Shares digital

With results thin on the ground the Shares team rounds up the trading hits and misses of the week

Corin (CRG) 481.5p HIT

Sales in the second half of the year have been driven by the shipment of its hip resurfacing device Cormet and associated instrumentation to Stryker. Total sales are forecast at £36.5 million, up 28% over the year before. UK sales rose 2% in challenging market conditions, but competition in Germany dragged sales down by 3% over the year. Sales in the US are in line with expectations. Broker Landsbanki says the shares are now trading on a 'substantially more reasonable FY2008 PE of 28' and has therefore upgraded its recommendation from hold to buy.

Shares says: Relationship with Stryker is promising and further good news should be on the cards this year. BUY

by: Rachel Robson

K3 Business Technology (KBT:AIM) 146.5p HIT

The rising tide of retail volumes being sold online should continue to play into the hands of the supplier of Microsoft-based business process software and services to small and medium-sized corporations in the manufacturing and retail industries in the UK.

K3 expects multi-channel retail orders to be a strong feature of 2008. This should help the Burnley firm build on last year, when the firm laid down fresh foundations for future growth, through the acquisition of McGuffie Brunton and Index Computing in the manufacturing area and Landsteinar Nederland in retail.

Shares says: Fears of a retail slowdown have mashed the stock, which looks very cheap. BUY

by: Russ Mould

ASOS (ASC:AIM) 229p HIT

The online fashion specialist showed why it's such a long standing Shares favourite, its Christmas trading update among the few to impress. With sales jumping 86% in the seven weeks to 20 January, the company is promising to beat forecasts significantly this year, prompting previous analysts to up their estimates yet again. House broker Seymour Pierce is now predicting profits of £6.7 million, and is confident enough to pencil in a pre-tax figure of £12 million for 2008/9. ASOS also looks almost certain to pay its first ever dividend this year.

Shares says: Strong momentum will drive the shares higher. BUY

by: John Marshall

The writer holds shares in this company

Kewill Systems (KWL) 79.75p HIT

A pair of acquisitions made last spring neatly supplemented good underlying growth at the supply chain control software expert, which has reassuringly just pulled in some large orders from the USA.

Any continued rally in the US dollar would also boost the Surrey firm, which is rolling out a hosted service offering to reduce its dependence on lumpy and unpredictable licence income and offer its software as a service (SaaS) to reduce earnings volatility.

Shares says: No sign yet of any economic slowdown pressuring client budgets and the stock is cheap. BUY

by: Russ Mould

Pearson (PSON) 669p HIT

The trading update from the Penguin book publisher and FT owner made pleasant reading for investors as it calmed fears that the company’s exposure to the US would dent growth. Chief executive Marjorie Scardino says that every five cent move in the dollar rate affects its adjusted EPS by around 1p per share.

However, its largest division, Education which is mostly US focused is said to be performing very well and is expected to report ‘its strongest year ever’. There was also good news from its UK operations. Despite concerns about the advertising markets, it says FT ad revenues have achieved sustained growth and that it has also improved margins while operations have also improved at Penguin.

Its $950 million acquisition of Reed Elsevier’s (REL) Harcourt Assessment business has recently been approved by the US Department of Justice after it agreed to sell several units, which paths the way for the deal to be fully completed. Analysts reacted well to the update with Numis setting a 825p target price for the shares, 23% above their current level.

Shares says: A solid update which has restored faith in the city. HOLD

by: Susanna Twidale

Peter Hambro Mining (POG:AIM) £12.86 HIT

Gold production grew by 14% to 297,000 with similar selling price gains to $668 per ounce. Plans for one million ounce annual production from 2009 is now 2011. It blamed the Miromir deposit, which is bigger than expected and requires further exploration. Hambro’s £1 billion market cap is valued on production profile. With output seen lower, Hambro could see a negative re-rating. It will move to the main market and pay dividends.

Shares says: We upgrade to Hold in light of gold prices forecast to remain strong against weak economic conditions. It was obvious that the 1m oz target would be delayed. Confirmation should ease negative analyst comments and reduce volatility in Hambro’s stock. HOLD

by: Dan Coatsworth

Humberts (HUM:AIM) 7.8p MISS

Having issued a profit warning in October stating underlying profit for the year to end-September 2007 would be below market expectations, the estate agency now believes full-year results are in line with forecasts. However, the shares slumped a whopping 71% over two days to an all-time low of 7.8p after the group revealed that the first half of the new financial year was likely to see an overall loss. Trading in its core residential agency business has been disappointing since September, with volumes considerably below expectations. Although the group currently has its own cash resources, it is looking into raising additional funding to strengthen its financial position and has already started discussions with potential funders.

Further negative news came in the form of the resignation of both chief executive Max Ziff and chairman Tim James. Both leave with immediate effect and John McLean, who was appointed to the board in December, will take on the role of chairman, taking responsibility for the ‘day-to-day running of the group’.

Shares says: A grim start to 2008 and prospects look far from inspiring. AVOID

by: Rachel Robson

Hat Pin (HTP:AIM) 41.5p MISS

Profits will be 25% lower than market forecast because of trading problems in its Talent Business subsidiary. The division’s CEO has been replaced. Post restructuring, Hat Pin is targeting 70% of profit from Asia and the Far East. Analysts have downgraded the stock rating and earnings forecasts. UK trading has weakened since December, blaming ‘deteriorating’ economic conditions. A 62% drop in the share price since October could attract a takeover approach, but don’t expect the bid premium to make up for the lost ground.

Shares says: Recruitment agencies are already being downgraded on poor investor sentiment. Exit anyone that has the added pressure of falling earnings. SELL

by: Dan Coatsworth

Tullow Oil (TLW) 571p MISS

After a superb 2007, which saw the share price shoot up 60% and the company ascend to the blue chip index, West African-focused Tullow has a lot to live up to. To that end an upbeat update would obviously have been a good way to start the year for the company.

Unfortunately the company’s forecast for oil production in 2008 was slightly below market expectations. On a brighter note management announced that it would be drilling eight wells in six countries in the next quarter. It has already spudded a follow-up exploration well on the WCTP licence offshore Ghana – an area that provided a lot of the excitement last year – with results expected towards the end of February.

Focus is also on Uganda where drilling on the much anticipated Ngassa well has been hit by delays, the well should now reach target depth at the end of March. Production of 73,100 barrels a day was up 13% on the same period last year and broker ABN-Amro has reiterated its ‘buy’ rating on the stock and set a target price of 680p.

Shares says: Potentially massive upside from drilling in Ghana and Uganda. SPECULATIVE BUY

by: Tom Sieber