Tuesday tips round-up: Cairn Energy, Hunting, Gem Diamonds

22nd Dec 2009 06:41

Shares in the FTSE 100 oil explorer Cairn Energy notched up the best gain among blue chips yesterday as it brought forward its eagerly awaited drilling campaign in offshore Greenland by a year.The best guess of RBS, Cairn's broker, is that the company will target discoveries in the region of 500 million barrels of oil equivalent, and at the rate of two a year. That alone could suggest a value of between 800p and £17 a share for each successful well ? which is not immaterial in the context of a £30 share price and helps to explain why growing interest in Greenland has seen Cairn's stock gain a fifth since the end of October.At current oil prices, Cairn India is valued at about £26 a share ? which, once Cairn's cash is factored in, means that, at yesterday's £31.88 (or 318¾p after today's ten-for-one stock split), the flurry over Greenland is relatively contained. Hold on says the Times.Based on current forecast International Ferro shares are trading on June 2010 earnings multiple of 40.6, falling to just 5 in 2011. However, with uncertainty remaining into next year, the Telegraph has changed its stance to hold.Gem Diamonds is debt-free with about $100m in cash after an equity fund-raising earlier this year. This cash pile represents about 23% of the group's current market cap. Now is a good time to snap up quality, strategic assets from distressed sellers. The shares are trading on December 2010 earnings multiple of 69, based on current forecast, but this slips to 17.7 in 2011 when the market is expected to show a recovery. Buy says the Telegraph.Hunting is doing a good job in a tricky environment. According to yesterday's trading update, the FTSE 250-listed oil and gas services company will come in at the high end of market expectations in 2009. The US gas price has already doubled from its September low, and economic recovery will help to further pull up the North American industry next year. Hunting is well-positioned to make the most of upturns in both developed and developing economies. Buy it while it's cheap says the Independent.What makes DCD Media stand out is that not only does it produce programmes, it can call on a private equity-backed fund to help finance them (a big deal this in the current climate) and in return gets the international rights to itself. DCD's success will largely depend on a continued flow of hits, something that can never be banked upon. But things appear to be moving in the right direction, and the company should produce a "clean" profit next year. This is a high risk call, but buy says the Independent.There was certainly no attempt to sugar coat the annual results by the magazine distributor Dawson Holdings. The group admitted that 2009 was "undeniably torrid" and "clearly an horrendous year" as its shares have plunged from about a pound into penny stock territory. There won't be a dividend for a while and while there could be some light at the end of the tunnel, steer clear until it becomes more visible. Avoid for now says the Independent.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.