Sunday share tips: Mitie, Royal Bank of Scotland, Diageo, Gleeson Homes
Mitie shares are worth avoiding, said the Sunday Times' Inside the City column, having rebounded hard since former chief executive Ruby McGregor-Smith left. On Monday, new boss Phil Bentley will unveil his new strategy for the outsourcing group. So far the ex British Gas and Cable & Wireless veteran has written off £50m the balance sheet and bought £3.6m worth of shares in his new employer.
Results are expected to show profits before tax for the year to April down by around two thirds to £29.5m from £98m. UBS forecasts PBT will surge to £45.5m next year. Bentley's plan is apparently to cut jobs and improve margins by using technology, believing office blocks can be managed more efficiently using data captured by security cameras and other devices.
Buy shares in Royal Bank of Scotland, said Questor in the Sunday Telegraph, even though such an idea is "against the run of play" as most praise has been reserved for fellow state-rescued bank, Lloyds. Now that RBS has reached a settlement with angry investors over former boss Fred Goodwin's disastrous rights issues in 2008, it is just waiting for a fine of up to $15bn over US residential mortgage backed securities. Oh, and an alternative to disposing of its Williams & Glyn network.
But then it should be free of legacy issues, with Chancellor Philip Hammond saying he is happy to sell the state’s remaining stake at a loss. RBS has grown its share of the mortgage market and is tipped to return to statutory profits next year for the first time in more than a decade. Although its outlook is tied to the UK economy, it is expected to return to the dividend list next year and risks are "far fewer than investors might credit".
Three consumer stocks – Unilever, Reckitt Benckiser and Diageo – and housebuilders and retailers could come up trumps in these uncertain times, suggested Midas in the Mail on Sunday. Unilever's food-to-household-products range, Reckitt's bathroom and kitchen range and Diageo's booze portfolio all share a characteristic in that they "sell millions of products to millions of people every single day", which won't change whoever is running the country. While all three are highly rated shares, they pay dividends are "bound to" deliver price gains over the long term.
House builders are recommended despite recent worries about stalling demand for new homes and falling house prices. However, the fact is that the UK still suffers from a chronic shortage of homes and most housebuilders offer solid dividends. Bovis Homes, thanks to its highly respected new boss, and Gleeson Homes, for its specialisation on affordable homes mainly in the North, are the two shares specially selected. The retailers are discounter B&M European Value Retail and Conviviality, which owns Bargain Booze and Wine Rack.
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