Wednesday tips round-up: Debenhams, Gem Diamonds, James Fisher

Don't expect Debenhams to set the world alight, but like its reborn Principles brand, it has legs, suggests the Independent.

The department store group sees potential to grow beyond 200 stores on home soil, and its shares - which have fallen from a 12-month high of nearly £1 - now look good value, trading on a 2010 price to earnings ratio of 9.4 times, which represents a substantial discount to the sector average of between 13 and 14 times. Buy says the paper.

After raising $75m last year in a placing and generating $72.2m of cash from its operations over 2009, Gem Diamond's balance sheet is strong. The company has $113.8m of cash in the bank and no debt. This puts the group in an ideal position to snap up any complimentary assets. After 18 months of being in preservation mode, the group can now look for opportunities for growth. The shares are trading on a December 2010 earnings multiple of 52 times, but this falls to 17.8 in 2011 as the market recovery is expected to gather pace. Buy says the Telegraph.

Shares in bank Close Brothers tend to lag those of more geared lenders when an upturn ensues. Even so, profit forecasts are now on the rise, the shares are unstretched - even after yesterday's 8% rise to 771p, or 11 times next year's earnings - and the dividend provides a solid 5.4% prospective yield. Hold on says the Times.

Shares in oil services group Wellstream have fallen by nearly a quarter since last year's rumoured bid interest from Saipem, of Italy - but there was nothing in yesterday's full-year results to send them any higher. Wellstream's confidence that it can limit the current-year decline in earnings to about 24 per cent takes a lot on trust. A takeover approach remains a possibility but at 525p, down 10p, or 20 times earnings, that is insufficient reason to buy. Pass says the Times.

The question at Wellstream is about the timing of orders, adds the Independent. Hold until there is some demand flowing in.

Barring a cyclical recovery in coastal shipping, James Fisher's presence in a clutch of steadily growing higher-margin niches should still ensure that profits move ahead this year. Any moves by the Government to outsource the operation of non-fighting ships would also bolster its defence division. At 400p, down 17p, or ten times 2010 earnings, the shares are a buy says the Times.

The Independent adds that the group as a whole is performing well, and trading on a 2010 price-earnings ratio, the shares are well below historic levels. The dividend yield of more than 3.5%is also a draw. Ostensibly, James Fisher is a good bet. Fill your boots now while the stock is cheap. Buy says the Independent.


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