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Expert View special: 5 star picks for Q4

We reveal the five new stocks Panmure Gordon's tipping to beat the street in the coming quarter.

by Harry Brooks on Oct 02, 2013 at 05:01

Top stock tips for the quarter

Each quarter broker Panmure Gordon releases a list of its top UK stock picks. The graph above shows the performance of their picks since the start of the year versus the market as a whole. Panmure started its top picks list back in 2010, and since then their picks have outperformed the Datastream UK Market Index by 57.9%.

Countrywide, easyJet, Petra Diamonds, Spirent Communications and bwin.party digital entertainment remain on the list from last quarter. In the following slides we'll take a look at their new picks for the fourth quarter.

If you'd like to receive news alerts on any of the stocks mentioned in The Expert View, click on the star icons below to add them to your favourites. To buy shares via JP Morgan, click on the shopping trolley icon.

Key stats
Market capitalisation£656m
No. of shares out33.94m
No. of shares floating28.35m
No. of common shareholdersnot stated
No. of employees11507
Trading volume (10 day avg.)0.04673m
Turnover212.26m GEL
Profit before tax65.21m GEL
Earnings per share1.93 GEL
Cashflow per share2.29 GEL
Cash per share9.10 GEL

*Correct as at 1 Oct 2013

Bank of Georgia: high growth, low valuation

London-listed Bank of Georgia (BGEO.L) offers a compelling combination of highgrowth and low valuation, according to the analysts at Panmure Gordon.

The bank was listed on the London Stock Exchange in 2012, and since then the shared have risen almost 90%.

'We expect the Georgian economy to revert to its high growth rate of 5%in 2014,' analyst Keith Baird said. 'Combined with increased penetration of the under-banked local market, and its market leading banking franchise, BGEO offersvery attractive multi-year profit growth.'

The shares trade on 6.9x forecast 2014 earnings, falling to 5.8x forecast 2015 earnings, and Baird has a target price of £22.

Shares in the group closed at £19.45 on Tuesday, up 13p or 0.7%.

Key stats
Market capitalisation£975m
No. of shares out134m
No. of shares floating133m
No. of common shareholdersnot stated
No. of employees639
Trading volume (10 day avg.)0m
Turnover£426m
Profit before tax£40m
Earnings per share30.12p
Cashflow per share30.80p
Cash per share18.23p

*Correct as at 1 Oct 2013

Bovis Homes: 'anomalous' valuation

Bovis Homes (BVS.L) is the cheapest stock in the UK housebuilding sector, according to Panmure, which believes its current valuation is 'anomalous'.

'On a premium to the net asset value (PNAV) multiple of 1.19x, Bovis Homes is the cheapest stock in the UK Housebuilding sector (PNAV Relative of 0.80 versus the sector),' analyst Mark Hughes said.

The announcement that the second phase of the government's Help to Buy scheme will be launched next week offers another reason to back the shares, and the analyst noted that even without this shot in the arm sales volumes are beginning to rise.

'Given the stronger growth on offer over the next few years, we believethis valuation to be anomalous.' The analyst has a target price of 840p.

Shares in the group closed at 729p on Tuesday, up 10p or 1.4%.

Key stats
Market capitalisation£2,075m
No. of shares out197m
No. of shares floating134m
No. of common shareholdersnot stated
No. of employees6649
Trading volume (10 day avg.)0m
Turnover737m USD
Profit before tax67m USD
Earnings per share0.34 USD
Cashflow per share0.56 USD
Cash per share0.60 USD

*Correct as at 1 Oct 2013

Hikma Pharmaceuticals: upgrades ahead

Next week's trading update from Hikma Pharmaceuticals (HIK.L) is likely to trigger further upgrades, Panmure predicts.

'According to our channel checks the company is still enjoying good doxycycline sales, which have been the source of two upgrades already this year,' analyst Savvas Neophytou said.

The company is guiding towards revenues of $230 million from its generic medicine business this year, but the Panmure estimate stands at $240 million and Neophytou said it could even hit $300 million.

'The next upgrade should not be too far away,' he concluded, reiterating his target price of £13.

Shares in the group closed at £10.50 on Tuesday, up 10p or 1%.

Key stats
Market capitalisation£2,153m
No. of shares out1,424m
No. of shares floating1,409m
No. of common shareholdersnot stated
No. of employees33593
Trading volume (10 day avg.)8m
Turnover£9,491m
Profit before tax£-586m
Earnings per share-58.25p
Cashflow per share-38.75p
Cash per share45.08p

*Correct as at 1 Oct 2013

Thomas Cook: more upside to come

More cost savings and better cash flow ahead means turnaround story Thomas Cook (TCG.L) has further to go, Panmure reckons.

'Thomas Cook remains at the start of its transformation project that continues to meet, if not exceed, initial targets with cost savings to-date increased to circa £400 million by 2015,' analyst Karl Burns said.

Next month's full-year trading update is likely to show the impact of the UK's unusually nice summer, but the analyst said there's likely to be more positive news on cost savings.

'Trading on a 2014E enterprise value/earnings multiple of just 4.8x we feel this is undemanding for a forecast of circa 44% compound annual growth rate in earnings per share over the next three years, returning dividends by 2015 and a potential rerating,' he added. Burns has a target price of 180p.

Shares in the group closed at 151.6p on Tuesday, down 1.8p or 1.2%.

Key stats
Market capitalisation£16,895m
No. of shares out1,335m
No. of shares floating1,253m
No. of common shareholdersnot stated
No. of employees116911
Trading volume (10 day avg.)4m
Turnover£10,373m
Profit before tax£823m
Earnings per share62.75p
Cashflow per share95.47p
Cash per share153.73p

*Correct as at 1 Oct 2013

WPP: all set for a strong second half

Advertising and public relations company WPP (WPP.L) is set for a strong six months with strengthening revenue trends and more aggressive use of free cash flow, the Panmure analysts say.

'In H1 2013 organic top-line growth was 2.4%,' analyst Alex DeGroote said. 'In July alone, this had improved to 5% growth year-on-year. Officially, WPP maintains 3% FY13 organic growth expectations.'

Although he called this 'prudent', he said the brightening economic outlook and improved bottom line means there's upside to this figure.

'Earnings per share risk is very much on the upside and, together with only modest multiple expansion from current levels, should result in share price upside of 15%-20%,' he added. DeGroote has a target price on the shares of £15.50.

Shares in the group closed at £12.65 on Tuesday, down 5p or 0.4%.

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Look up the shares

  • Bank of Georgia Holdings PLC (BGEO.L)
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  • Bovis Homes Group PLC (BVS.L)
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  • Hikma Pharmaceuticals PLC (HIK.L)
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  • Thomas Cook Group PLC (TCG.L)
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  • WPP PLC (WPP.L)
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  • Countrywide PLC (CWD.L)
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  • easyJet plc (EZJ.L)
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  • Petra Diamonds Ltd (PDL.L)
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  • Spirent Communications plc (SPT.L)
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  • Bwin.Party Digital Entertainment PLC (BPTY.L)
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