Wednesday tips round-up: Misys, Arm, Croda

28th Jul 2010 06:53

Reckitt Benckiser is looking for more bolt-on acquisitions in the health and personal care area - and SSL is an excellent purchase, although at £2.54bn it cannot be described as cheap. However, you have to pay for quality and SSL will fit well with Reckitt. The shares are trading on a December 2010 earnings multiple of 15.6 times, which is not too stretched for this well-managed, debt-free and cash-generative business. Buy says the Telegraph.After it sells Allscripts, software group Misys will have nil debt and will be on the lookout for bolt-on acquisitions. It also has huge R&D costs, £104m last year, and has great hopes for its new BankFusion operating system for its banking customers, which have been holding back on IT spend. Misys shares have strongly outperformed and sell on 17 times's next year's earnings. High even for a tech company and further progress looks limited says the Times.Chip designer Arm is a fundamentally strong company with great prospects. It may fall prey to profit-taking in coming months but any dip in its share price will be temporary. So, buy if it shows any weakness, and keep holding in the meantime says the Independent.Croda makes the base chemicals that go into cosmetics and toiletries. Continuing demand, and the penetration of these products into emerging markets, drove a 35% rise in operating profits to £71.2m from the consumer care division in the first half of this year. The interim dividend is raised by 50% to 9¾p as a gesture of intent. The shares are selling on almost 14 times earnings. A decent long-term hold, but high enough for now says the Times.Although a good defensive play, Halfords has been held back by worries over where growth is coming from. Autocentres is supposed to rectify this and double in size in five years. This is a highly competitive if fragmented area, though, and the market will need further reassurance. For now, the shares sell on about 11 times earnings, suggesting no compelling reason to chase says the Times.On a valuation basis, sub-prime lender Provident Financial's dividend yield of 7.2% is first class and the multiple of 11.8 times this year's forecast earnings is undemanding. But between 40 and 50% of Provident's customers are in regular receipt of benefits, which in the case of welfare and housing payments are set to see an especially sharp government blade. Avoid says the Independent.War games retailer Games Workshop showed its recent battles are behind it by more than doubling pre-tax profits to £16.1m for the year to 30 May, boosted by a sharp jump in its gross margins. These factors helped Games Workshop to reinstate its dividend with a 25p payment. While its shares trade on a forecast 2011 multiple of 12.3, ahead of the retail sector, it is a niche player and its miniatures have proved they are well-equipped for any economic battles. Buy says the Independent.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.