Tuesday tips round-up: Electrocomponents, United Carpets, Phytopharm

19th Jul 2011 06:33

Shares in Electrocomponents are currently 22% below their peak in May and 9% below the price when its smaller rival Premier Farnell came out with a shock profit warning a week into July. This suggests either that both companies, distributors of a huge range of electronics products, are running into the same problems of slowing markets and possibly looking at a double-dip recession, or that this is a buying opportunity for Electro. The shares are now on 11 times this year's earnings and have the support of a 5 per cent-plus yield. Attractive, in the longer term, though sentiment may require some time to shift, says the Times.The achievement of United Carpets, which has 86 stores, to deliver a 4% rise in pre-tax profits to £1.2m for the year to 31 March should not be under-estimated. Although it trades on a modest forward earnings multiple of 8.3 times, we think it's best to err on the side of caution and avoid this well-run carpet retailer until the wider economy, and the housing market, strengthens, says the Independent, which has a "hold" recommendation on the stock.Phytopharm is a development-stage pharmaceutical company. The group's lead series of compounds, the Sapogenins, has the potential to be a new class of therapy for neuro-degenerative diseases, including Parkinson's, motor neuron and glaucoma. For those looking for a classic high-risk "high-reward" investment in a developing pharmaceutical company, Phytopharm could be interesting. The Scotsman says buy.There is not much point in castigating Melrose for making an opportunistic bid for stricken fellow engineer Charter International, because that is what Melrose does for a living. Analysts think an auction could push the price as high at 950p, while if Melrose walks away, the shares could be back to 600p. Investors with no compelling reason to cash out should stay in for the fun, though, says the Times.John Standen, acting chief executive of Lavendon Group, can thank his lucky stars that the plant hire company he finds himself running today is not heavily involved in Greece or Portugal as well. As it is, Lavendon has taken the inevitable decision to cut its losses and run from Spain. Mr Standen wants to raise the return on capital employed, about 7 per cent, to 11 per cent, though this will take several years to achieve. Analysts were raising their forecasts for 2011, but with the shares on more than ten times earnings, further progress looks to be slow, says the Times.Meggitt, the engineering group which supplies the defence, energy and civil aerospace markets, stock tumbled, sliding well below 300p in the summer, as traders attempted to a get a handle on the depth of the cuts. But then, once the details were out, the market changed tack, driving the share price up on a combination of relief and signs of an uptick in the civil aerospace market. The Independent thinks the company is on the right track, and well placed to fulfil the promise held out by its bullish outlook statement in March, when it flagged up the prospect of growth this year and beyond. The shares should respond in turn as Meggitt delivers with its performance. Buy, the newspaper says.Brady is a software company, with a twist. It specialises in solutions for the commodity markets, working with banks, miners, refiners and the like. Brady now has over 150 energy and commodity clients, three times as many as three years ago, making it the largest such company in Europe. It has also secured six new license deals this year. Adding to the attraction, the company had £10.3m of cash and no debt at the end of June. Buy, the Independent says.---RGPlease 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.