Tuesday newspaper share tips: Bovis Homes, Sage

16th Aug 2016 11:13

(ShareCast News) - Bovis Homes should hold the course on its current strategy but management will have to be patient given investors' caution and shareholders should avoid the stock, The Times's Tempus said. Unlike some of its rivals, the homebuilder, which is focused on the southeast, is intent on continuing to grow.Indeed, it reckons it was one of only a few builders which more than doubled production throughout the past financial downturn, having bought land in 2009 at depressed prices.That strategy means it has lower margins than its peers and pushes less excess cash their way, hence the lower dividend yield on offer.Management at Bovis does seem to have grown a tad more cautious however. A handful of agreements to buy land have been renegotiated in the aftermath of the referendum vote. Bovis may also miss its target for site openings this year.It has also raised the expected rate of return on land acquired before Brexit with a view to cushioning any adverse impact from a downturn in the market.As well, for the first time in many years land purchases are running ahead of completions."All this seems sensible because, given the traditionally quiet summer market, it is too soon to forecast the future direction of the market. I suspect, though, that those higher-yielding stocks will outperform," the tipster explained."Avoid," Tempus said. Sage's lofty valuation is safe, for the moment at least, said the Financial Times's Lex column.Some analysts are banking on that vast 'white space' of small enterprises who do not yet use any accounting software will drive a pickup in revenues.Sales at the firm rose tenfold since 1996 to reach £1.4bn but have stagnated since 2013, making it difficult for the company to justify its valuation of 25 times' this year's earnings.The company is also convinced that the advent of the cloud will help it to shift towards a subscriber-based model without having to sacrifice margins or market share.Hang on one second, UBS said in a recent report to clients, the tipster pointed out, the cloud has lower barriers to entry and threatens greater competition.In the company' favour however is the sheer hassle of shifting software providers as well as new leadership focused on streamlining its inefficient and bloated structure, spread across 105 management databases and 139 offices.Yet not everything is under its control, so the company should be careful not to make promises it can't keep.Nonetheless, unless a new and aggressive rival appeared on the block who was willing to invest heavily to steal its clients, its rating looked safe enough for now, Lex said.