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Thursday's tips round-up: First Choice, Melrose, Resolution

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Date: Thursday 08 Mar 2007

LONDON (ShareCast) - Given the performance of the mainstream business, and the likelihood this will worsen as a result of the Thomas Cook/MyTravel merger, First Choice shares are best avoided, says the Independent.

Melrose is proof that turning underperforming businesses round and selling them on for a handsome profit needn't be the preserve of private equity, says the Telegraph. On the basis of the average price earning ratio for the engineering sector, the shares are about 15pc undervalued even after yesterday's 5pc rise. Good value, it adds.

Despite Resolution’s promise to pay a 15 per cent improved dividend up to 2009, medium-term and long-term growth prospects are occluded. Sell, writs the Times.

In spite of sitting on a price-earnings forecast of 23 times for 2008, Mucklow is one of those smaller companies which often disappear under the radar - but shouldn't, writes the Telegraph.

With plans for a further 30 to 40 new restaurants to be added every year to 2010 and beyond, it's time to take a bite in The Restaurant Group, says the Independent.

While there are signs that Yule Catto's performance could improve, uncertainty remains. The 4 per cent dividend yield is covered only about 1.9 times. That makes the attractions too thin in the context of the risks. Avoid, says the Times.

Although Balfour Beatty's shares trade at a premium to its peers, given the group's track record they are worth holding, recommends the Independent.

At 750½p, or 14.4 times 2007 forecasts, Provident Financial shares have priced in demerger. But a 5.4 per dividend yield means that they are still worth holding, says the Times.

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