Tuesday newspaper share tips: G4S, Dignity

True, stock prices don’t go up in a straight line, but before yesterday’s bounce shares in G4S were trading at their lowest since early 2009, The Time’s Tempus pointed out.

Investors breathed a sigh of relief the security services outsourcer G4S didn’t announce any more ‘bad news’ in its unscheduled trading update.

At its full-year results the company had unveiled £255m in write-downs for various reasons, spanning everything from onerous contracts to losses on businesses being hived off.

Yet more bad news lies ahead, Tempus said.

G4S has yet to learn whether that most onerous of all its contracts, a programme for asylum seekers into the UK, will extended for an additional two years beyond the summer of 2016 – costing it another £57m.

Standard&Poor’s recently ruled out binning its rating on the company’s debt but no one can rule out an eventual rights issue to cut its £1.75bn debt pile.

Nor was there any mention of the asset disposals which are expected, because chief Ashlay Almanza was set to address a business services conference tomorrow.

“The shares are at a very low ebb and cheap for the sector, but there could be further bad news to come and conceivably a rights issue. Avoid for now,” Tempus said.

Mark Twain’s famous phrase “reports of my death have been greatly exaggerated” would seem to apply to funeral parlour operator Dignity, The Daily Telegraph’s Questor team said.

Yes, a lower death rate at the start of the year took its toll on the company’s share price. Over the first three months of 2016 the death rate fell 11% to 156,000.

However, the outfit had delivered excellent gains for investors over the past decade, as it consolidated the highly-fragmented UK market.

After a 2015 that saw increased deaths as a result of the cold winter and a bad flu season the firm says the death rate in the UK is now returning to its normal level, which has remained remarkably stable at between 540,000 and 600,000 a year since half a century ago.

That steady business had driven the shares over-1,000% return since they floated in 2004.

Furthermore, Dignity still has room to expand as most funeral parlours in Britain continue to be independently owned.

Even so, its premium rating of 22 times earnings seems a bit toppy; should the UK economy slows down then a rating of 15 times might be more appropriate.

That said, for the long-term investor this remains an excellent share that offers a small but steady income with an impressive track record.

‘Hold’, Questor said.