Wednesday tips round-up: Johnson Matthey, Smiths Group, Headlam...

20th Jul 2011 06:49

Johnson Matthey's investors have become accustomed to the company making all the right noises when it updates the market. And yesterday it did not disappoint, writes the Independent. The speciality chemicals operation, which refines platinum and is the world's biggest maker of catalytic converters, has enjoyed a buoyant start to its financial year - sales (excluding precious metals) motored ahead by 12 per cent to £617m while underlying profit before tax jumped by 19 per cent to £98.2m.What we particularly liked about yesterday's statement was the group's confidence that the first-quarter performance will continue through the rest of the year - and this has been a company that usually delivers on such predictions. The shares are no bargain - they trade at 14 times forecast full-year earnings, against a sector average of about 11 times. However, Johnson Matthey is well positioned in good markets and yesterday's statement was notably more upbeat than some rivals'. It's a tough call, but on balance, we'd keep buying, suggests the Independent.Smiths Group, the UK industrial conglomerate, operates across the medical, oil and gas and explosive detection sectors. Smiths' diverse nature has proven to be both a blessing and a curse in recent years. While its exposure to a range of end-markets and industries helped maintain robust profits during the downturn, it has also meant that investors have applied a conglomerate "discount" to a company that does not fit easily into any one identifiable category. Smiths is trading on a 2012 PE of close to 11x, a discount to the UK capital goods sector and offers a dividend yield of 3 per cent. Even in the absence of any corporate restructuring, we believe this undervalues a company that sells into well-diversified markets and has significantly improved its operating performance. Buy, says the Scotsman.Headlam, the European floor-covering distributor, has, like the retailer United Carpets, bucked the downturn in the carpet market by rolling out stellar figures for the first half of the year. Analysts at Peel Hunt said the result was "excellent" in what the distributor's management called a "flat" market, particularly in the UK, where its like-for-like sales surged by 7.4 per cent. It's also worth noting that Headlam trades on what is a relatively modest forward-earnings multiple of 11.6 times. Buy, recommends the Independent.The reaction to unexpected and unexpectedly good halfway figures from Henderson Group looks churlish. Perhaps it is because they were not expected and, as we know, this market doesn't like surprises. But while the shares were marked a touch higher, up 6p to 155p, analysts queued up to find reasons why the figures were not as good as all that.The fund manager, which in April bought its distressed rival Gartmore, said that underlying profits in the first half of 2011 would be between £83 million and £87 million. As this is much higher than £48.5 million last time and the company has a dual listing in London and Sydney, Australian rules apparently require it to point this out as soon as possible, which suggests the actual interims on August 17 will be a bit of a non-event. The shares are on abut 12 times' this year's earnings, in line with the rest of the sector. There seems no particular reason why they should outperform, says the Times.Craneware is a bit of an oddity in that it is based up in Edinburgh but sells only to customers on the other side of the Atlantic. The company describes itself as the "market leader in automated revenue integrity solutions for the US healthcare market". It said yesterday that revenue for the year to the end of June was expected to meet growth forecasts of 34 per cent to $28.4m. Adjusted profits are expected to come in at about $7.6m as management said its ClaimTrust acquisition had started to contribute. Although it trades on a punchy valuation of 36 times forward earnings, falling to 25 on the estimates for next year, Craneware boasts an enviable momentum, which should underpin the share price, says the Independent, which suggests to buy.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.