Wednesday May 7, 07:05 AM
Wednesday tips round-up: Lloyds TSB, Tullow Oil,
LONDON (ShareCast) - If a high dividend has been the perennial attraction of Lloyds TSB, the credit crunch has also showed that payout to be the bank's greatest protector. Its controversial decision not to cut its dividend in 2004
- which prompted the exit of its finance director - imposed a heavy discipline. That ability to manage through tough times now implies that at 439p, or seven times 2008 earnings, it remains a relative safe haven. Hold says the Times (1832.HK - news) .Shares in the hedge fund manager RAB Capital (LSE: RAB.L - news) - once the second-biggest investor in stricken mortgage lender Northern Rock (LSE: GB0001452795.L - news) - fell more than 15% after it gave warning that first-half profits would be significantly lower than last year. The culprits remain its two biggest funds, special situations and energy. Liquidity concerns (especially in the smaller natural resources companies), investor nervousness and market volatility showing no signs of abating and the shares are best avoided says the Times. Tullow Oil (Dublin: TQW.IR - news) had predicted that Jubilee, offhsore Ghana, contained 170m barrels of oil, with a best-case of up to 1.38bn. Analysts now think Jubilee could contain 500m at least, and up to 1.8bn. Whether that proves to be the case or not Tullow is a good long-term play. It is looking at several prospects in Uganda that equal the potential of Jubilee. But yesterday's good news is already reflected in the price. Hold says the Telegraph. Online gaming technology specialist Playtech (LSE: PTEC.L - news) 's first-quarter revenues were almost 100% ahead of the same quarter last year and almost 20% ahead of the fourth quarter of last year, thanks largely to success in the casino and poker markets. Analysts were quick to upgrade forecasts, which put the shares, after the recent strong run, on 18 times 2008 earnings. Yet that is still a significant discount to its major rivals. Buy says the Telegraph. DataCash, the AIM-listed payment processing specialist, trades at a heady 27 times current-year earnings reflecting its strong growth so far. But until DataCash's resilience to a consumer downturn can be more clearly established, the shares are up with events. Hold says the Times. Outsource giant Capita attracts its fair share of bad headlines, but for investors looking to get out of something much dodgier, like the retail or financial services sectors, Capita is a good safe punt and the company is miles away from the credit crunch. The problem is there does not seem much room for the shares to grow. Hold says the Independent.
United Drug (Dublin: UN6A.IR - news) , the UK and Irish pharmaceutical wholesale and marketing group, posted solid first-half results yesterday with a 15% rise in pre-tax profits to €;33.2m. The problem is the pound. If the group can continue delivering growth at the rate the market is used to, buyers will be sitting pretty. Sterling continues to be a headache, but should not dent a handsome 2008. Buy says the Independent. Mobile marketing group Hipcricket's net profits were down sharply to $6.86m (£3.48m), with the group saying the losses were down to reinvestment. It is hard to value the group as there are few competitors, but there is plenty of room for growth. Hold for now says the Independent. Aberdeen Asset has seen fit to swim against the tide in property. Its acquisition of Goodman Property Investors, for as much as £110m, will see the group become Britain's second biggest property fund manager and place it among the top 10 globally. If Aberdeen is correct, it should ride out any further deterioration in property and will be well placed to capitalise on a return to health in property. Its a high risk scenario, however, and one the Telegraph does not believe is worth taking at this point in the cycle and sees better value elsewhere. Sell.
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