Tuesday tips round-up: Wm Morrison, VT Group, RM

Wm Morrison shares have hit the skids in recent days as investors grapple with what to do about the curveball thrown at the group by the departure of chief executive Marc Bolland for M&S.

Given the uncertainty, Morrison is a speculative buy, not least because the shares will be choppy as speculation over the succession mounts and names are linked to the job (the rumour mill has already started). But those with a strong stomach may be rewarded if they tuck in says the Independent.

First half profits from maintenance specialist Mitie jumped by 12.5%, with the firm adding it is confident of hitting full-year targets. The stock currently trades on a p/e of 12 times, putting Mitie shares at a discount to rivals like Serco and Capita. The dividend yield, at 3.2%, is decent enough, but after a good run hold says the Independent.

At 235p, Mitie shares have marked time in recent months - and may tread water still, given fears that underlying growth could falter from here. But at 11 times next year's earnings, and the balance sheet strong, they remain reasonably valued. Hold adds the Times.

Consumer electronics group Armour shares appear relatively inexpensive, standing as they do at little more than a third of the company's asset value. At around 14p, they are trading at around the same levels as mid-September 2008, when Lehman Brothers went under. That makes them undervalued. Buy says the Independent.

VT has changed beyond recognition and is even changing its market sector to reflect this. Earlier this year the group completed the sale of its shipbuilding assets to BAE Systems and it is now a pure outsourcing contractor. Trading on a March 2010 earnings multiple of 14.4 times and falling to 12.9 next year, the stance, based on the prospects for outsourcing in the UK, remains buy says the Telegraph.

The market has been cold on prospects for educational IT company RM. However, The main concern has been over the prospects of the Building Schools for the Future (BSF) scheme in the UK. As public sector belt-tightening looms, the budget is expected to be trimmed. The shares are trading on an 2010 earnings multiple of just 10.3 times, falling to 8.8pc next year. Questor believes that the company is operating in an excellent global market and the shares look undervalued. Buy says the Telegraph.

There is also potential for consolidation at home, adds the Times. Redstone, the indebted rival which beat RM to two big-ticket BSF contracts in Birmingham and Lancashire, is in play - and RM confirmed yesterday that it was keeping a "close eye" on the situation. RM is a buy suggests the Times.

Consultant civil engineer Hyder Consulting concedes that spending by UK water utilities will remain tight: not least because expectations of a tougher regulatory regime has put some short-term projects on hold. But an 11% rise in the interim dividend suggests that its confidence remains undimmed. At 249œp, or eight times earnings, tuck away says the Times.


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