Wednesday tips round-up: Serco, Informa, Robert Walters

16th Dec 2009 06:42

Serco is usually billed as the company that runs London's Docklands Light Railway, but it does everything from business process outsourcing to defence to education. Outsourcers of Serco's ilk stand to be among the few winners from the slash and burn in the public sector over the next five years. because their services will be in demand if they can show they help to achieve those savings by taking over more of the public sector. Buy says the Independent.Serco shares are trading on a high multiple, but this is justified. The December 2009 earnings multiple is 18.7, falling to 16.1 in 2010. The yield, at 1.2%, is nothing to get excited about, but the dividend is more than four times covered by earnings so there is ample scope for an uplift in the payout. Buy says the Telegraph.Informa shares dropped when news of its bid for Springer Science + Business Media leaked and still haven't fully recovered. At eight times enterprise value to this year's earnings, it represents a discount to the wider sector and with stability next year and growth expected in 2011, buy says the Independent.Don't rule drug developer Renovo out yet says the Independent. The company has cut its workforce by a third and saved £3m to £4m a year as a result. Cash burn should be no more than £20m annually. With net cash of £65m there should be enough cash to see key drugs through to the all-important stage three trials, with up to £30m left when the first EU phase three trial on Juvista reports in the first half of 2011. A speculative buy says the paper.The problem for investors in Robert Walters is that recruiters' shares have already priced in a sharp recovery in profits. On brokers' forecasts of a £5m pre-tax profit in 2010, Walters, at 184½p, up 3½p, already trades at a heady 48 times forward earnings. However, having conserved cash and maintained its network ? 38 offices in 17 countries ? through the worst of the downturn, it remains highly geared to rising sales. Hold says the Times.At five times forecast operating profits, Fiberweb's £134m debt burden remains a concern. But operating margins have more than doubled from their 2007 lows and should rise further given easing resin prices and more effective hedging of raw materials. The initial signs from Fiberweb's Americas joint venture with Brazil's Petropar are also encouraging. At 66½p, or seven times earnings, and yielding 6%, buy says the Times.Shares in contractor Scott Wilson may have risen sharply over the past six months but its pension deficit has grown even faster. At 109p, or seven times earnings, poor sentiment on UK public works is likely to prevent a re-rating. Pass says the Times. A buying opportunity has been presented in Australian coking coal producer Caledon Resources. Its shares have plunged more than 40% over the past 10 days. Coking coal prices are set in the annual round of negotiations in April, the same as with iron ore. This April, there should be a substantial increase in the price of the contracts as China continues to soak up raw materials and coking coal is extremely important in construction. As one of the few independent coking coal plays anywhere in the world, the stance is buy, says the Telegraph.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.