Wednesday tips round-up: Lloyds, Barclays, Stagecoach

The Telegraph says investors in UK banks had a lot to digest on Tuesday, what with the confirmation of Lloyds' £13.5bn rights issue and Royal Bank of Scotland (RBS) coming back to the taxpayer cap in hand and the asset sales forced upon the banks by European regulators.

The paper suggests existing Lloyds shareholders should take part in the fund-raising, if only to avoid heavy dilution of their stakes. If they choose not to take up their rights, Lloyds estimates that shareholders' voting interests will slump by almost 80%.

The shares will be priced on 24 November at the higher of 15p, or a 38% to 42% discount to the ex-rights price, calculated as 29p to 34p based on Monday's closing price. With the stability provided by the huge capital raising, Lloyds can start afresh as a profitable retail bank. Existing investors should certainly take up their rights, concludes the Telegraph.

The Telegraph's top banking pick is Barclays, which it says has deftly manoeuvred its way through this financial crisis. Barclays avoided the dramatic caps on bonuses that Lloyds and RBS were forced to accept yesterday. As such, it can scoop up any of the top talent inclined to jump ship if their pay package is hit.

Barclays is also at liberty to pay a dividend and is trading on just 1.1 times its tangible book value, which looks cheap considering its growth prospects over the next three years. Barclays seems the safest bet of the lot. Buy says the paper.

Tuesday's trading update from Hammerson - and the first from David Atkins, only a month into the job as chief executive - contained little that ought to alarm. The FTSE 100 property developer behind Birmingham's Bullring and London's Brent Cross shopping centres flagged the return of confidence to commercial real estate markets, rising UK property valuations and a stabilisation in demand from tenants. At 390œp, at par with estimated net asset value, and a discount to its large-cap peers, hold say the Times.

New Britain Palm Oil is on course to open its first refinery on these shores, in Liverpool, in April. NBPO is already vertically integrated - it breeds seeds, plants trees and processes palm oil itself - but this new facility will enable it to capture the margins it loses from using rival refiners in Europe, its biggest market. At 362œp, or 11 times next year's earnings, and yielding 4.5%, the shares are a buy says the Times.

AIM-listed video search engine developer Blinkx is still very much in former parent Autonomy's shadow. It is hard to see what will drive the shares higher from here, short of Autonomy conceding that demerger has not worked and buying the company back again. At 17œp, or 13 times 2011 earnings, pass says the Times.

Yesterday's management statement from Rolls-Royce - the engineering giant - was a modest affair. Trading is in line with expectations, underlying revenues are still expected to grow in 2009, and underlying profits are still forecast to remain broadly flat on those achieved last year. Given that the global civil nuclear market is forecast to be worth £50bn in 15 years' time, there is considerable room for export growth. Even at the current price, Rolls-Royce is still a buy says the Independent.

Bus and train group Stagecoach warned yesterday that trading remained tough, albeit within expectations, and that revenue growth "remains below the growth rates observed in recent years". The attractive dividend yield of 4.7% is enough to persuade the Independent to recommend keeping the shares, but there is too much uncertainty about Stagecoach to convince it to be a buyer. Hold.
























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