Blue Oar

Following a positive pre-close missive from aviation and distribution services outfit Dart, Blue Oar has upgraded its earnings estimates from 8.1p to 8.6p, placing the AIM-listed venture on a p/e of 15.5 for March 2007. ‘Combined with recent share price weakness, this means that a valuation gap is opening up relative to comparable stocks in both the logistics and airline sectors,’ the broker notes. Nevertheless, Blue Oar is cautious concerning fundamentals, pointing out that Dart’s budget airline Jet2 is eating up cash and has contributed to debt trebling in 12 months to £16 million. Blue Oar views the shares as a hold.

After a trading update, analyst Douglas McNeill suggests £170 million-cap logistics company Christian Salvesen trades at an ‘unwarranted’ premium to its rivals TDG and Wincanton. Although the group’s revenues are running ahead of expectations, it could be at the expense of its margins – ‘often the way at Salvesen in recent years’. Even though net debt has been halved to £45 million, problems ‘persist’ at the key transport division and McNeill advises selling down to a price of 55p.

He prefers rival Business Post as it has ‘the best growth prospects in the logistics sector’ with its UK Mail subsidiary continuing to purloin market share from Royal Mail. ‘Impressive’ revenue growth at the AIM-quoted counter has been driven by the success of its three year-old UK Mail arm and should continue from cross-selling services to existing customers.

McNeill is forecasting earnings of 16.2p for the year to March recently ended, a figure that should rise to 21.2p in 2008. ‘Fundamental prospects fully justify the stock’s 25 per cent premium to the sector’ and the shares are worth buying ‘up to 525p’.