Date: Sunday 13 May 2012
Pump and valves specialist Weir Group has been a favourite of the bears this year on concerns the low US natural gas price would crimp orders for equipment for the shale gas industry. The boom in fracking and shale gas production has resulted in a glut of gas in the US – and it does not yet have the infrastructure to support exports. This has resulted in producers reining in gas developments. However, 32 per cent of total revenues in 2011 were generated by the oil and gas unit – and not all of these orders related to US shale. Last week’s trading update revealed that orders in oil and gas slumped 26 per cent on a like-for-like basis in the first quarter. However, order input at its minerals division rose 18 per cent, which was ahead of expectations. Power and Industrial orders were also strong, up 35 per cent, or 27 per cent on a like-for-like basis. This meant the group maintained its full-year guidance. Questor feels very strongly that the long-term prospects of Weir outweigh the short-term issues in some of its markets. Each of its sectors is in a long-term bull market as the global population rises and demand for energy and basic materials rises. For that reason it concludes by saying that, “Questor maintains a buy on this quality company.”
There are many infrastructure funds listed in London, with the unique selling point of 3i Infrastructure (3IN) being its Indian exposure. Last week's full-year results were hit by weakness in its Indian assets, but this doesn't mean it's not a good strategy. Any investment in India will be volatile, but the long-term growth prospects are fantastic. The company has a stake in 3i India Infrastructure Fund, which accounts for about 13% of its assets. The value of which fell £28.7m as a result of a weak rupee and a near-40% fall in the price of one of its listed investments, Adani Power. However, despite the setback in India, the fund managed to grow its net asset value (NAV) per share over the year to 121p from 120.3p. The income from the portfolio over the year of £73.1m fully covered all dividends and company costs. Investors should not expect rapid share price gains, but a steady rate of growth over time, with the income being the priority. Since lifting, shareholders have gained 9.4pc a year including dividends. The shares are at about the same level they were tipped at last year and remain a buy for income, Questor says.
Small investors do not trust Royal Bank of Scotland as far as they could throw it. At least that is the case if Midas’s mailbag is anything to go by. The recent announcement by RBS that it was planning a share consolidation has alarmed some of its 214,000 individual shareholders, who will have the chance to vote on the plan at the annual meeting on May 30. Given that the Government holds 66% of the voting shares, these resolutions will be passed as a formality. But what does the consolidation mean for small investors? Don’t panic, says Midas. Fears that this plan amounts to an expropriation of shares, or will reduce the value of your stake, are without foundation. Concerns that the Government is doing better out of this than other investors are also wholly misplaced. But will it help the RBS share price become less volatile? I have previously said that there might be a scintilla of truth in the idea that being a penny share is unhelpful. Indeed, the worried reaction of some small shareholders to this technical change suggests the nominal value of a share can affect irrational sentiment. But it is a very arguable point and in the big picture of RBS’s restructuring and rehabilitation, it is probably a diminishingly small effect. The best that can be said of this move is that it might at the margin make a tiny difference to the sharp movements in the share price. At worst it will have no effect at all and will prove a bit of a waste of time, effort and money.
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