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Friday tips round-up: Pennon, Sportingbet, Quintain

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Date: Friday 01 Dec 2006

LONDON (ShareCast) - Landfill capacity in these crowded isles may be getting short, but quoted water utilities with waste management operations are in even thinner supply. Pennon, the owner of South West Water and Viridor, is the last of its kind.

On the price recently paid by Spain’s FCC for Waste Recycling Group, Viridor alone could command a value approaching £1bn. Part of that premium may be already in the shares, but on most measures, Pennon is still one of the cheapest stocks in its sector says the Times.

Pennon itself has recently been rumoured as a target for Goldman Sachs' infrastructure fund. For this and the fact that the company is holding up in an otherwise troubled sector, the shares are definitely worth holding, adds the Telegraph.

Pennon shares have risen by nearly 50% over the past 12 months. Nevertheless, they remain one of the cheapest in the industry, says the Independent.

Online gaming group Sportingbet shares could look extremely cheap in a year or two. But, given the uncertainties surrounding it, Sportingbet is a stock for gamblers only, writes the Independent.

Abacus made two key acquisitions this year, which turned the group into Europe's fourth biggest electronics distributor. Brokers expect Abacus profits to hit £17m in the present year and £22m in 2008. With the shares trading at 10 times forward earnings and yielding 4%, they are worth tucking away says the Independent.

Holidaybreak shares are trading on a multiple of almost 14. Given the tricky trading environment that is not cheap. But the prospect of value-creating deals and a dividend yield of 4.8% make them worth holding, says the Times.

It is the adventure side that promises the best returns in the long run for Holidaybreak as holiday makers become increasingly adventurous. A hefty potential 4.7% yield more than makes up for the quite high PE ratio of 13 times this year's estimated earnings. A cautious buy says the Telegraph.

Apart from the growth of its nascent healthcare arm, more upside should come from the mooted demerger of Findel’s school supplies division, which, ignoring debt, could be valued at £300m. Buy says the Times.

Quintain Estates is far more about development than merely managing buildings and making a turn on rents. On price-earnings ratios roughly half some of the larger players such as British Land or Land Securities, Quintain is far more nimble, more fleet of foot, and far more likely to generate stellar returns than most in its sector. Time to buy says the Telegraph.



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