Wednesday tips round-up: Carillion, Hamworthy, Heritage Oil...

5th Oct 2011 06:57

Carillion, which bought Eaga, the home insulation and green energy business, in the spring, has now raised its estimate for annualised cost savings from £9 million to £15 million, notes the Tempus column in the Times. Carillion, like its rival support services group Kier, is now seeing the promised, cuts-inspired public sector outsourcing work seeping through in the form of offers to tender. Further growth will come from Canada, where the Government has just announced a C$35 billion (£21 billion) spending programme, half of it to go on healthcare, and the Middle East, albeit at lower margins than the company was enjoying before the Dubai bubble burst. The shares now sell on about 7.7 times' this year's earnings, which looks a little low compared with its peers, though in these markets I would be in no hurry to buy now, suggests the Times.The fact that Hamworthy's shares were slightly higher despite the market rout last night tells you just how much City liked the marine engineer's latest acquisition, says the Investment Column in the Independent. The company, which makes fluid handling systems for the shipping, oil and gas and industrial sectors, said it was buying AW Flow, which makes specialist valves for the oil and gas industry. We bought in back in April, when Hamworthy was changing hands for around 524p. The subsequent months were positive, with stock rising as high 705p in July. But then they began giving way, even though Hamworthy issued a confident update alongside its annual meeting in July. Still, the company has not put out any warnings that would spark concern about its business. Adding to the attraction is the fact that, at around 16 times earnings on the estimates for next year, falling to around 12 times on the figures for the year after, the stock is affordable. We would keep backing ahead of what we expect to be another upswing in the shares. Buy, says the Independent.Heritage Oil's move into Libya is less of an investment and more of a cheap foot in the door that will not have hurt the company much even if nothing comes of it, according to the Tempus column in the Times. It is paying $19.5 million in cash ? "option money", according to one analyst ? for a controlling share in a company that provides oilfield services there. The aim is to use Sahara Oil Services to rehabilitate existing fields and to win work to develop others. Heritage's financial situation is undeniably odd. It has a market cap of about $900 million, cash of about $470 million in the bank and another $405 million tied up in a tax dispute with the Ugandan authorities after the sale of its interest there last year. This doesn't seem to put much of a valuation on its assets in northern Iraq, Africa, Russia and Malta. Heritage shareholders have an appetite for risk and will happily stay in for what could be an exciting ride. Not for widows and orphans, though, says the Times.The story of Walker Greenbank's recent revival is a familiar one in the corporate world, according to the Investment Column in the Independent. Not only does the furnishings group operate at the luxury end of the market, which has been more resilient of late, but it is also benefiting from strong demand for its brands overseas, in the Russian, Japanese and Chinese markets. Its growing international reach helped Walker, which sells its products through department stores and licensees in more than 75 countries, boost pre-tax profits by 14 per cent to £2.35m for the six months to July. Revenues were up 11 per cent to £37.4m, with all four of its brands making a positive contribution. Overall, as the business celebrates its 150th birthday this year, we think its heritage brands have growth ahead of them, particularly overseas. And with its shares trading on a forward earnings multiple of just 6.1, we think the luxury group is worth a punt, says the Independent, who suggests to buy.Someone else plainly taking a positive view of the Arab Spring is Hikma Pharmaceuticals, which already has a strong position in the Middle East and North Africa, known by the acronym MENA, write the Tempus column in the Times. Last year the company bought an American maker of a range of injectable pharmaceuticals in a move that apparently lessened its dependence on the region. Now Hikma, which already manufactures under licence in Egypt, Tunisia and Algeria, is buying the ninth-biggest pharmaceuticals maker in Morocco. This is one of the more stable regimes; there is the prospect of introducing some of its existing range to a market where the Government has prioritised healthcare. It also may provide a springboard to expansion in to western Africa. We all hope the countries of North Africa develop economically and generate a prosperous middle class and a decent heathcare system. But there is no guarantee, while Hikma's shares, on 15 times this year's earnings, enjoy a high rating, writes the Times.BCPlease 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. 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