Sunday share tips: Fulcrum, Greene King, Primary Health
A trip of share recommendations from the tipsters at the Sunday Times, Sunday Telegraph and Mail on Sunday.
Fulcrum Utility Services was a 'buy' for the Sunday Times' Inside the City column. The electricity and gas infrastructure and services provider, which IPOed on AIM eight years ago after being spun out of National Grid, was tipped as a potential beneficiary of the rise of electric vehicles, though far from the glamorous end of the scale. Electric cars will rely on an infrastructure backbone that is currently "clearly not up to the job" and this could "turbocharge" Fulcrum.
Fulcrum's owns and installs power cables and gas pipes for residential and business, with its own assets generating returns over decades. Client jobs include connecting housing estates up to the grid for housebuilders, connecting remote Highland whisky distilleries and a future area could be smart meters. Fulcrum's portfolio of utility assets is worth £13m and churned off £2.1m cash in the six months to end-September, allowing the paying of dividends that see its shares yield about 3.4%. The attraction of using cheap debt to build assets that pay double-digit returns has seen Fulcrum agree a new £20m debt facility.
Targeting the electric car charging market, Fulcrum recently spent £22m acquiring a business that specialises in electrical connections and has an electrical licence from the power watchdog Ofgem. A partnership has also been signed with US-based Chargepoint to instal its electric-charging stations.
Shares in Greene King were a 'buy' for Questor in the Sunday Telegraph, down 11% since the paper recommended at early December that they should be sold. Shares in the pub company are down as many investors think it will be dragged down by a £2.3bn gross debt pile that dates back three years to the £774m acquisition of the Spirit Pub Company, while the industry faces a consumer slowdown, rising business rates, minimum wage pressures, and commodity and utility costs.
On the other side of the coin, the City sees the group’s dividend, yielding 7%, as safe and while there are a tough few years ahead, shares trading at eight times next year's earnings, makes the shares attractive. Management boasted a record Christmas in the managed pub estate, though heavy snowy weighed on the wider numbers, with the division's sales down 1.4% in the first 37 weeks of the financial year. Cost cutting amid the downturn in casual dining has seen the Fayre & Square food brand scrapped and a sale of its Loch Fyne seafood chain.
Analyst have suggested an activist investor could arrive on the scene, as seen elsewhere in the leisure sector, which could be a catalyst for asset sales, debt restructuring or more sector consolidation.
Primary Health Properties was also a 'buy' for Midas in the Mail on Sunday. PHP, which was listed on AIM in 1996 and has since upgraded to the full list, has increased its dividend every year as a public company.
PHP owns more than 300 purpose-built healthcare sites that are rented to GPs, pharmacists, dentists and physiotherapists. Management are looking to drum up £100m at a price of 108p to expand the property estate, with the offer at below the current market price of 110.25p open to both new and existing shareholders. Directors have identified a pipeline of opportunities worth roughly £150m in the UK and Republic of Ireland. Rents are agreed in advance so virtually all the income that PHP receives is guaranteed or its Irish equivalent.