Date: Sunday 24 Jun 2012
Ashtead hires construction equipment and has tapped into a trend of companies renting rather than buying plant in order to preserve their cash. It also continued to invest through the downturn, despite a slump in construction. As well, the company has one of the largest market shares of the fragmented US market and smaller rivals have had difficulty investing in their businesses. This has given Ashtead an edge. In the year to April, revenues rose by 21% to £1.13bn and pre-tax profits jumped to £135m from £1.7m. This demonstrates the company’s leverage to any improvement in the construction market as it has a relatively high fixed-cost base. The total dividend is 3.5p, with the final payment of 2.5p slated for September 7. The shares trade without this payment from August 15 and the prospective yield in the current year is 1.4%. Trading on a current year earnings multiple of 13.3, falling to 11, the shares are at a premium to its US-listed peer United Rentals. However, upgrades are likely, as is more infrastructure spending. Buy, says the Sunday Telegraph´s Questor team.
Last week we had profit warnings from French group Danone and US-listed Procter & Gamble. Should we expect one from Unilever? Unilever’s exposure to Spain is pretty minimal in comparison with that of Danone. However, it is obvious that all Western markets are challenging. Rising commodity prices are also an issue for all players in the sector. As for P&G’s warnings, they could actually be good for Unilever, which has been investing in emerging markets , which make up about 56% of the group’s business. Part of the problem has been that P&G has been trying to take on Unilever in areas where it is already strong. Although rising commodity prices have been a problem, prices and inflation are falling. This could provide some relief to those worried about Unilever’s margins. The European issue is likely to be more of an issue for Reckitt Benckiser, which generated 40% of sales in Europe, than Unilever. The reported slowdown in China is more concerning, but the region accounts for just 3% of sales. Trading on an earnings multiple of 16.1, falling to 14.7 and yielding 3.8%, Unilever shares are not cheap; but they are worth owning as a structural play on emerging markets. Hold, Questor recommends.
Just over 40% of GB Group´s revenues are from verification services, with customer registration, marketing services and tracing making up the rest. It has taken GB a decade to get to where it is. In this time it has knitted together 72 different datasets culled from the likes of BT, the DVLA and the credit checking agencies, it is able to search them using proprietary software and algorithms developed in-house. These relationships with the data providers and its technical expertise provide a huge barrier to new entrants. And this is a big and growing market. Furthermore, what the company believes will be crucial now, and the area in which it is well ahead of the competition, is to be able to provide a global verification solution. The company made progress in this respect last year, more than doubling the number of countries for which it has data to 14. The company is valued slightly ahead of the sector average, according to the City research firm Edison. But this assumes a tax rate of 22%, where the reality is the group has significant tax losses it can deploy. On that basis the P/E drops to 12 and below the average. “Up 60% in the past year, the shares have enjoyed a good run. However, GB’s fortunes could alter irrevocably if it can piece together the jigsaw and provide an international solution to internet identity fraud. This is one to buy and hold for the long-term,” says The Financial Mail on Sunday´s Midas column.
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