Thursday newspaper share tips: Poundland and Berkeley Group

South African retail conglomerate Steinhoff can certainly afford to pony up with the dosh to buy Poundland, but the Financial Times' Lex column ponders the purpose of such a deal.

Steinhoff yesterday revealed itself as the mystery suitor for the UK bargain chain, adding that it was mulling an offer for the apparently tasty target.

A lengthy probe into Poundland's buy of rival 99p Stores and a period of softer trading have seen its shares decline over the past year.

Even a quarter gain on news of Steinhoff's stakebuilding left the shares a third below their 300p flotation price.

But, noted Lex, Steinhoff's strategic agenda was altogether less clear.

Its model -- making furniture cheaply in one place and flogging it in another -- was easily understood, along with fit-in acquisitions Homestyle in the UK (in 2005) and Conforama in France (in 2011).

Failed tilts at Home Retail Group and Darty would have fitted, too.

The column pointed to the attractions for Steinhoff of increasing its Europe footprint.

"It would reduce exposure to South Africa's moribund economy and volatile currency, increase its sales per square foot of store space and lessen its dependence on sales of big-ticket items," asserted Lex.

But, it added, in operational terms Poundland was not the neat fit for Steinhoff that its other bid targets had been.

"True, its high sales volumes mean that even a small improvement in margins ... would give a big boost to profit," said Lex.

Some experience in discount retail via South African clothing chain Pepkor did not translate to believing Steinhoff could help Poundland's margins than that company's own management.

"Despite its substantial European presence and Frankfurt listing, most trading in Steinhoff shares still takes place in Johannesburg," cautioned Lex.

"If it is to increase its appeal to European investors, it needs to do a better job of explaining itself."

Meantime, The Telegraph's Questor column has suggested selling shares in Berkeley Group, contending there was more pain to come for the house builder.

It was wary of the stock given there was increasing evidence that the UK housing market was nearing a cyclic peak, noting Berkeley's just-issued results.

The London-focused builder of premium flats saw its shares fly higher on the capital's housing bubble, fuelled by offshore safety buyers and reliable rents bolstered by a stock shortage.

The brownfield-land conversion specialist generated sector-leading gross profit margins of 33% during the year to end-April, but the cracks were beginning to show in this property cycle, Questor said.

In the past year, Berkeley sold more homes, but the average price was down. Pre-tax profit and revenue were both lower, too.

These results to end-April included a last hurrah by investors nipping in to buy properties before a stamp-duty rise, and, noted Questor, the concern was that sales would fade away.

The column observed that Berkeley could weather the storm over the short-term as it has already agreed sales on £3.25bn of property, or just over a year's forecast sales.

It also enjoyed a huge land bank of some 42,858 units, or more than 11 years in future sales.

"The problem we can see is 12 months down the track when that lower sales rate begins to really bite into trading. This would come as London is increasingly finding itself oversupplied with new-build flats," Questor wrote.

Berkeley's shares -- apparently cheap on 8-times forecast earnings, but not so much at 20-times on a cyclically adjusted ten-year average -- offered attractive income levels, and a revised cash-return programme.

It had returned £5.34 so far, and aimed to return a further £11 in dividends by 2021, or £2 a year at a yield of about 6.7%

"The risk is that, in chasing the income, investors expose themselves to a loss of capital if we hit a crunch in about 12 months time," said Questor.

"We recommended selling Berkeley shares at the end of last year as London property began to cool and we still think there is more pain to come."