Friday newspaper share tips: AB Foods a long-term plan

Future growth in Primark as well as good prospects for sugar saw The Times’ Tempus rate Associated British Foods shares at ‘buy long term’ on Friday.

In a trading update for the 16 weeks to 2 January, the company said group revenue fell 2% from the same period last year, but was up 3% at constant currency.

Total sales at Primark, which is currently being rolled out across the US, were 7% higher at constant currency but up 3% at actual exchange rates due to the weakening euro against the pound.

The maker of Twinings tea said the like-for-like sales performance in the first seven weeks of the financial year was strong, benefiting from comparison with the previous year when the autumn was unseasonably warm.

In the following nine weeks, LFL sales were down due to warmer and wetter weather across Europe in the run-up to and over Christmas.

Tempus said despite the company’s split between food ingredients and clothes retailing, the trading update said it has its advantages.

It noted the focus in the past has been on Primark’s growth while sugar and food have been hit, but this update showed the situation has reversed due to the mild weather.

However Tempus had some questions about what happens when EU production quotes are lifted in October next year.

“Without going into too much detail, this will depend on the difference between the EU price and the world price,” it said.

“They are not too far apart, and that limitation on production and consequent tightening of stock levels suggests the damage may be limited.”

Tempus said AB Foods is a company that investors need to take a long-term look at, and subsequently rated it at ‘buy long term’.

In The Telegraph, Questor was keeping a close eye on stamp dealer and collectibles auctioneer Stanley Gibbons.

The company was forced to announce on Wednesday it was considering a number of fundraising alternatives to boost its working capital position before the end of the financial year on 31 March 2016, as shares sank over 10%.

It said that while an equity fundraising is an option, the discount to the group's net asset value at which any such fundraising would likely be priced could make it unattractive route to go down.

It said it will update the market on the progress of these considerations in due course.

Questor said the situation at the company has “worsened at an alarming pace”, with the main problem being related to Asia.

“Asian buyers could usually be relied on for steady sales of high-value, rare stamps, but the economic slowdown in emerging markets has seen buyers evaporate,” the column said.

“Stanley Gibbons is now left with lots of expensive stamps it is struggling to sell, but wages and other costs that still have to be paid.”

With the outlook not looking much better since Questor last warned investors in September, the pundit rated them at ‘sell’ again.