Greenfield growth

Both stocks are listed on the FTSE 250 and trade at bargain valuations of 5.9 and 8.9 times earnings, respectively. They are in favour today, but what does the long term hold?

John Laing is an asset manager that invests in greenfield infrastructure and has a market-cap of £1.54bn. Today’s results for the six months to 30 June show profits before tax of £174.3m, up from £36.6m in June 2017. Earnings per share (EPS) also multiplied, from 9.4p to 38.8p.

Piping hot

The group has also reported a 9.3% increase in net asset value per share since 31 December, together with a healthy £2.3bn pipeline of investment opportunities, including 12 shortlisted public-private partnership (PPP) positions worth around £325m. It also made realisations of £241.5m from selling its investments in project companies, up from £151.3m last year. Finally, its £1.26bn portfolio is up 18.2% since December.

The group is reducing its exposure to the UK, a good thing given the construction slowdown and post-Carillion PPP controversies, and expanding in Europe, North America, Asia Pacific, and beyond. It has a forecast dividend yield of 3.2%, with whopping cover of 4.9, which gives scope for progression. The stock trades at a forecast valuation of just 5.9 times earnings.

Earnings are forecast to rise 43% this year, although a dip of 5% is expected in 2019. Despite that, my colleague Roland Head recently rated it a long-term buy and investors are diving in today. Merits a bit more digging.

Tech bust

It has been a tough year for the £1.78bn online gaming firm Playtech. Its stock plunged last year as management warned it was set to miss performance targets, then crashed another 26% in July after a disappointing Asian performance triggered a profit warning.

No such worries today, as the stock surges despite a reported 15% drop in adjusted EBITDA to €145m, and a 34% drop in both adjusted profit before tax and adjusted EPS. The good news was a 4% rise in revenues to €436.5m. Clearly investors were braced for worse.

Playtech also reported net cash from operations up 51% to €222.5m and continued progress on balance sheet efficiency with the sale of its holding in Ladbrokes-Coral & GVC. The interim dividend per share was sustained at 2017 levels.

Child’s play

Chairman Alan Jackson reported “important operational progress and new licensee wins in key strategic markets, the UK, Europe and Latin America,” which led to “higher quality earnings for Playtech with Group revenue now 69% regulated.” Tough market conditions in Asia do not reflect on the core strength of the groups model, he added, while the recent Snaitech acquisition opens up the fast-growing Italian market.

Playtech is now valued at just 8.9 times forward earnings with a stonking forecast yield of 6.1%, and cover of 1.8. While earnings are forecast to drop 14% across 2018, next year looks brighter, with 14% growth pencilled in. By then, the yield could be 6.8%. It’s a gamble, but a tempting one.

The post These 2 FTSE 250 growth and income bargains are absolutely smashing the stock market appeared first on The Twelfth Magpie.

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harveyj has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

In my view, it makes sense for investors to focus on building their own long-term income machines. So today I’m looking at two stocks with asset portfolios that could provide reliable dividends over many years.

A strong turnaround

First up is construction and infrastructure group Balfour Beatty (LSE: BBY). I admit that a business involved in construction wouldn’t normally be a good choice for long-term investors. But hear me out.

The group’s turnaround under chief executive Leo Quinn is going very well. Half-year accounts published on Wednesday showed the group’s underlying pre-tax profit for the period rose by 126% to £52m.

Cash generation — a key test for businesses of this type — has also improved. The firm reported average net cash of £161m during the first half of this year, compared to £45m during the same period last year.

Looking ahead, the outlook is bright. The troubled Aberdeen ring road contract should be completed later this year. And Balfour boasted an order book of £12.6bn at the end of June, up from £11.4bn at the end of 2017.

This is the interesting bit

Mr Quinn says that the construction and services business’s profit margins are now largely in line with industry norms. The problem is that these are very low — typically 1%-3% for construction.

This type of high-cost, low-margin business doesn’t really appeal to me. But what does interest me is that Balfour Beatty often also takes an equity stake in the projects on which it works.

This has left the company with a £1.2bn portfolio of infrastructure assets. This provides both income and capital gains. For example, the group sold a 12.5% stake in the company which operates and maintains the M25 during the first half, raising £108m and generating an accounting profit of £22m.

With careful management, this portfolio could continue to provide reliable profits for many years to come.

Why bother with construction?

Balfour Beatty trades on a 2018 forecast P/E of 15.7 with a dividend yield of 1.9%. This doesn’t seem a very attractive entry point to me, especially given the low-margin nature of the construction business.

Personally, I’d rather own the group’s asset portfolio without its construction business. So I’d like to suggest a possible alternative.

Don’t build, own

John Laing Group (LSE: JLG) has an asset portfolio similar to that of Balfour Beatty. Its investments in the US and Europe include renewable energy projects, roads and schools.

Happily, John Laing doesn’t get involved in the risky and low-margin business of construction. Instead, this FTSE 250 asset manager simply invests in major infrastructure projects, either during construction or after they’re complete.

Performance has been good since the firm floated in 2015. Dividends have risen from 5.3p per share in 2015 to a forecast total of 9.1p per share this year. And the shares have risen by about 65%.

The stock currently trades at about 290p, which is slightly below the group’s last reported net asset value of 306p per share. At this level, John Laing has a forecast dividend yield of 3.1%.

I’d prefer to see a bigger discount, but I’d still rate this stock as a long-term income buy at this level.

The post Forget the State Pension: these FTSE 250 dividend stocks could help you retire in comfort appeared first on The Twelfth Magpie.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

If you’re looking at investing to help fund your retirement, this kind of share can help you to build an auto-pilot portfolio that pays out an inflation-beating income.

A 6% yield I’d trust

At the end of January, Legal & General Group (LSE: LGEN) was the third-largest holding in fund manager Neil Woodford’s flagship equity income fund. This week’s results from the insurance and asset management group suggest that these shares are one of Mr Woodford’s better picks.

Underlying operating profit rose by 12% to £1,616m, helped by a £332m boost from “mortality release”. In other words, life expectancy is increasing more slowly than expected, reducing the amount of cash required to fulfil pension obligations.

Why I’d invest

Legal & General was able to release a total of £1,352m of cash from its operations last year, comfortably covering a 7% increase in the dividend to 15.35p per share. That’s equivalent to a dividend yield of about 5.8%.

Analysts expect adjusted earnings to rise by 7% to 24.7p per share this year, while the dividend is expected to climb 6% to 16.2p per share. These projects give the stock a forecast P/E of 10.7 and a prospective yield of 6.1%. In my view, this remains a compelling buy.

More opportunities than expected

Legal & General is finding profitable investment opportunities in the property market. So too is infrastructure investment specialist John Laing Group (LSE: JLG).

The company invests in projects such as wind farms, motorways, tunnels and waste treatment works. These require upfront cash before generating an income and — eventually — being sold.

Much of the firm’s new growth is taking place outside the UK, in the USA and Asia Pacific regions. Last year saw John Laing’s pipeline of opportunities grow much more quickly than expected. This resulted in the firm making new commitments totalling £383m, nearly twice the £200m originally budgeted for.

To help fund these without excessive borrowing, the company announced plans for a £210m rights issue of new shares today. Shareholders will be able to buy one new share at 177p for every three shares they own.

This cash will be used to help fund the £383m of investment commitments made by the group in 2017. The balance of the new investments will be funded by cash from asset sales, which totalled £289m in 2017.

This could be good news

When a company holds a rights issue, it’s often a sign of financial distress. That’s not the case here. Today’s figures showed that the group’s assets under management rose by 12% to £1,472.3m last year, while year-end recourse net debt was just £28m.

Shareholders will receive a total dividend for 2017 of 10.61p per share, a 30% increase from 2016.

My calculations suggest that after the rights issue, the shares will have an initial net asset value of around 277p. That’s consistent with the group’s share price, which has fallen around 4% today to 265p.

Investors will need to trust management not to overpay or be indiscriminate when investing in new projects. But progress so far has been good. With the stock trading in line with my estimate of book value and offering a yield of about 3.6%, I think this could be a good buy-and-forget income investment.

The post Legal & General Group plc isn’t the only dividend stock I’d buy today and hold forever appeared first on The Twelfth Magpie.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Shares in the FTSE 100 company are down 5% year-to-date against a tough political and economic backdrop in South Africa, but I reckon the stock has been oversold as a major restructuring could help its shares push into higher ground.

Managed separation

The group is going through a “managed separation” which will see it split along its four underlying businesses: asset management, wealth management, insurance and banking. This strategy has the potential to unlock value for shareholders, as the value of its individual business units could be significantly more than the company as a whole.

With its shares trading at just 9.1 times its expected underlying earnings this year, a conglomerate discount seems to explain the valuation gap between itself and sector peers. What’s more, asset realisations allow the group to sell of its more highly-valued asset management business, locking in high prices in order to recycle capital to invest in its core emerging markets business.

Breaking up could bring long-term benefits too, as having standalone units enables each business to focus on what’s best for itself without being troubled about the broader impact on the larger group. The removal of central operational and debt costs is also expected to deliver annualised cost savings of £31m.

Meanwhile, City analysts may previously have been too pessimistic about Old Mutual’s near-term growth prospects as they’ve hastily revised their expectations upwards in recent months. The current consensus analysts’ forecast for underlying earnings per share in 2017 is 21.5p, up from 20.1p a year ago.

Dividend growth

Shares in infrastructure group John Laing Group (LSE: JLG) haven’t fared much better. After the company announced a £25.5m writedown on its long-troubled Greater Manchester Waste project in August, shares in the company have since lost more than 15% of their value.

The writedown was bigger than many analysts had previously expected, meaning the company would expect to earn a much smaller profit from the investment than it had earlier forecast. But although the Manchester project is one of its biggest single investments, representing roughly 8% of its investment portfolio at the end of 2016, it is only one of many.

Taken together, the company said its portfolio was performing “in line with expectations”. As such, the firm’s net asset value (NAV) has continued to trend upwards, with a 2.5% gain in the six months to the end of June, demonstrating its still-attractive outlook for long-term value creation.

Looking ahead, further growth seems likely as the global need for infrastructure is growing fast and governments are increasingly turning to the private sector for investment. Reassuringly, John Laing has a strong pipeline of investment opportunities in place, with commitments to date of £340m, well ahead of its original guidance for 2017 of approximately £200m.

But despite the upbeat outlook, John Laing currently trades at a forward P/E of just 7.6.

The post 2 low P/E stocks I’d buy and hold for the next 10 years appeared first on The Twelfth Magpie.

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Jack Tang has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Things haven’t exactly been rosy over at the Luton business in recent times, having said that, a situation that has led to two heavy profits falls in the past couple of years. Not only has easyJet been smacked by the impact of recent terror attacks across Europe on traveller appetite, but the effect of sterling’s steady slide, allied with intense competitive pressures, have also served to smack the bottom line.

But things are finally looking up for the FTSE 100’s orange-liveried lovely. EasyJet’s leading position in the low-cost segment, a market that continues to grow at a terrific rate, has been helped by a slew of rivals going to the wall in the past several months. This should help ease the need for the industry’s major players to continue slashing the cost of their tickets.

Meanwhile, easyJet’s desire to keep boosting capacity as well as the number of routes it operates also promises to deliver perky profits growth. The business shifted a record 80.2m passengers in the 12 months to September 2017, up 9.7% year on year, and the rapidly-improving economic backdrop across the continent promises to keep demand from holidaymakers as well as from travellers smoking nicely.

So City analysts are expecting easyJet to bounce back into profits growth with a 16% rise in fiscal 2018. And this creates a forward P/E ratio of just 15.2 times, a brilliant level upon which to latch onto the flyer’s exceptional long-term growth outlook, in my opinion.

Build a fortune

I would like to look at another share that, like easyJet, could make you a fortune in the years ahead: John Laing Group (LSE: JLG).

In a bright end-of-year update the infrastructure giant advised that total investment commitments have clocked in at £340m in the year to date, smashing its original goal for 2017 of £200m. The FTSE 250 firm advised that the result underlines the strength of its pipeline of investment opportunities across its three key regions of Asia Pacific, Europe and North America.

The company estimated that total realisations should be around £256m for this year, also smashing to smithereens its prior target of £200m.

And John Laing has struck an upbeat tone looking ahead, advising: “The pipeline of new investment opportunities remains strong in both PPP and renewable energy, especially in Australia, the US and Canada.” The company added that it is part of nine shortlisted PPP bids due to reach financial close either next year or in 2019, five of which are in North America and four are in Europe.

Now while the business is expected to endure a 34% earnings fall in 2017, it is expected to get the bottom line moving higher again from next year (a 12% advance is currently anticipated). And I am confident that John Laing’s broad geographic and sector footprint should lay the foundation for sustained profits growth as global infrastructure spending grows.

In my opinion a forward P/E ratio of 7.9 times makes it a steal right now.

The post A dirt-cheap FTSE 100 stock that could make you rich appeared first on The Twelfth Magpie.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

With most eyes on the FTSE 100 these days, it’s easy to overlook bargains among the smaller companies making up the FTSE 250.

Shares in infrastructure investor and manager John Laing Group (LSE: JLG) have gained 63% to 304p since the firm relisted on the FTSE in 2015, and dividends are already expected to yield 3.1% this year and next.

There’s a 20% fall in EPS forecast for this year, but that still leaves the shares on a forward P/E of only 7.4 for the year, dropping as low as 6.8 on the 9% EPS rise predicted for 2018. Unless there’s something seriously wrong with the company, that looks like a serious over-reaction to me and a very likely bargain buy.

Latest update

First-half results are due in August, and the company has just put out a pre-close update, showing investments made so far in 2017 of £111m spread between Australia and France. Total investments for the year are expected to amount to around £200m.

Realisations of £151m have been made too, via the sale of projects in Poland, Hungary and the UK, with the firm’s guidance for the year remaining stable at £200m.

Laing’s outlook appears impressive to me, with chief executive Olivier Brousse saying: “We plan to continue to scale-up our model based on our expertise as an originator, investor and manager of greenfield infrastructure projects.“

There’s a pension deficit of around £30m, but that’s falling, and I don’t see any serious debt problems — so I really can’t understand the reason for the low valuation of the shares. All I can put it down to is the Brexit hit on property and infrastructure firms in general, and John Laing doesn’t appear to be especially vulnerable.

Banking opportunity

I reckon we’re in a great period for contrarian banking investments right now, eschewing the big (and widely watched) names and focusing on smaller upstarts — like the UK’s ‘challenger’ banks, and overseas ones with impressive-looking potential.

I looked at Georgia-based BGEO Group recently, and I’m feeling attracted to compatriot TBC Bank Group (LSE:TBCG) too. TBC has only been listed on the London Stock Exchange since August 2016, yet already the shares have climbed by 50%, to 1,571p. And on forecasts, they’re still looking very cheap indeed.

We have an 18% EPS rise on the cards for this year, followed by a further 11% in 2018, and that gives us P/E valuations as low as 7.7 and 6.9 respectively — and very tasty-looking PEG multiples of just 0.4 and 0.6, where anything under 0.7 is typically seen as an attractive growth valuation.

Progressive dividends

And there are dividends too, with forecast yields of 3.4% and 4.3% for this year and next, so why are the shares so lowly-valued?

The obvious reason is Georgia, and it’s understandable if investors are shying away from emerging markets in general and the ex-Soviet region in particular — governments can be unstable, and we can’t guess at what political crises might emerge.

But I’d argue that banking in Georgia surely can’t be riskier than it was in the UK just before the crash, and I see TBC as an attractive candidate for those seeking growth and not afraid of a little bit of risk along the way — but I’d only include it in a diversified portfolio.

The post Two FTSE 250 growth stocks at bargain basement prices appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.