Tuesday tips round up: BG Group, Telecity and Weir



LONDON (ShareCast) - In The Times Tempus writes that the fall in the BG Group (LSE: BG.L - news) share price since last Wednesday's profits warning looks unjustified. The company was not saying that large chunks of its reserves were not actually in the ground, after all, simply that some would take longer than expected to reach production. Significantly, the market in the company's corporate bonds barely moved; any serious threat would have been reflected there. So it is another case of the market overreacting to any bad news. Analysts' target prices for BG are all over the place, ranging from £10 to £19, though only one has a "sell" note out. The shares, one of Tempus' tips for this year, will take a while to recover, but, at their present level, this looks like a long-term buying opportunity.

Tempus writes that the Finnish capital -Helsinki- is the main hub through which traffic from the huge Russian market reaches the West. This explains the decision by Telecity Group (Berlin: 3TH.BE - news) to spend €33m on acquiring a market-leading position, with the purchase this summer of two operators of data centres there. Unfortunately, the market reacted negatively to the deal, fearing that Telecity, which needs a steady rate of growth in capacity, was getting to the point where it was having to pay too much for this expansion, which would dilute earnings. The shares fell 8.5% to 835p yesterday. This looks overdone and it brings down next year's earnings multiple to about 23. The rest of the third-quarter trading statement suggests the company is still trading robustly, while the 15MW capacity added so far this year, to 83MW, is a record for the outfit. Telecity says it has sites with sufficient planning permission to get it to 135MW across Europe (Chicago Options: ^REURUSD - news) in three to five years. If this rate of growth can be achieved, the shares continue to look like a good long-term bet.

Questor in The Telegraph writes that Weir Group (Other OTC: WEIGF.PK - news) bears must have been smarting yesterday, as the shares were the biggest gainer on the FTSE 100 (FTSE Index: EO100.FGI - news) after its third-quarter update. Questor continues to like Weir and the markets in which it operates. All of its end-users are in sectors with good long term prospects. US gas prices are unlikely to stay this low, particularly as the country could start exporting gas at some point in the not too distant future. Questor remains in the bull camp. Weir is a market leader with its technology and innovation and the exploitation of shale gas is expected to spread to other areas of the world. Trading on a 2013 multiple of twelve times earnings and yielding 2.2%, the shares remain a buy.


Featured Content