Tuesday tips round-up: Interserve, Petroceltic, easyJet

8th Jan 2013 06:56

Support services and construction group Interserve is one of the best places for one to invest their hard earned money in, The Times's Tempus believes. The company's exposure to UK construction has tended to hang over the shares, as 35 to 40 per cent of revenues, but rather less in profit terms, is linked to this sector. But this is generally spending in areas such as schools, hospitals and water, which are non-discretionary and have held up well. Far more important, and as one broker recently pointed out, through its recent acquisitions the company has regained the profits it lost through the disposal of minority private finance initiative (PFI) stakes, but after investing only £50m or so, roughly half the proceeds which it gained. The company is set to release a trading statement on this same Tuesday morning. While this is unlikely to provide much of an update on the reassuring note that accompanied the PFI deal, it could trigger some earnings upgrades for the current year. The shares are on a little more than eight times this year's earnings and yield about 5.5% prospective. "Needless to say, I reiterate my recommendation," Tempus says. Despite the promise of its merger with Melrose Resources, shares of Petroceltic International have trod water since since the merger and are well back from the first quarter of last year. That is the result of exploration and production setbacks in Egypt and Italy. However, there are four significant developments that could provide some fresh impetus in the near future. To that one must add its tantalizing prospects in Algeria and Kurdish Iraq. Hold for now, writes Tempus.EasyJet's day-glo orange has been the sector's high-flier over the past year - but can this outperformance continue? December statistics, released yesterday, were excellent. The load factor, which measures how full the planes were, rose by 2.3 percentage points to 87.9%. An increasing load factor is particularly good for easyJet as its model is based on charging more for seats as the plane fills up.Prospects for the budget airline this year look pretty good, especially since the risk for fuel costs appears to the downside. As well, flag-carrier airlines are overhauling their short-haul operations, which could lead to easyJet gaining market share. However, ahead of the statement yesterday easyJet shares showed an above-average level of 'short interest' in the shares - these are investors who think the price could fall. In the month before the announcement, short interest in easyJet shares more than doubled to 6% from 2.7%.Some analysts have said they see more upside in IAG that easyJet because as the Iberia issue is rectified it will become a catalyst for outperformance. Questor is yet to buy into this argument and easyJet shares remain Questor's favoured European airline. However, on valuation grounds, the shares remain a hold, Questor adds. 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