Tuesday tips round-up: Genel, HomeServe, UBM

14th Jan 2014 07:07

Authorities in Kurdish Iraq on Monday announced that the first oil has flowed through a new pipeline to Turkey. That is a landmark achievement as until recently oil had to be transported out by lorry, no less, with much of it then having to be sold on the local market. The main UK-listed beneficiaries of that achievement stand to be Genel Energy and Gulf Keystone Petroleum. Nevertheless, investors would be wrong to think that political risk has evaporated, like so many gas fumes. A gas supply agreement is likely but Baghdad considers the cargoes unconstitutional and Washington is not particularly pleased either. Proof of the above, perhaps, Afren does not even include the large Barda Rash field in its reserves estimates. Genel's share price has soared over the last year but the stock is beginning to look a little toppy and investors might think about taking some profits. In regards to Gulf Keystone, the most likely outcome remains a bid, before or after it gains a full listing. Then there is Petroceltic, who is also present in the region, but its exposure is limited. "As ever with such stocks, the risk is not to be dismissed. Political developments in Iraq may weigh more heavily on the shares this year than exploration success", according to The Times' Tempus column. FTSE 250-listed home repair group HomeServe is now expected to face a total fine from the Financial Conduct Authority of approximately £34.5m, far in excess of what the company had originally expected. That is the price it must now pay for its alleged mis-selling practices. Given that the firm is forecast to make £84m in adjusted pre-tax profits for the year to end March 31st that fine looks manageable. Nevertheless, Monday's announcement regarding the size of the fine helps to clarify this risk, which could clear the way for bid interest from private equity buyers. However, what has really hurt HomeServe is the freeze imposed on its huge telesales and marketing machine. That will be the main factor which will decide whether it can return its core UK business to growth and continue to pay the dividend. Details on its UK operations will be forthcoming on February 5th, when Homeserve provides an update to investors. Changing hands on 16 times' forecast earnings, falling to 15 times next year, the stock has been upgraded to a 'hold' by The Daily Telegraph's Questor team.The handover of power at the top of UBM has been well executed and with care. However, it comes at an unfortunate juncture for the firm due to the vagaries of the economic cycle - though outgoing Chief Executive David Levin can hardly be faulted for that. Even so, it was Levin who oversaw the transformation of the business from one based on different media assets, such as the old United Newspapers, then United Business Media, into another with a global exhibitions portfolio. The company, which has undergone an important transformation, now includes a marketing side, which supports the aforementioned business unit and the PR Newswire service. The firm, however, is somewhat unbalanced. Some of those exhibitions fall into odd years and fluctuations in the values of the US dollar and the Brazilian real are weighing on earnings from those two jurisdictions. Should UBM pursue acquisitions to counter those imbalances? Investors will have to wait for the new Chief to arrive for further progress, although on 13 times' this year's earnings the stock is not dear, says The Times' Tempus. 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