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Sunday share tips: Mears Group, ProCook

Sun 06 February 2022 19:22 | A A A

No recommendation

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 Financial Mail on Sunday's Midas column recommended readers 'buy' shares in Mears Group, arguing that their price did not reflect "recent progress, prospects or the resilience through tough economic times".

Specialising in maintenance and repair work of local authorities and housing associations, the company's business is booming after lockdowns in 2020 and 2021 led many jobs to be cancelled or postponed.

Indeed, just recently Mears had upgraded its guidance for the third time in under six months.

The company had also won new business, signing contracts with councils nationwide and developing a rich pipeline of work for 2022 and beyond.

In particular, Midas highlighted Mears move into the housing management business with clients including the Ministry of Defence, Ministry of Justice and the Home Office.

The business was said to be growing "fast" and generating "plenty of profit" while also serving a useful social purpose.

"Looking ahead, the group should continue to win more contracts from this division and drive revenue across the original repairs and maintenance business," Midas added.

Furthermore, debt was "negligible" and dividends were likely to rise.

"Social housing maintenance may not sound glamorous but the work is necessary, the benefits are tangible and contracts last for years. Most are inflation-linked too, providing an extra layer of security in today's uncertain environment.

"At £2.05, Mears shares are likely to deliver long-term growth and attractive dividends too. Buy."

The Sunday Times's Sabah Meddings thinks ProCook will be able to overcome workers' return to offices and restaurants and that its decision to pull its range of cooking ware from Amazon.com will pay off.

To back up her case, she pointed to the company's latest trading update, which revealed a near 35% jump in sales versus a year ago with same store sales up by more than half over the past two years, if the third lockdown of 2020-21, when it stores were shut, is stripped out.

Online sales did fall by 7% over the 12 weeks ending on 9 January, but repeat purchases rose by 27.3% after its shift away from Amazon.com.

And while workers return to offices and restaurants might drag on sales, rising energy bills and food prices could possibly encourage consumers to trade down, she said.

Another potential headwind were rising shipping costs.

And while the company faced competition at the lower end of the market from supermarkets and discounters its cookware was cheaper than alternatives from John Lewis and Le Creuset, a third less expensive in the case of the latter.

Hence, said Meddings, the shares were a 'buy'.

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