Companies: NFC    SVN    TNO   

Analyst Susan Gordon took the opportunity of an upbeat AGM statement and acquisition to reiterate her positive stance on AIM-quoted corporate client Sovereign Reversions (see page 24).

She finds the share price fall to 331p from a 420p high earlier this year ‘puzzling’ given the buoyant market for equity release assets, ‘spurred by some compelling arguments in favour of growth in the use of equity release by elderly homeowners’. Gordon argues, ‘Sovereign’s portfolio of UK residential housing stock is significantly more defensive than that of the major commercial real estate groups.’ She points out that the group trades at a discount to net assets and has plenty of financial headroom for acquisitions.

Tenon’s figures add up
Another company receiving a rapturous write-up is Tenon, upgraded from add to buy following results for the year to June. Profits of £12.4 million were ahead of forecasts on sales of £137.5 million, with organic growth complemented by good cash generation and levels of debt better than expected at £10 million. Forecast profits for 2008 are £14.2 million and Ben Archer sees a forward price to earnings ratio (p/e) of 10.7 – based on 5.3p of earnings per share and a 57p share price – as undemanding.

Next pleased Charles Stanley’s research team with an 11 per cent interim profit rise to £198.2 million. Based on a forecast rise in earnings to 156.6p (146.1p) per share for January 2008, the FTSE 100 retailer trades on a forward p/e of 11.9 with a decent yield at £18.61 per share. That valuation ‘is starting to look attractive’, says Charles Stanley, ‘but with the trading environment likely to become tougher in the second half, the recommendation remains hold’.