Investment: The Week in Review - Rock Is a Hard Place
Foley, Stephen, The Independent (London, England)
Aircraft are flying less frequently with fewer passengers. That has lengthened the time between maintenance checks, a staple revenue for Rolls- Royce. As it secures new maintenance deals, investors should remember it is the customer, rather than the company, that is likely to have dictated the terms. Some 1,3000 planes are still out of service, mothballed in various deserts around the world. It is very hard to see any upswing in profitable orders to make engines for new jets. A dividend yield of 5 per cent offers some degree of protection amid the uncertainties, but Rolls-Royce shares are likely to drift south.
Old Mutual is the largest financial services group in South Africa. Its businesses there are slick operations, and the company's dominance means opportunities for growth are scant. With 80 per cent of profits coming from the country, it will be impossible for Old Mutual to hedge against the faltering rand. The depreciation of the currency also poses problems for South Africa's attack on inflation which, if not brought under control, could make consumers increasingly unwilling to save, hitting Old Mutual's new business figures in its core market. Avoid.
With customers hooked on its famous Warhammer series, Games Workshop's profits are back on an impressive trajectory. The recovery from an earlier sales wobble in the UK - effected by making shops more welcoming to war- games fans - should give confidence that the directors know what they are playing at. Analysts are instructed not to get carried away with talk that the new Lord of the Rings game could become the biggest thing in the toybox, but investors have already chased the shares high enough.
ML Labs has proved a disastrous stock market investment, but the chairman Kevin Leech is at least apologetic. He is days away from finishing his year-long search to improve shareholder value and, as well as putting the For Sale sign on a swath of assets, is on the verge of a deal to merge ML's respiratory drug development business with another group. The hope is this will crystallise the portfolio's value higher than the present ML share price. The stock could be lucrative for short-term gamblers.
The Dublin-based designer of microchips for mobile phones is feeling the pinch. Many of Parthus's recent licensing deals have been agreed on less favourable terms than usual. It warned of a weak first half, but repeated its intention to become profitable in the second half. Meeting that goal will depend on an upturn in the electronics market. Fortunately, Parthus still has a $123.3m cash pile, and licence agreements with some of the world's biggest names in electronics. The shares remain high-risk.
Marlborough Stirling specialises in software and outsourcing for providers of investment products, life assurance and mortgages. With sales of life cover and home loans booming, financial services firms have turned to the company for help satisfying demand. Marlborough Stirling has avoided the profit warnings spewing from the other tech firms, yet its shares are cheap relative to the software sector. But there was no news on trading since New Year or on the outlook for 2002 when the company updated the market this week. Investors should hold back until a clearer picture emerges at March's annual results.
A deal to produce the TX1 black cab in China rescued the taxi designer Manganese Bronze last month, but its components business has had a tough time, due mainly to a single unprofitable contract. Zingo, a project to develop technology for hailing your nearest taxi from a mobile phone, has had delays. Analysts expect only a tiny profit before costs associated with Zingo this year, so now could be a good time to lock in profits. …