Thursday tips round-up: Inchcape, Interserve, Melrose

Joint broker Investec - which is not pencilling-in a dividend for the foreseeable future - believes that Inchcape's pre-tax profits will rise to £165 million this year, putting the shares on a multiple of just over 11 times. That feels a little rich for a motor retailer. Even if you applied it to Investec's ambitious earnings target of £215 million pre-tax in 2012, that only gets us to a longer-term share price of about 35p. At 28Œp, pass, says the Times.

Five months ago the Independent sold Inchcape at 35.5p. At the new level it feels there's enough life in the international business to make a small holding worth while. So hold.

Interserve, the services, maintenance and building group, trades on a very undemanding valuation of 5.4 times Collins Stewart's estimates for the full year. That falls to 4.9 times the broker's forecasts for 2011, and then to 4.7 times on the numbers for 2012. All the while, the yield stands at around 9 per cent. Based on that, the Independent says buy.

No one does it quite like the chaps from Melrose. David Roper and Christopher Miller - respectively, chief executive and chairman - are the last of a breed whose totems in the 1980s were Lords Hanson and White, corporate raiders who built conglomerates and bought and sold businesses with the explicit aim of making money for shareholders. Melrose is a stock you back for the management. At 207Œp, up 14p, or ten times 2010 earnings, and yielding 3.7 per cent, stick around for the next big deal, writes the Times.

Yesterday's results from Chime Communications needed no spin. The public relations and advertising agency filed record full-year figures, with sales, operating profits and dividends all up 10 per cent. At 209œp, or less than ten times earnings, this is a stock to buy on weakness, according to the Times.

Laird's yield is still a fairly healthy 5.6 per cent, and the shares trade on a tame 2010 price to earnings ratio of 11.6 times. This could be indicative of weakness, rather than because there is an inherent undervaluation in the stock, but the Independent says it would give Laird the benefit of the doubt, for now. Hold.


Please note: Digital Look provides a round-up of news, tips and information that is impacting share prices and the market. Digital Look cannot take any responsibility for information provided by third parties. This is for your general information only as not intended to be relied upon by users in making an investment decision or any other decision. Please obtain a copy of the relevant publication and carry out your own research before considering acting on any of this information.