Sunday share tips: Flybe, United Utilities, FairFX

Sell shares in Flybe, was the verdict of the Sunday Times' Inside the City column as prospects for profits look limited. A week and a half away from full year results, shares in the regional airline are flying at 53.5p, half the level they started 2015 and valuing the company at a £55m discount to its solid cash pile. Boss Saad Hammad was helicopetered from his role as chief commercial officer at EasyJet in summer 2013, with the shares at 47p and a pledge to pilot Flybe to a "new and exciting" era.

The shares have flown as high as 150p two years ago on the back of a strategy of adding routes to the likes of Edinburgh, Dublin and Exeter and improved service levels. A £150m rights issue was carried through on the wave of excitement. But some new routes were quickly discarded due to competition from rivals or cheaper car journeys, plus sometimes a lack of demand. An oil price hedging strategy has limited Flybe's ability to cut prices, although management are still hopeful of prospects for the coming summer thanks to a 17% increase in capacity.

United Utilities shares are worth holding, according to Questor in the Sunday Telegraph. The water watchdog has chewed up the company's profit prospects somewhat in its latest five-year regulatory cycle, enforcing lower prices and slower price hikes, together with a hefty investment commitment. From 2017, competition is also increasing in the once-monopolistic market for business customers, with residential competition coming in the next decade.

While there is long-term reassurance, the latest full-year results showed the regulatory price cut reduced profits and kept sales on a par with the previous year, with the spending on infrastructure adding to net debt. As well as long-term certainty about pricing, UU also benefits from being able to tie up its £6.3bn debt to the market's super low interest rates for the next half-decade. This contributes to a near-concrete progressive dividend policy but does not justify the massive premium to the rest of the FTSE 100.

Shares in FairFX are 'well worth a punt' said Midas in the Mail on Sunday. A smaller player in the holiday and business foreign currency market, FairFX caters to a British holiday market that will spend £35bn aboard in 2016, plus a smaller business focused on business customers where clients buy pre-paid currency cards for employees on trips overseas. Whereas exchange bureaux at airports take a 10% cut for changing money, and banks and the Post Office take around 4% or 2.5% for using an ATM abroad, clou-based FairFX aims to take an even smaller cut of 1% to 1.5% but cutting out bureaus and kiosks and other costs.

The AIM-listed outfit has also developed an app, which customers can use to buy cards or top up existing ones. Customers can stock up their pre-pay cards when the pound is strong way ahead of their trip abroad. Having raised £5.3m in March, management plan to increase marketing spend this summer to increase the customer base from the current 530,000 consumers and 2,000-odd business customers, which include the McLaren Formula One team. In April's annual results there was a 35% increase in sales and a solid gross profit but this fed through to a £3.4m pre-tax loss due to investment in growth. One more year of losses is forecast before FairFX breaks even.

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