We round up the Sunday newspaper share tips. This week, FirstGroup, Tesco and TI.
Tesco is finally back on analysts’ radars, after a torrid few years, says Midas
Questor, Sunday Telegraph – TI
How can a company built on the combustion engine cope as the industry switches to clear greener alternatives, asks James Ashton in the Sunday Telegraph’s Questor.
That, he says, is the question facing TI, which supplies all of the major car makers.
The company believes it is well placed. Electric cars still need cooling, heating and braking.
But Questor says that worrying what is lacking is orders and revenues from the new-wave stuff. The company will signal the direction of travel with its full-year figures on March 20.
The shares are not particularly expensive, it adds.
‘There could be a decent growth story here but doubts remain whether TI has emerged from the hands of successive financial owners best placed to exploit it.’ Sell, it says.
Midas, Mail on Sunday – Tesco
Barclays, for example, reinstated an overweight rating on Tesco shares with a target price of 225p – they are currently 212 3/4p.
The retail giant reinstated a dividend and the end of last year, a sign that it is confident enough about cashflow to start giving money back to shareholders once again.
UK sales were up 2.1 per cent in the 19 weeks to January 6, it said in a buoyant update at the start of the year.
While it still faces challenges, including a slow down in spending, it is responding by overhauling its value ranges, cutting costs and improving margins.
The Booker deal should also help, since the new, enormous business will have even greater power than Tesco had alone. Cost synergies should also boost profits, and Tesco’s access to restaurant chains and corner shops.
Midas verdict: Hold – analysts seem optimistic about the potential for this new behemoth and those who already hold shares are now being rewarded for their patience with a dividend. Anyone not already in may want to hold off until the dust settles on the Booker deal.
Inside the City, The Sunday Times – FirstGroup
FirstGroup has still not paid a dividend since it begged shareholders for £615million of cash almost five years ago, says John Collingridge in The Sunday Times’ Inside the City.
Debt to the tune of £1.2billion was still outstanding as of September.
Trading is hardly helping, and shares are wallowing at 85.4p.
First’s UK rail operations are seeing revenues grow, but not fast enough.
Luckily it has the lucrative Great Western franchise and First may be handed a new deal until 2024 without competition.
It won the TransPennine franchise in 2016 and has a 70 per cent share in the South Western Railway operation, but neither route is growing as fast as hoped, says Inside the City.
Sell, it says.