Stocks to watch in April


MP Evans and REA Holdings are two rapidly-expanding palm oil producers taking advantage of the growing prosperity of emerging markets in Asia.

Evans's businesses include palm oil plantations in Indonesia, beef cattle in Australia and property development in Malaysia. There are plans for rapid expansion of both the palm oil production and the cattle herd. The target for oil (used both as staple food and as a biofuel feedstock) is to raise production from 200,000 to 500,000 tonnes a year by 2015.

Analysts think this is setting the company's profits on a steady growth course with pre-tax returns for the year just ended expected to reach £26.3 million (£20.7 million in 2010).

The forecast consensus is for the group to make £34 million this year and £43 million next. That would bring the price/earnings multiple down to only 7.3. The shares, trading on the Alternative Investment Market (AIM) at 443.5p, look good value.


Equally intriguing is the growth story emerging at REA Holdings. REA has been around the South East Asian plantation business for more than a century and has now evolved into a highly profitable operation, with palm oil production from one large area of the East Kalimantan region of Indonesia running at over 600,000 tonnes a year. It has also acquired coal-mining concessions in the area and has ambitions for a large open-cast coal-mining development.

Profits for the year just ended are expected to rise from £32 million to £51 million, while pre-tax returns of £64.6 million appear on the cards for the current year. The shares, at 605p, sell on a very modest forward multiple of 5.3. Chairman Richard Robinow has a 30% stake, while funds run by Prudential and Artemis between them hold another 20%.


Gulfsands Petroleum's mix of oil interests in Iraq, Syria, Tunisia and in the Gulf of Mexico has inevitably meant that the shares are likely to continue to perform in a volatile manner for the foreseeable future.

But the company continues to deliver impressive results. The next bulletin should show profits up from £28.5 million to £49.6 million, with some analysts projecting profits of over £100 million in 2013.

With the stockmarket currently valuing the business at only just over £200 million, the prospective earnings multiple on the shares is a lowly 2.7.


We put Whitbread under the spotlight a year ago at 1,750p, but by August the shares had slithered down to 1,409p in the then-hostile climate for equities. But the shares bounced strongly last autumn, touching 1,700p at the end of October.

The market thinks the Olympics will be great for the company's range of hospitality brands (which include Premier Inns, Costa Coffee and Beefeater).

Profits should rise from £312 million for the year just ended to £335 million in the current year and £375 million for 2013/14. Such an outcome brings the forward-earnings multiple down to 10.9. Dividend yield should go up to 3.4%.


Heritage Oil's decision to focus exploration on unstable regions such as Iraq and Uganda has cost it dear. As high as 585p two years ago, the shares have recently dipped as low as 160p.

Losses are expected to tumble from £28 million to £17.5 million for 2011 after a doubling of oil revenues.

Those revenues are expected to double again this year with losses whittled down to around £8 million.


The contrast between Heritage and Ithaca Energy, another oil company we featured, couldn't be greater. Ithaca's low-risk approach - squeezing extra oil from mature North Sea fields - has attracted a takeover approach after the shares ran up from 90p in October to 187p recently.

Analysts now expect production to rise from around 5,000 barrels a day to over 20,000 by next year. Profits for the year just ended are expected to double to £49 million. The shares featured in this column a year ago were at 173.5p.


Tipped here at 56p on recovery hopes last year, the shares of restaurant chain Prezzo touched 71.5p in January. Profits of £16 million (£14 million) are on the cards for 2011. Brokers confidently predict they will hit £17.55 million this year and over £19 million next.


We focused on Faroe Petroleum shares a year ago just as they hit an all-time peak of 205p. Results for 2011 should be out at the end of March with the group expected to swing into profits for the first time with positive pre-tax returns of £26.1 million, compared with a loss of about £26 million.

Profits of over £50 million are forecast for the current year. Broker Panmure Gordon recently set a target price of 243p for the shares. Unfortunately, the price has been very volatile despite continued exploration success in the North Sea.

The shares sank to as low as 130p in October but have since recovered to 165p.


Shares in Game Group, Europe's leading retailer of computer games, have plunged from 67p to just 5.13p in the year since they featured here as having "considerable speculative attractions".

Unfortunately, the company fell victim to weak pre-Christmas consumer spending despite new product launches.

It now appears to be heading for losses in the order of £30 million compared with a £23 million profit last time, and may be forced to sell many of its non-UK stores.

Such a strategy might bring the group back to profit next year but in the current year losses are likely to persist.

Note: since this article went to press, Game has filed for administration.


Shares in specialist insurance broker Brightside singularly failed to perform in the past year. Mentioned here at 36p, they have slipped back to as low as 15.75p towards the end of January.

However, a reassuring statement insisting the group was in line for record results and increased earnings in the current year has comforted the market, sending the shares back over the 20p mark.


The merger of the North Sea assets of Petrofac with those of the Swedish group Lundin created EnQuest in 2010, the largest independent offshore oil explorer in the UK.

The group is mapping out a growth formula for itself by building interests in lower-risk developments. It has just become the operator of the recently discovered Kraken field and also has half a dozen other mature producing fields. With high oil prices these fields are generating healthy cashflows for the group.

Upcoming results should be spectacular with profits of £247 million on the cards compared with only £35 million last time. The analysts' consensus prediction for this year is for £255 million and £335 million in 2013. That would cut the price/earnings multiple to a modest 9.6.

The shares have been quite volatile since they came onto the market two years ago and hit a peak of 158.5p a year ago. They look excellent long-term value at current levels.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

This article was produced by our sister publication Money Observer