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Sunday share tips: Airtel, Capita

Sun 30 August 2020 22:31 | A A A

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No news or research item is a personal recommendation to deal. Hargreaves Lansdown may not share ShareCast's (powered by Digital Look) views.

(Sharecast News) - The Mail on Sunday's Midas column labelled shares of Airtel a "bargain", pointing to the fast growth in its sales, promising outlook and generous dividend payouts to back up its case.

"The current price seems unfair, reflecting concerns about the economic impact of the coronavirus rather than Airtel's present growth rates and future potential," the tipster added.

Less than half of Africans had a cell phone and those terminals were typically slow and simple.

But that was set to change, driving further increase in demand for Airtel's data services and user numbers, with the former alreadya growing at an annual rate of 35%.

The company was also especially excited about its mobile banking arm, given the extreme dearth of bank branches across the entire continent.

For the year ending in March 2021, analysts were expecting a 5% rise in total sales to £2.7bn and a 16% jump in profits to about £466m.

"Mobile phones have become essential items around the world. African countries are at an earlier stage in the digital revolution than most others, but progress is rapid and Airtel is helping to make it happen.

"Investing in Africa is never without risk but, at 57p, Airtel shares look like a bargain, particularly with a dividend yield of more than 9.5 per cent."

The Sunday Times's Sabah Meddings thinks outsourcer Capita's shares are best avoided.

More recently, the former FTSE-100 high-flyer clinched a five-year extension of its contract with TfL, she conceded.

But in March the company had reported that its turnaround plans were costing more than expected, resulting in a full-year pre-tax loss of £63m while debt had ballooned to £791m which was at least £100m more than the City had been anticipating.

Furthermore, a failure to sell a clutch of businesses worth about £200m could hurt its prospects further, the tipster said.

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