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Sunday share tips: Card Factory, BT Group in focus

Sun 23 May 2021 17:37 | A A A

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(Sharecast News) - Writing in the Sunday Times's 'Inside the City' column, Sabah Meddings conceded that Card Factory's road to recovery could be a slow one.

Indeed, the company had taken 24 years to grow from its first shop to over 1,000 sites spread across the UK and Ireland.

More recently, the fact that it made most of its sales in stores meant that it had largely lost out on Valentine's Day and Mother's Day, unlike rival Moonpig.

Nevertheless, it had been "consistently profitable" since it listed in London back in 2014, Meddings pointed out.

And just last year, it began offering personalised cards through its website, allowing it to compete with its newest rivals, Moonpig and Funky Pigeon.

It also sported a sizeable market share, of 30% by volume and 20% by value.

The key to its success was its ability to mass produce cards at a fraction of the cost of most retailers, boosting its margins, Meddings said.

In the year before the pandemic it turned a pre-tax profit £65.8m on sales of £451.5m.

"Card Factory is well-run with a profitable business model, at least pre-Covid anyway. It has also expanded its sales into Aldi and Matalan stores. It may be a long road ahead, but there is optimism. Buy."

Shares of BT Group had made "precious little headway" for years, but "now is not the time to sell", the Financial Mail on Sunday's Midas column told readers.

In particular, the tipster noted the recent purchase of £2.0m-worth of stock by the company's chief executive officer, Philip Jansen.

More importantly, the company was investing heavily in upgrading its infrastructure, which would allow it to raise prices, and streamlining its operations.

In time, that would allow it to reward investors, Midas argued.

Regular dividend payments worth about 550.0p per share since it listed provided a measure of "comfort" to investors.

But the shares were now trading at just 176.0p, having floated in 1984 at 130.0p, although they did top 700.0p in 1999.

Yet while the dividend payout for the financial year to March 2021 had been shelved and massive further investments in fibre and 5G networks were needed, a payout of 7.7p was scheduled for the 12 months to march 2022.

Furthermore, dividends could increase "substantially" beyond the next five years, once the necessary investments have been completed.

To that end, Jansen was planning to boost efficiency by reducing the number of locations from which BT operates from 300 to 30.

It was also possible that BT Sport might be put on the auction block.

"Jansen is making progress, albeit slowly, and his decision to shell out £2million of his money on stock suggests he believes the price should rise," Midas judged, adding "I am inclined to believe him."

    The value of investments can go down in value as well as up, so you could get back less than you invest. It is therefore important that you understand the risks and commitments. This website is not personal advice based on your circumstances. So you can make informed decisions for yourself we aim to provide you with the best information, best service and best prices. If you are unsure about the suitability of an investment please contact us for advice.


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