Wednesday share tips: IG Group, Galliford Try

18th Sep 2013 07:27

Analysts get paid to make forecasts, but it seems a bit of a stretch to put too much weight behind revenue forecasts from some of them which extend out to May 2016. These ultimately depend on where markets will be by then. Hence, it would seem fair to say that IG Group has absolutely no forward visibility. Even so, the spread-betting specialist was careful to pint out that the 15 per cent rise in revenues seen during the first quarter of its new financial year should not be read as an indication of the year as a whole. Nevertheless, there is a certain amount that IG can do to improve its overall performance. The company is concentrating on wealthier clients, hoping to lose those that trade in small amounts. So in the UK, for example, the number of active clients fell by 10% during the quarter but the revenue per client grew by 28%. Revenues were ahead in the UK and Continental Europe but behind in Japan and Australia, the last affected by the recent election, though the company did increase its market share. The shares, up 10p at 604.5p, have risen from 455p at the start of the year and sell on more than 15 times earnings. That looks high enough, given those uncertainties, The Times´s Tempus says.Galliford Try has a unique hybrid model - with its business split between contracting and house-building - and offers shareholders an attractive progressive dividend policy. However, that exposure to contracting means that its shares have lagged the sector, as it tends to recover later than housing. Nevertheless, the company was spot on when asking for additional equity from shareholders back in 2009 to buy housing land at the bottom of the market. As well, the company is on track to see margins in house-building in the 17% to 18% range within five years. The only constraint is sharp inflation in both wages to bricklayers and the like and in the cost of building materials, a problem endemic in a highly cyclical industry. In any case, the main attraction of the shares is the progressive dividend policy, with the total up 23% to 37p. Analysts expect a total payment of 43p this year, putting the shares, off 16p at £10.48, on a forward yield of a little above 4%. Attractive for that reason alone, though prospects for contracting may continue to hold the shares back, Tempus explains.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