Wednesday tips round-up: Severn Trent, Travis Perkins, Renold...

24th Nov 2010 06:48

Behind the as-expected headlines, water firm Severn Trent has a good story to tell. Most importantly, given the new pricing structure, Severn Trent's cost-cutting plans are on track. Operating expenditure is also in line with forecasts, and below the level set by the regulator. With a price-earnings ratio of 11.7 times this year's estimates, Severn's shares already look attractive. The tasty new dividend policy, and a recent run that has seen the stock add 12% since the start of last month, only make the case stronger. Buy says the Independent.Severn shares have had a good run and, at today's level, that projected dividend payment represents a prospective yield of 4.8% . This rather suggests there is better value elsewhere, adds the Times.Telecoms group Kcom is a good news story as management has overhauled the stuttering company and offloaded some of the businesses that have performed less well - which is partly responsible for yesterday's drop in earnings. The interim dividend has more than doubled to 1.1p, and the board has committed to 3.3p for the full year, up from 1.8p. That is expected to grow 10% over the next two years. The price of 7.9 times estimated full-year 2011 earnings also looks undemanding. Buy says the Independent.Travis Perkins trades on multiples of 10 times forecast earnings for 2011. Though cheap in itself, the valuation appears even more undemanding when considered in light of yesterday's update from BSS, the plumbing and heating firm which Travis is in the process of buying for about £558m. The results suggest that BSS should drive further growth at Travis. Buy says the Independent.There are some macro-indicators of recovery in engineer Hamworthy's markets ? seven cruise ships started by operators so far this year against none in 2009. As a gesture of optimism, the interim dividend is up 5% to 3.36p. But the shares have had a strong run this summer and are now, even after yesterday's fall, on about 20 times' this year's earnings. Avoid for now says the Times.Industrial chaim maker Renold believes that it can return to margins of about 10% by 2012-13, which would suggest operating profits of more than £20m if sales continue to grow at their present pace. The shares were well above 120p at the end of 2007, before a substantial fundraising. They are now worth a little more than 30p and there is no chance of a dividend this year. One for the brave to lock away for the long term. Someone may even buy it says the Times.Tesco is the only supermarket group in the UK on which the Telegraph has a buy rating. The reason is simple - it is the only one with an international strategy that could offer impressive growth over the longer term. The group now plans to quadruple Chinese sales to £4bn over the next five years, as it more than doubles the number of supermarkets it operates in the country. Tesco's current-year earnings multiple is 12.9 times, a discount to Sainsbury's on a multiple of 14.6. Morrison is trading on 12.1 times earnings. The shares are a buy says the Telegraph.Trading on a March 2011 earnings multiple of 12.3 times, falling to 11.3 in 2012, derivayives broker ICAP's valuation appears pretty full, as recent unusual market conditions have benefited the group. Hold 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.