Sunday share tips: AO World, Phoenix Group

Should you want a new dishwasher, AO World may be a good option but it´s too soon to buy into the shares, The Times´s Tempus said.

The online white goods seller had already taken 20% of its market and an update due on 12 January was likely to show strong growth.

However, after a profit warning issued two years ago its shares were still standing at less than half where they were when they listed on the London Stock Exchange, in 2014.

Despite that, the stock was still changing hands at more than 80 times' analysts profit estimates for 2018, Tempus added.

Furthermore, how the firm accounted for warranty sales might be impacted by a new accounting rule, IFRS 15, set to come into effect that same year.

Some analysts believed AO World was too aggressive in booking revenues from commissions selling third-party warranties.

Instead of spreading them over the time horizon over which they were paid, everything was booked up-front.

"Sell", said The Times´s John Collingridge.

The Daily Mail´s Midas column saw promise in Phoenix Group´s growth plans.

The firm, which only managed closed-end insurance and pension funds, was already the largest in the closed-life sector.

That was critical, Midas said, because size gave it cost synergies, better predictive ability, the ability to invest with less risk and hence the capacity to pay better dividends.

Indeed, Phoenix chief Clive Bannister had stated his intention to continue with his acquisitions and after the company´s purchase of Abbey, which completed in December, the firm was projecting it would generate at least £2.7bn in cash until 2020, boosting its ability to continue raising its pay-out.

Just as important, the company had shown discipline when acquiring new assets, only buying those which increased its ability to pay dividends.

At 748.5p the shares were a 'buy', Midas said.