Tuesday tips round-up: RBS, Aggreko, Fidessa

29th Oct 2013 07:05

The task facing new UKFI Chief James Leigh Pemberton is to manage the government's stakes in RBS, Lloyds and a portfolio of other troubled assets. However, and contrary to what one might expect, his real challenge is political rather than financial. Later this week the government - not UKFI - will announce whether it has decided to split up RBS (of which it owns 82 per cent). The rescued lender has become increasingly politicised as the year has worn on. Some of that may be unavoidable, but it is damaging to outside shareholders. Mr.Leigh Pemberton needs to prove that UKFI can be an effective bulwark against state interference, especially at RBS. If he can do that, he stands a chance of convincing investors to buy into RBS sooner rather than later, hastening the day when he can close UKFI down, the Financial Times's Lex column writes. Given fears of a slowing in emerging markets and the fact that its shares are sitting atop a multiple of 17.5 times' earnings, it should come as little surprise that the bears had scented continuing weakness at Aggreko. To make matters worse, the FSTE-100 temporary power provider has had a dismal twelve months, having been hit by two profit warnings at the end of last year followed by a sickly looking spell of further under-performance. However, short-sellers got whacked yesterday after the company released third- quarter numbers which while no better than expected were still good enough to squeeze the short-sellers. Yes, the company is making less money than 12 months ago. Furthermore, the US?Federal Reserve's agonies over "tapering" are prolonging the emerging markets' pain. So the bears may yet have some fun in the coming months. Ultimately, nevertheless, that is not the way to bet. In the long run, capital will flood back into emerging markets and bolster their currencies. Aggreko has the track record, franchise and reach to benefit. Patient shareholders should keep the faith, writes The Times' Tempus. The City's kremlinologists are easily pleased. Despite the fact that trading software developer Fidessa yesterday again failed to provide a single number within its succinct - and yet typically vague, if not baffling - latest trading update, they kept their full-year profit forecasts unchanged and the shares ended the day 32p higher at £20.50. Then again they do get paid to translate such slippery verbiage. On the one hand, for example, the company says it continued to suffer customer attrition and pricing pressure in its third quarter; on the other hand, its pipeline of new business was strong. Nevertheless, the company has been diversifying out of its core area of equities into derivatives and other asset classes. As well, half of its revenues are coming from America and Asia. Furthermore, it enjoys a strong franchise, with 88% of revenues being recurring and clients are notoriously sticky. The ex-Royal Blue is now trading on 25 times its expected 2013 profits. Implicit in this lofty valuation is the assumption that at some point the global securities industry is going to return to its pre-2007 era of heady growth. However, even if volumes do pick up, there is no certainty that investment banks ? battered by regulators and pressured by shareholders ? will shell out for technology as enthusiastically as they have in the past. Sell, says 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