Wednesday April 30, 07:03 AM
Wednesday tips round-up: HBOS, Game, JD Wetherspoon
LONDON (ShareCast) - A theoretical ex-rights price of 426p based on yesterday's close equates to a new earnings multiple of 6.1 times for HBOS (LSE: HBOS.L - news)
. Even that is no bargain, with the sector trading on an average of around six times 2008 earnings. However, it is pretty much in line with book value, which should provide something of a floor to the price. If you can afford to, taking up the rights should offer some insurance against falls in the price from current levels, but for shareholders already struggling with higher energy and food costs, an option known as "tail swallowing" may be best says the Telegraph. Life group St James Place is confident in its long-term target of achieving business growth of 15% to 20%. However, given stock market volatility, to which it remains geared, and a forward earnings multiple of 16 times, the shares lack an obvious catalyst to send them higher. Avoid says the Times (1832.HK - news) . There is no better pub company at responding to changing consumer tastes than JD Wetherspoon, but it was no surprise to hear its tell investors of the continuing pressure on margins. However, this is a well-run and conservatively geared company that still owns the freehold of about half its 700 or so pubs. The shares are trading on about 10.5 times 2008 earnings. Hold says the Times. Not too long ago the stock traded at more than £7 a share, and if investors reckon that now is the time to get back into pubs, it might be a safe bet to buy JD Wetherspoon. Hold for now says the Independent. Computer games retailer Game insists that the market will continue to grow over the medium term and is opening 100 stores in the coming year. Competition from supermarkets remains a worry, as does the threat from likes of HMV and Zavvi. There is also the longer-term threat of its market moving online. At 14 times next year's earnings, Game is not expensive on forecast profit growth of 20 per cent, but after a rally that has lifted the shares by 46% in two months, there will be better times to buy. Avoid says the Times. The Telegraph adds that further into the future there is the prospect that games may become as easy to download from your computer as music or television content. Given these challenges, Game's price to earnings ratio of 14 times looks pretty steep. For the short to medium term, however, the stock has further to run. Buy says the Telegraph. There are credit crunch concerns, but Game argues that it is defensive, offering cheap entertainment that lasts. Investors may have missed much of the Game Group (LSE: GMG.L - news) party, but there should still be some left to enjoy. Buy says the Independent. Miners use a tremendous amount of electricity, so when the power stops, there is a major problem. That is the issue faced by Anglo American (LSE: AAL.L - news) , which had to cease platinum mining in South Africa for long periods in the first quarter. Credit Suisse thinks that at earnings per share of 13.9 times for 2008, the group is going great guns. Investors may prefer to wait until the next update to discover how much the South African power situation has improved. Hold for now says the Independent.
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