LONDON (SHARECAST) - The shares of Lookers, the car dealership, were weak last week, as the 17.3 per cent stake owned by Trefick was sold off in an orderly manner. The sale came after two failed takeover attempts last year. Indeed, with the share hitting a high of 73½p early last week, it looks like the board was correct to knock back both offers. The stake sale is a positive thing, as it will increase liquidity in the shares of the UK-focused car group. The shares are trading on a current-year earnings multiple of 10.1 times, falling to 9.7. Management have said they will raise this year’s dividend by 8 per cent, after leaving the interim payment flat. This means the prospective yield is 3.4 per cent, rising to 3.6 per cent next year, which is attractive – particularly as the lion’s share will be made in the final payment. The Sunday Telegraph´s Questor team said the shares were a hold last month, but with the extra liquidity and after last week’s falls they are once again a buy, despite solid gains this year, Questor now believes.
On Friday, the Home Affairs Committee released its report on G4S’s Olympics security fiasco. It concluded that the group should forego its £57m management fee after the Army was called in to meet London 2012’s staffing requirements. This was in line with expectations, after G4S guided to a £50m loss. However, the most surprising news on Friday was positive. G4S has won a government contract to manage electronic tagging of offenders in Scotland. The contract will last five years and its shares edged higher on the first piece of upbeat news for some time. G4S also unveiled a new acquisition last week – Brazilian security provider Vanguarda. The focus on developing markets is key to the company’s future – and is likely to be the main driver of the group’s long-term recovery from recent events. By 2019, 50% of the global security market is expected to be in developing nations. Globally, G4S remains the market leader in terms of security services, having 8% of the market compared with closest rival Securitas, with 6%. The shares are trading on a December 2012 earnings multiple of 11.7 times, falling to 10.2 and they look fairly valued, given the increased risk profile. However, even if the worst happens with UK government business, its moves into countries such as Brazil should boost medium-term growth. Hold, says Questor.
The housing market may be subdued but builder Galliford Try has had an excellent year. Annual results released last week were better than expected and brokers believe the shares, up 49% to 710 1⁄2p since Midas tipped them in January, should rise even further in the next year. The company focuses on the South-East of England, where house prices are more stable, and it embarked on a land buying spree in 2009 when prices were at rock bottom. The strategy is bearing fruit. Profits rose 80% to £63.1m and the dividend 88% to 30p for the year to June. Chief executive Greg Fitzgerald is optimistic about the year ahead as the firm has a big land bank and now builds about 80% of its houses in the South East. Fitzgerald hopes to improve margins over the next three years. Brokers expect profits of £72m next year, rising to £100m by 2015. The firm has also declared a progressive dividend policy, so 36p a share is anticipated for 2013 rising to 56p by 2015. Investors who bought in January could sell 25% of their stock after the recent strong run. Selling completely would be unwise as prospects are good and dividend payments are generous, says The Financial Mail on Sunday´s Midas column.