Thursday tips round-up: United Utilities, Yell, Game

24th Sep 2009 06:01

Even at eight times next year's forecast earnings, United Utilities is not a stock to be buying, and is probably not even one to hang on to for investors looking to cash in any time soon. Water is a decent backbone for a portfolio, but United Utilities looks the weakest link among its peers. Sell, says the Independent.The Telegraph thinks the balance sheet is in sufficiently good shape that the dividend structure will be maintained, so these shares are worth keeping in the portfolio.Investors must decide how much of Yell's problems are cyclical (caused by temporary cuts in advertising by its traditional small business customers) and how much structural (the permanent migration of traffic to online rivals). Sadly, that debate will be settled only by economic recovery ? by which time it will be too late. Further, until the final terms of the rights issue are announced, putting a value on the existing shares is difficult. But at 64¾p, down 13½p, why bother? Pass, says the Times.Game Group, the computer games and consoles retailer, is definitely one to avoid. The group said yesterday that half-year profits plunged by 67pc, from £32.8m to £10.8m. Like-for-like sales fell by 16.3pc. Game has a dividend yield of 3.5pc and trades on a price to earnings ratio of 7.2pc. Although they are cheap, the Telegraph says it is not tempted to buy.Sterling Energy said yesterday that it had secured a rig and would begin drilling before the end of the year. Further out, the company has sizeable prospects in Cameroon and Madagascar, which, at the very least, suggest that, should Sangaw North disappoint, the shares should not be worthless. At 4p, higher-risk investors should buy Sterling, writes the Times.HomeServe said its UK emergency services business, which provides household repairs on behalf of insurers, was still suffering from lower volumes and would post a loss for the period. While the company is in talks about selling the unit, a deal has not been finalised. HomeServe's business has proved resilient in the recession. The shares are not exactly cheap, but this makes them worth holding on to, according to the Independent.Holidaybreak may still be seeking a chief executive, but the outlook for the specialist travel group is improving. Carl Michel is leaving the business in good shape after his four years in charge, particularly after the recent £31 million rights issue, which offers scope for expanding its education unit while reducing net debt to about £130 million. At 308p, nine times next year's earnings, tuck away, says the Times.Nanoco started life as Evolutec Group, using technology from Manchester University and Imperial College in London. It will licence that technology to these companies and the chief executive, Michael Edelman, says there are more deals in the pipeline. Yesterday's contract provides a solid revenue stream and analysts reckon that with some more buzz, Nanoco could well be profitable next year. Those feeling brave should take the quantum leap. Buy, says the Independent.