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Sunday share tips: Merlin Entertainment, Speedy Hire, Ashoka India Equity
A round-up of Sunday newspaper share tips, as the Sunday Telegraph takes a look at Merlin Entertainment, the Sunday Times offers up Speedy Hire, and the Mail on Sunday examines the Ashoka India Equity investment trust.
Merlin Entertainment was a 'buy' for the Sunday Telegraph's Questor, after a rollercoaster experience as a listed company for the owner of Alton Towers, Thorpe Park, Legoland, Madam Tussauds and new attractions based around Peppa Pig and Bear Grylls brands. The shares are on the up as they recover from last October's profit warning, when London tourist numbers were down due to poor weather and the impact of the London Bridge terror attack. While London trade should benefit this year, the UK is part of a business that operates in 25 countries via over 120 attractions, 18 hotels and six holiday villages.
"What makes the stock attractive is the step-up in profitability that is due in 2019," Questor says, with sentiment on the up thanks to the launch of a Bear Grylls climbing adventure aimed at older teens, with the first to open later this year in Birmingham, and Peppa Pig's play area opening in China and the US this year and next. There are few challengers in its market and demographic trends are beneficial as Merlin stabilises this year and invests for future growth after a rocky period. The shares are available for 16 times next year's forecast earnings.
Speedy Hire shares were tipped as a 'buy' in the Sunday Times' Inside the City column. Three and a half year ago ex-Hertz man Jan Åstrand was appointed chairman of the tool hire company and three years Russell Down was promoted from finance director to chief executive on what was meant to be a temporary basis following a succession of profit warnings over two years, sparked by accounting problems in the Middle East. A major shareholder tried to force a merger with UK competitor HSS but Åstrand was confident Speedy remained a fundamentally good business and Down delved behind the scenes to eradicate unnecessary costs, update systems and improve efficiency.
Cutting the number of Speedy's product lines down by 30% to 3,500 and the new systems have stores improve asset utilisation and improve responsiveness to customer demand trends. Since Down took over, the share price has gained 20%. "There is more to come," the column says, with a stronger balance sheet enabling acquisitions of services businesses, such as the specialist lifting equipment business Lloyds British Testing bought two years ago. Not as profitable as Speedy's core tool hire business, services improve the group's return on capital. While there is exposure the construction industry cycle, growing its number of infrastructure customers provides a "cushion".
Midas in the Mail on Sunday recommended the Ashoka India Equity investment trust as a "good opportunity for British investors to access the Indian market". The trust is looking to float on the London Stock Exchange main market in July with a fundraising of at least £100m that founder Prashant Khemka, former Goldman Sachs Asset Management chief investment officer, and his locally based team aims to invest fairly quickly. While Indian companies do not have the best record in London, Khemka plans to pour funds into 20-40 undervalued, mid-sized companies with significant growth potential. The Bombay Stock Exchange has at least 800 companies of sufficient size to figure as an investment.
The Mumbai-born Khemka, who ran the Goldman India Equity fund for a decade, will invest for the long-term, aiming for investee companies to generate returns over a five to ten-year period. There will be no annual management fee but instead a performance fee, paid in shares subject to delivering outperformance versus the MSCI India IMI Index total return over the medium-term. The Indian economy is predicted to grow faster than the UK, US and China this year, up 7.5%, with medium-term growth helped as the Indian middle-class expands fast. Unlike many emerging market countries, India has a strong democratic tradition, an independent judiciary and robust property rights.
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