Tuesday tips round-up: Smiths, Alterian, BP...

18th Jan 2011 06:40

Philip Bowman's decision to turn down a £2.4 bn cash offer for the medical division of Smiths Group, where he is chief executive, is understandable for any number of reasons. The sale of medical services, which enjoys margins in excess of 20% and provides Smiths with about a third of its earnings, could lead to a rerating downwards of the rest of the business. These approaches are also never the last word on value but have a habit of sparking a lucrative auction. if the market takes the view that it is open season on Smiths, the shares will respond accordingly and he would then be looking for an eventual take-out in the £18 to £19 bracket. This one has a lot further to go says the Times.Smiths is in no rush to sell its medical arm, confident that, when a break-up finally comes, it can get an even better price. Analysts reckon the medical division may now be worth upwards of £3bn. Bidder Apax's offer, at 2.9 times July 2010 sales, was decent enough. But Smiths' chief executive Philip Bowman knows that few sectors are quite as hot, at the moment, as health care. The shares stand on a prospective multiple of 14.4 times, yielding 2.8%. For long-term investors, they're a buy says the Telegraph.Alterian provides software and services that allow corporates to check on what is being said about them on the internet. Since the acquisition of Techrigy in July 2009, this has included social media sites such as Facebook. Now comfortably back to around £2, they sell on about 15 times' this year's earnings. Further progress, though, could require a clearer view of prospects for the current quarter says the Times.Shares in BP crawled over the 500p mark on Monday as investors digested the £5bn share swap with Russian state-owned group Rosneft. Overall, BP still looks cheap - even taking into an account an expected rebasing in the dividend this year - trading at seven times 2011 earnings and a yield of 4.8%. Buy says the Telegraph.Stanley Gibbons, the stamp-collecting and memorabilia company, is likely to be celebrating more than most at the Royal Wedding this year, following its acquisition of the Benham Collectibles business in September. The company expects the royal event to help lift Benham's revenues by as much as 40% in 2011. If Kate doesn't leave Wills at the altar, long-term happiness for investors beckons. Buy says the Independent.SDL is a company that makes sure things do not get lost in translation, and with a market cap of nearly £500m has become a significant player in the UK software industry. The company, which develops technology and offers support services to manage its clients' content across the world, yesterday put out an upbeat trading statement. SDL has performed strongly in the past year, particularly in critical emerging markets such as China and South Korea, as well as Japan and North America. At 19.6 times estimated 2010 earnings, the company is at a slight premium when compared with its peers. But quality doesn't often come cheap, so buy says the Independent.UK Coal has issues, not least a load of debt. Then there is a chunky property revaluation loss - besides mining, UK Coal has vast property holdings - of around £30m, which came to light in last night's trading statement. Stacked against that are coal market fundamentals. Spot prices have been on the up, and are forecast to rise further. If UK Coal can keep production problems at bay, this stock may mount a real recovery. At less than 11 times forecast earnings for this year, they look cheap. A good speculative buy says the Independent.UK Coal's land is in the books at £384m but could easily be worth more than twice that with the appropriate planning permission. Brokers have a target price of 61p on the barely traded shares. An interesting long-term play if you can lay your hands on them says the Times.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.