Companies: CIU   

Following a positive ‘pre-close’ update, energy sector support services group Cape has earned earnings upgrades from analysts. Cape said calendar 2007 final figures, set for release in March, will beat City forecasts with record levels of business seen in the first half of last year having continued in the second half.

Significant sales growth was seen across all regions last year – Cape's main markets are the UK, the Middle East, the CIS, the Far East and Australasia – and three recent Australian acquisitions made positive contributions to the figures. Affirmations regarding management’s firm focus on cash and a prediction regarding a ‘sustained period of strong organic growth’ buoyed the share price.

Cape, whose fortunes have been restored under respected chief executive Martin May, offers growth twinned with good defensive characteristics. Global energy demand is growing and Cape’s energy-producing clients need to extend the life of assets. Its large customers are increasingly looking to outsource non-core services and work with safe suppliers. The blue-collar services Cape provides aren’t sexy, but they are essential, ranging from access scaffolding, insulation and fire protection to specialist cleaning.

Numis Securities' Francesca Raleigh has selected Cape as one of her small-cap tips for 2008. Setting a 366p target price for the shares, she has upgraded her 2007 forecast earnings figure by 10% to 23p, from pre-tax profits of £33.5m, following the upbeat trading update. For 2008, investors should at least expect profits progression to £42.9m and 25.5p of earnings, although those numbers are likely to receive further upgrades once full-year results are confirmed. Trading on modest prospective multiples of 10.7 and 9.6, Cape is a strong buy.

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