wider market concerns.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