Brokers say five of our top 10 companies are in line for a particularly good stock market performance in 2010 while the others have been given neutral or hold recommendations.
Analysts do tend to be optimistic – there is little money to be had in sell recommendations – but they have a good overall track record and their similar five tips for last year enjoyed some remarkable gains.
Aggreko, for example, more than doubled in value over the year while John Wood (up 50%) and Cairn
(75%) also trounced the stock market average.
Scottish & Southern Energy (11%) and FirstGroup (8%) were only slight disappointments.
Similarly, Standard Life was the only sell recommendation last year and justified its poor rating with a share price fall over the year.
The brokers continue to favour SSE, FirstGroup and Aggreko this time round, although Cairn and Wood have been dropped after their strong share price performances.
Their other buy tips are Weir (a new entrant to the top 10) and Aberdeen Asset Management as it absorbs its major Swiss acquisition.
Royal Bank of Scotland, still Scotland’s biggest company by stock market value, remains left out in the cold although two out of 11 brokers polled by Hemscott believe its shares are worth a flutter at below 30p each – the others have sell or hold recommendations.
Most believe that Stephen Hester has been doing a decent enough job since taking over from Sir Fred
Goodwin but say the bank’s future is out of his hands with the government owning 84% of the business and a four-year programme of asset disposals due to be confirmed in February.
Businesses to be sold include the insurance arm – perhaps through a public share offer – the global merchant services operation and its massive commodities trading venture together with RBS branches in England and those of NatWest in Scotland.
The bank is also due to shed the accounts of some two million small and medium sized companies, involving £20bn of assets.
Along with investor uncertainty, another 15,000 employees could lose their jobs in addition to the 16,000 who have already left.
All this means that the group is unlikely ever to return to the good old days which saw it earn nearly £10bn profits in 2007 and shareholders can only dream of an eventual return to the dividend list with impairment charges likely to swallow trading profits for years to come.
In contrast, Sir Bill Gammell’s Cairn Energy is threatening to overtake Standard Life to become Scotland’s third largest company as it enjoys first fruits from its vast Indian oil discoveries.
Figures due at the end of March are expected to show final losses of around the £10m mark although shareholders will not be bothered if charges are a good deal higher in view of the riches to
come – most analysts expect nearly £600m to flow into the group’s coffers in 2010.
They believe that Sir Bill, pictured right, and the group could yet enjoy another bonanza through its Greenland exploration activities with its first drill ship scheduled to start operations in the summer and a chunk of finance already in place after the Malaysian state oil company agreed to pay $70m for a 10% stake in six licence blocks.
Edinburgh-registered Premier Oil is also hoping for exploration success in 2010 with no fewer than 10 drillings pencilled in for promising fields stretching from Indonesia and Pakistan to Norway and the UK North Sea.
Annual figures, also due in March, are expected to show a profits downturn from £190m to around £140m but brokers expect a good bounce in 2010 as the company enjoys the effects of higher prices on increased production after splashing out some £350m on acquisitions in the North Sea and Vietnam.
Aberdeen oil services group John Wood will be hoping that others will join the Scots companies in stepping up their exploration programmes because its profits are set to suffer from the global downturn in 2009.
Followers still believe that the company will gain from cost cutting to record approaching £200m profits for last year but have pencilled in expectations for a further modest slippage in 2010 while hoping there still could be some pleasant surprises.
Aggreko, the Glasgow-based temporary power specialist, certainly managed to keep analysts on the hop last year as they were forced to upgrade expectations when chief executive Rupert Soames produced a series of better than anticipated trading updates.
Most now expect to hear that the group lifted annual profits by 20% at the height of the global recession last year, thanks to some hefty orders from Africa and other Third World regions which made up for a downturn elsewhere.
While the analysts believe that profits could slip back in 2010, directors have positioned themselves for growth with increased capital spending and the company could yet surprise again.
Glasgow pumps and valves group Weir is another share which has attracted buy ratings in anticipation of increased profits and dividends for 2009, although analysts accept it has yet to see the
full effects of the recession as much of its work relates to orders placed
some time ago.
Scottish & Southern Energy lost a few of its fans last year when it declined to cut its charges to fully reflect the global downturn in energy prices, though it was no worse than its competitors in that respect.
Brokers take it as read that SSE boss Ian Marchant will report a small dip in profits this year as a result of the fall in demand caused by lower industrial production. But they again tip the shares because of their high dividend yield which means that investors can pick up a virtually guaranteed £6 or more for every £100 invested.
Better news is in prospect for another two of Scotland’s major financial institutions with Standard Life predicted to benefit from higher asset values as a result of the stock market revival and Aberdeen Asset Management due to gain full benefits of last year’s Swiss acquisition.
Both enjoy buy ratings from the majority of stockbrokers although that could change very rapidly if
global markets turn sour during 2010.
Aberdeen’s FirstGroup should make the most of its revenue protection agreements with the government to achieve higher profits despite a downturn in commuter traffic because of rising unemployment and there are high hopes of further dividend increases over the next year or so.