Sunday share tips: Aggreko, Sumo Group

Questor told readers to 'avoid' shares of Aggreko ahead of the temporary power supply company's strategic update on 17 November.

As if the uncertainty about the firm's need to adapt to the ongoing energy transition global was not enough, chief executive officer, Chris Weston, had "barely delivered" over the past five years.

Part of the company's poor performance can be put down to its reliance on the oil and gas sector for a fifth of its turnover.

It has also faced falling margins in its long-term projects for utilities in areas where the national grid is lacking, which had once been a cash cow for the outfit, as competition has increased.

On the upside, Weston has promised to achieve profits of £80-100m in 2020 and believes he can increase returns on capital.

Analysts at RBC also point out the company's solid balance sheet and net debt at just 1.2 times earnings.

"The future, it seems, revolves around decentralisation and decarbonisation. Part of the opportunity is to provide backup to solar and wind power generation, which can be weather dependent," the tipster said.

"Aggreko has the same challenge as BP and Shell – to marry rewards for the planet with rewards for shareholders – and the same doubts exist even though the shares trade cheaply at 10 times 2021 forecast earnings. True, a brighter, greener future could beckon.

"Aggreko is one to watch but better to await some more upbeat news before investing here. Hold off for now."

People have taken the World Health Organisation's advice about video games to heart, resulting in a "huge" pick-up in demand for Sumo Group, the Mail on Sunday's Midas column wrote.

The health watchdog's recommendation of video-gaming earlier in 2020 as a way for people to remain in touch during lockdown has turned it into the favourite past time of billions, even ahead of Netflix or Amazon Prime.

And since contracts are long-term, revenues are "steady and robust".

According to the tipster, analysts were anticipating a 25% jump in annual sales to reach £61.5m in 2020 and a further surge to £93m in 2021.

The company's profits on the other hand were seen little changed for 2020, but were expected to rise to up to £17m in 2021.

Sumo has also expanded into the US.

"Midas recommended Sumo in September 2018, when the shares were £1.64. Since then, they have risen 59 per cent to £2.60. The increase reflects strong growth and rising confidence in Sumo's prospects.

"Existing shareholders should hold on to the stock. New investors could even snap up a few shares."