Compass, IHG, Fuller's...

Whatever its intrinsic merits, the attempted purchase of ISS of Denmark by G4S for £5.2 billion has focused attention on the more cautious acquisition strategy being pursued by another big name in the outsourcing sector, Compass Group, says the Tempus column in the Times. Compass is buying Integrated Cleaning Management for an undislosed but probably small sum, in the context of the group as a whole, with the company having revenues of £61 million in the latest financial year. This takes Compass further into cleaning and support services and away from its core food operation. The shares have always commanded a high multiple because of that record of growth, but 13 times' earnings for the year just started does not look unreasonable. A strong hold, says the Times.

The US economy saw tepid growth in the second quarter, with analysts increasingly worried about the strength of the recovery. But this uncertain backdrop has not stopped InterContinental Hotels, the world's biggest hotelier, from powering ahead in the past nine months, with the US arm seeing strong demand, writes the Investments column in the Independent. It has registered growth in revenue per available room (revpar) - a key measure for the hotel industry - at all of its seven brands across the pond, including InterContinental, Crowne Plaza, Holiday Inn and Hotel Indigo. We believe that IHG - which trades on a forward earnings multiple of just over 8 - is still a buy and will rebound. Future investors should also note its shares are forecast to yield more than 6 per cent next year. Buy, recommends the paper.

Fuller, Smith & Turner, the west London brewer and pub owner, bought no pubs at all last year and in December lost to Young's in bidding for Geronimo Inns, notes the Tempus column in the Times. This summer, it lost another bidding auction, to buy the Capital Pub Company, to Greene King this time. The battle became distinctly bad-tempered, with the target management making it clear that they would prefer to be bought by anyone but Fuller's. Instead, Fuller's is taking a longer route, buying individual pubs or small numbers in the same deal. It has acquired ten so far over the past six months, including the famous Coach & Horses in Soho and The Lamb & Flag in Covent Garden, the last for an undisclosed but apparently generous sum. Yesterday the company added another five new pubs from Marston's in a deal worth £16 million, including another couple of London landmarks, The Hand & Flower in Olympia and The Wellington in Waterloo. Also on the list, The Pavilion End in the City. It brings the total estate to 365. The shares are trading on 17 times' this year's earnings; high enough, given the difficult times in the market, says the paper.

It is a good time to snap up a few shares in City of London Group (COLG), suggests the Investments column in the Independent. Originally a PR outfit, the group brought in Eric Anstee as chief executive a couple of years ago to set up investment businesses to fill gaps in the market. The company's shares haven't done too well this year, dropping 22 per cent and valuing COLG at less than £13m. But if Mr Anstee's fledgling businesses show their worth, there could be the chance to hitch a ride before others notice. Not for the faint-hearted but perhaps worth a small flutter, according to the paper, which recommends to buy.

 
Sharecast 25.10.11