Wednesday tips round-up: Whitbread, Capital Pub, Chemring

22nd Jun 2011 06:33

Costa Coffee and Premier Inn owner Whitbread had indicated at the time of its preliminaries in April that the pace of growth was slowing. Some brokers hope for a bid from private equity, but others worry about further weakness in the regional hotel trade. On almost 13 times' this year's earnings, further outperformance looks unlikely, says the Times.The Capital Pub Company posted annual profits up 48% yesterday and came out fighting after news on Friday that it had received two takeover approaches in as many months from Fuller, Smith & Turner. Capital, which grew profits to £4.1m in the year to March, has real momentum, though its shares now trade on a forward earnings multiple of 16. Some City analysts believe Fuller's may come back with a bid in excess of 250p, but we are not convinced of the rival's appetite extending to much beyond 200p. Hold, says the Independent.As defence budgets in developed markets come under pressure as a consequence of government spending cuts, Chemring is in the almost unique position of being a UK defence company with significant organic growth opportunities. We expect further earnings enhancing acquisitions to be made over the next year. Previous purchases have demonstrated management's ability to generate significant operating improvements. We feel that the market has failed to recognize the growth opportunities available. Buy says the Scotsman.Halma, the maker of a range of safety equipment ? sensors and the like ? aims to double in size every five years by using its strong cashflow both to invest in existing businesses and to buy new ones, while also offering investors dividends rising at 5% or more. The shares have come on by 45% over the past year and sell on a hefty 16 times this year's earnings, while offering a prospective yield of about 2.5% . This looks high enough for now, the Times thinks.RPC Group, formerly Rigid Plastic Containers, makes basic receptacles for various consumer products. The cost of polymers is about a third of the company's turnover, and prices rose by 20% the last financial year to the end of March, continuing to increase thereafter. RPC reckons to be able to pass on those increases to customers such as McBride, albeit with a delay and an inevitable impact on margins. The shares, up 10p at 354¾p , are selling on about 10.5 times' forward earnings, but this suggests no real reason to chase, says the Times.Playtech, the AIM-listed gambling software group yesterday announced a licensing agreement with the California Online Poker Association (Copa), which is made up of a coalition of Native American governments and licensed card rooms in the Golden State. Its Sciplay International joint venture will also provide Copa with "play-for-fun" internet games. These deals provide Playtech with a firm foothold in the market for when - and it is only a question of when - the US government legalises online gaming, not least for the tax revenues. Buy, says the Independent. The latest financial year marks a decade of operations for the communications group Creston, and boss Don Elgie was popping the champagne corks yesterday. He said 2011 had been a "significant and successful year" with revenues up 7% to £67.8m. At 6.7 times forward earnings, the stock is cheap. 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.---RG