Wednesday tips round-up: Enterprise Inns, Serco, Wellstream

It has been a fairly depressing year for the pub industry and one of the sector's biggest operators, Enterprise Inns, did little to lift the gloom yesterday.

The UK's second-biggest pub operator, which has 7,399 leased and tenanted pubs, said pre-tax profits tumbled by 95% to £11m for the year to 30 September. With robust cash generation, Enterprise Inns is one of the sector's most reliable long-term punts, but there are too many dark clouds for the next year to take a gamble. Sell says the Independent.

Ballooning public expenditure should mean strong growth for outsourcer Serco in the future - that's why the shares are trading on such a high rating. The December 2009 earnings multiple is a heady 19 times, falling to 16.3 times next year. The yield, at 1.1%, is very unimpressive - however, there remains significant scope for the payout to be increased as the dividend is covered by earnings more than four times. Despite the high rating, the stance remains buy because prospects for the outsourcing sector look solid says the Telegraph.

Yesterday's statement from oil services group Wellstream prompted concern about the state of the company's order book, which currently stands at £170m, compared with a backlog of £215m at the interim results stage. The uncertainty surrounding the backlog means that it is hard to justify a buy stance, but Wellstream appears to be on the right track. Hold says the Independent.

Guernsey-registered investment trust Dexion Commodities will not provide the thrills of direct investment in commodities. But, as a low-volatily savings vehicle trading at a discount to its 96p-a-share net asset value, at 89œp it is worth a look suggests the Times.

Publisher Informa is well placed to take advantage of upturn. Sales are forecast to be flat for the foreseeable future, but any improvement in the top line will provide a disproportionate boost to the bottom. Consumer-dependent media stocks should feel recovery sooner. But, at 321œp, or ten times 2010 earnings, Informa remains reasonably priced. Buy says the Times.

Cineman operator Cineworld is the market leader in 3D films and next year's release schedule in this format is strong - including James Cameron's Avatar, Tim Burton's Alice in Wonderland and the next film in the Saw horror franchise. There is even talk of previous blockbusters such as Titanic being reworked in 3D and re-released. With the shares yielding a relatively secure 6.5% and the future looking steady, the stance remains buy says the Telegraph.

There are two reasons to take a contrary view of Care UK: first, the coming squeeze on public spending might actually encourage more use of private sector outsourcing, not less; second, private equity group Bridgepoint saw at least something in here to prompt a cheeky bid last month. It might still back a management buy-out at a premium. Buy says the Independent.

Severfield-Rowen, the maker of the steel skeletons that support everything from football stadiums to shopping centres, has been losing weight. A construction downturn at home has seen sales, profits and operating margins head sharply lower. At 165p, or 12 times 2010 earnings and yielding 6 %, look to buy lower down suggests the Times.


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