Wednesday tips round-up: Glaxo, BG, Finsbury Food...

27th Jul 2011 06:53

Amid all the doom and gloom across the stock market and beyond, GlaxoSmithKline gave investors a reason to smile yesterday. Yes, turnover was down in the second quarter, but the pace of decline was slower than before. Not just that, but profits were sharply higher, and the second-quarter dividend was up by a healthy (sorry) 7%. Shares have been doing well, and outperforming rival group AstraZeneca, since the company issued its first-quarter results earlier this year. And yet they continue to trade well below City target prices. As an aside, it is also worth remembering that, as a pharma stock, GSK boasts the kind of defensive characteristics that are often sought out by investors in times of economic or market stress. There is, then, little to fault here, and we see no reason to change our prescription just yet, says the Independent, which recommends a buy.The market reaction to second-quarter figures from BP and BG Group yesterday is instructive. Both showed respectable enough profits growth, BG's underlying earnings up 27% to $1.12 billion, but BP shares ended down 12% at 463.25p while BG climbed 4.3% to £14.86¾p. The difference is in levels of production. BP fell by 11% in the quarter; analysts are increasingly worried about how it and the other oil majors will be able to keep up with global energy needs, given the increasing expense and difficulty in getting the stuff out of the ground. BG has increasing amounts of gas that are looking cheaper and cheaper to produce. It is significant that almost all the analysts' questions at yesterday's presentation were about the company's huge oil and gas reserves in fields offshore Brazil.Production this year for BG is expected to be about 5% higher than in 2010 but should hit double-digit growth rates from 2012 and beyond. There is the option of selling a stake in Brazil and no shortage of buyers, but that rapid jump in its worth suggests the company is in no mood to do so in haste. Meanwhile, a 10% rise in the halfway dividend to 10.8 cents is encouraging, although BG is not an income stock. I suspect the shares have a bit further to run, suggests the Times.Finsbury Food's shares were in high demand yesterday, and no wonder. The maker of cakes, bread and gluten-free bakery products pleased investors with a robust trading update, signalling better-than-expected sales for the year ending July 2011. The icing on the cake for us is that we said "buy" at 17.5p in July 2010. But even after yesterday's rises, the shares still look ridiculously cheap, trading on just 2.8 times forecast earnings for the 2011 financial year. Tuck in, suggests the Independent.PZ Cussons should really not be doing as well as it is. Best known as the maker of Imperial Leather and Carex soap and for having, for historical reasons, a large trading operation in Nigeria, the company hit a number of headwinds in the last financial year. The looming Nigerian elections meant some disruption to sales there. The company faced significant input cost increases from anything from palm oil and tallow to packaging.In the event, the elections in Nigeria came and went and trading picked up again, even if operating profits from Africa, almost two fifths of the total in the year to the end of May, were down a little. In Europe, the company responded by heavier promotions and reckons to have grown its market share in its core washing and bathing market from 21% to 25% over the year. The shares, more than half of which are owned by the founding Zochonis family, have always sold on a multiple of above 20 times' earnings and are currently on almost 25 times' this year's forecast. Hold, says 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. Please obtain a copy of the relevant publication and carry out your own research before considering acting on any of this information.