Sunday share tips: Greggs, Tharisa
Greggs is the focus of Sunday Times' tipster column this week, while Midas in the Mail on Sunday is examining smallcal miner Tharisa.
Gregg's shares were given a 'hold' recommendation by the Sunday Times' Inside the City column. The shares look "fully valued" as the Newcastle-based fast food chain faces growth constraints from obesity warnings, while around a 7% rise in prices of ingredients and the greater employment costs faced by all UK firms has pushed wages up more than 3%.
At the end of last September, Greggs had 1,830 shops trading and expects a net increase of about 100 over the year as a whole, as it targets "substantially” more than 2,000.
The FTSE 250 group will provide a fourth-quarter trading update on Tuesday, 16 January, where the column expects the downbeat levels of consumer confidence to be a problem. Yet, by last Friday the shares had put on around a third over the past 52 weeks. For the full year, profit of close to £83m are expected, on revenues of close to £1bn.
The future store roll-out will be less on the beleaguered High Street but in train stations, motorway service stops even a drive-through, with plans for openings in hospitals and expanding the service providing office deliveries. This year there are also 130 refurbishments to the existing estate.
Tharisa, a chromium and platinum miner that listed on London's main markets and in South Africa, was a 'buy' for Midas in the Mail on Sunday. The group, which is 44% owned by the founding family, pays a dividend and has plans to increase production by 50% over the coming three years.
The group operates the huge open pit mine 60 miles from Johannesburg and, while chromium has often been viewed by platinum miners as an irritating by-product, Tharisa has designed its business to make money from this lustrous metal as well as platinum, palladium and rhodium. Chromium is an essential component of stainless steel, with demand from China a key driver, with the need for chrome "likely to increase elsewhere as well and prices have begun 2018 on a positive note".
Platinum, palladium and rhodium are used in jewellery but more so for catalytic converters, which are "increasingly important in the automotive industry", the column said, as governments clamp down on harmful emissions.
Prices for platinum group metals have been strong in the new year. Tharisa's strategy is to keep increasing production and efficiency and trim costs. Having produced 1.3m tons of chromium in the year to last September, close to 144,000oz of platinum, palladium and rhodium, for 2018 chrome production is expected to rise to at least 1.4m tons, with 150,000oz of the PGMs. Long-term, management want to produce 2m tons of chrome and 200,000oz of PGMs by 2020.