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Sunday share tips: Greggs, Berkely Energia

Sun 04 August 2019 16:01 | A A A

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(Sharecast News) - While Greggs' vegan sausage rolls make up a mere fraction of the company's total sales, Joanne Hart at the Mail on Sunday said the buzz around the product had certainly encouraged more people to venture into stores, most of which were "pleasantly surprised" with the group's transformation under chief executive Roger Whiteside.

In her Midas Share Tips column on Sunday, Hart pointed out the Greggs shops were "brighter, cleaner and more spacious", with faster service and expanded range, which now includes more sandwiches and healthy options such as salads and fruit pots.

Hart pointed out that this strategy helped Greggs to report a 10.5% increase in like-for-like sales, a 58% surge in underlying profits to £40.6m and an 11.2% rise in its interim dividend to 11.9p in the six months ended 29 June.

"The figures would turn most competitors green with envy and a special dividend of 35p was declared too, an added bonus for shareholders," said Hart.

"Midas recommended Greggs in 2009 when the shares were the equivalent of £3.65. Last week, they closed at £21.90 so they have risen exactly sixfold."

Hart noted that much of Greggs' growth had come in the past six years, under Whiteside, who had not just made the stores more inviting but had also opened a lot more of them.

"At £21.90, Greggs shares have come a long way in the past decade but the stock should continue to do well. Greggs is vulnerable to rising costs, as sterling weakens, but customers spend less than £3 on average per visit so the group is more resilient than many to slowing economic growth," noted Hart.

"Greggs generates plenty of cash too so the dividend is well protected and special payouts are likely to continue in the future. Existing investors should keep hold of their shares. New investors could also find value in this stock."

Rachel Millard at the Sunday Times said Berkeley Energia was always going to have "an uphill task" building and financing its mine in Salamanca, but with the politics of nuclear energy and the sensibilities of western Europe, it was starting to "look like a long shot".

Berkeley Energia, which hoped to become one of the world's top-10 uranium producers when it arrived in Spain in the early 2000s, started off well, with its shares leaping tenfold over the first two years.

However, Millard said "the shine has started to come off" when writing in her Inside the City column, as doubts over whether it will get the necessary licences sent its shares plummeting last October.

"Rejection has not come just yet, but there is no decision in sight and a key report from Spain's powerful Nuclear Safety Council has yet to materialise," said Millard.

Millard highlighted that Spain's politics "do not bode well", with the anti-nuclear socialists, including environment minister Teresa Ribera, re-elected in April, with many now fearing the Salamanca mine "will be mired in indecision indefinitely".

"Even if the current permits arrive, they will not solve all its problems - Berkeley will still need permits for other parts of the development. And uranium prices have been weak since the Fukushima disaster in 2011, which shut down reactors," said Millard.

Millard acknowledged that Berkeley, which started looking across western Spain for metals used in batteries, such as lithium and cobalt, could see upside given that the metals were "all the rage" given the expected rise of battery-powered cars, but still warned that Berkeley's work so far had been "too vague to give much hope to investors".

"The company has about £56m in the bank to tide it over while Madrid prevaricates, but its shares have fallen more than 60% over the past year, and are languishing at 15.75p, valuing it at £40m."

"Barring a sudden change of politics in Spain, they have further to fall. Sell."

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