Tuesday tips round-up: Capita, Bovis, Tullett Prebon

Recent full-year results from Capita were decidedly mixed - with the market particularly concerned about a slowdown in organic growth at the company in 2009 and 2010.

However, the dire state of the British Government's finances mean the opportunities for this outsourcing business over the next few years are now stronger then they have been for some time. Trading on a December 2010 earnings multiple of 16.9 times, falling to 15.1 next year. The prospective yield is 2.6%. Taking a longer-term view based on the bid pipeline and the potential for significant outsourcing following the election, the stance on the shares remains buy says the Telegraph.

Housebuilder Bovis has plenty going for it, including a healthy balance sheet which has been bolstered by the £221m of cash generated last year, and a strong land bank. At just over 12,000, the number of plots held is slightly lower than a year ago, but it is still an impressive asset. It is it is trading at a big discount to brokers' estimated net asset value per share of565p, which tips the balance in favour of a buy says the Independent.

The valuation only bolsters the investment case for derivatives broker, Tullett Prebon, whose shares trade on a multiple of 7.5 times broker estimates for the full year. Compared to its peers, Tullett trades at a unjustifiable discount of 25%, buy says the Independent.

Oil services group Petrofac once again performed better than anyone expected in 2009. Not only that, it managed to double the size of its order book and it remains debt-free, with cash of $1.4bn (£924m). The shares are trading on a December 2010 earnings multiple of 12.8 times, falling to 11.5 in 2011. The latest set of numbers was exceptional, coming in ahead of market expectations and with the strength of the order pipeline means that the stance on the shares is now buy, up from hold, says the Telegraph.

Yesterday, the third-largest recruitment specialist, SThree, reported its results for the three months to the end of February. Despite a fall in profits, its cautiously upbeat message sent the shares up. Despite the downturn, SThree has £40m in cash and continues to pay divvies, with a 3.9% yield expected this year, in line with 2009. Buy says the Independent.

All told, Petrofac estimates that $200bn of work will come up for grabs in its core markets over the next three years. At £11.17, up 44p, or 11 times 2010 earnings once the cash is ignored, the shares are a solid hold adds the Times.

Intertek's niche - checking that everything from chemicals to cuddly toys complies with quality, safety and environmental standards - is still highly fragmented, prompting perennial rumours. At £13.24, or 16 times current-year earnings, the shares are likely to trade sideways. Even so, hold on says the Times.

Exhibitions organiser Tarsus contends that although corporate spending on its niche is tight, delegates and exhibitors continue to attend the biggest events in their industry at the expense of smaller, second-tier gatherings - a phenomenon that has worked in its favour. Its exposure to cyclical recovery and 5% dividend yield make the shares a buy says the Times.


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