Thursday tips round-up: Logica, Rightmove, Aviva

Most companies are looking at any way to cut costs during the downturn, which puts a company like Logica, one of the biggest UK-listed IT service providers, in a strong position. Yet, analysts fear that profit growth will not be huge next year and Evolution Securities rates the stock at 11.7 times prospective full-year earnings, which puts it in line with its peers. Probably worth holding for now, says the Independent.

Rightmove has cut its costs (by about £5 million a year) but has been able to increase its prices, which means it should benefit from operational gearing. Equally, it is now sitting on net cash. This raises the prospect that Rightmove could resume share buybacks - it has previously mopped up £40 million worth of its own stock far below the current price - or perhaps pay a special dividend. Either way, at 526p or 17 times next year's forecast earnings, the shares remain reasonable value given the prospect of 20 per cent growth next year. Hold on, says the Times.

While Aviva is clearly in its most resilient position in more than a year, the issue for the group is how it intends to capitalise on its stronger balance sheet. Management yesterday indicated that it is open to the prospect of acquisitions - but with its sales slipping and ongoing speculation that equity markets may have bounced back too far and too fast, investors would be right to question whether reducing debt is a better course of action. While the extra flexibility that the cash from assets sales has provided is clearly a plus, further clarity on strategy for the proceeds would be equally welcome. Hold, says the Telegraph.

FirstGroup's business is balanced insofar as around half of revenues come from medium-term contracts not affected by the economy. And the shares have underperformed the market by nearly 25 per cent, according to Gert Zonneveld at Panmure Gordon. With a price to earnings ratio of 9.1 times, and a yield of 5.5 per cent, FirstGroup is a buy, according to the Independent.

Afren continues to buy licences on its own account, yesterday acquiring additional acreage offshore Nigeria. But, given the recent strengthening of its balance sheet and stable and rising production (it targets 100,000 barrels a day by late 2012), it has scope for more. Confirmation of Afren's move from AIM to the full list further enhances its appeal. At 92Œp, buy, says the Times.

Cobham, the defence and aerospace electronics group, did not add much with yesterday's interim management statement. But it's numbers are still respectable, with a price-to-earnings ratio of 10.9 times and yield of 2.9 per cent in 2010, according to number crunchers at Evolution Securities. The shares had a sluggish start to this year, before taking off in the last couple of months. Although the near future is unlikely to carry on at such a pace, Cobham is still a buy, according to the Independent.

Alterian is clearly cash generative: its coffers rose to £7.3 million, despite the outlay on bolt-on acquisitions. Further, recent takeover activity (the purchase of Interwoven by Autonomy and Omniture by Adobe) testifies to the allure of its niche and suggests Alterian, too, could become a target. At 189p, or 13 times 2010 earnings, tuck away, says the Times.

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