Tuesday newspaper share tips: OneSavings Bank and Wolseley

Business is booming for OneSavings Bank, which has just clocked up a £35m profit after selling a £250m securitisation of pre-crisis mortgages, writes the Financial Times' Lex column.

The buy-to-let lender intended to use the dosh to originate more mortgages, and its loan books have swollen by more than a third each year since 2013.

And yet, noted the column, shares in OneSavings Bank have lagged Lloyds'. This was true also of other buy-to-let lenders Shawbrook and Aldermore.

Lex reckoned valuation could be the reason, observing that the stock trades at a twice-2017 book value, which was rather high for a European bank.

It also looked to a list of bearish points, among them increasing purchase taxes, Brexit and further cuts to tax relief of buy-to-let mortgages.

"Yet lending keeps growing," wrote the column. In April it was up 16% on the year to £18.5bn, according to Council of Mortgage Lenders' estimates.

But also Lex contended that these factors would help so-called professional landlords -- those with four properties or more -- who could absorb the higher costs and would want more services, such as setting up tax-efficient corporate structures.

Property consultancy thought that the proportion of UK homes rented out privately would rise four percentage points to 22% in the next five years.

"A share contraction in the property market would hit buy-to-let lenders hard," said Lex.

"But anyone worried about a housing crash should not own shares in a UK bank."

Meantime, The Telegraph's Questor column also dipped into the property-related theme, slapping a "Sell" opinion on the hsares on plumbing supplies business Wolseley.

It pointed to a 10% slump in the outfit's shares after a grey third-quarter trading update.

"There could be more pain to come as slowing growth at the FTSE 100-listed company leaves the shares exposed," contended the column.

Wolseley generated most of its revenue and profits in the UK, and warned that industrial markets -- contributing about 14% of the US' £8.3bn revenues -- experienced weaker demand.

"The company operates the Ferguson brand in the US, where orders have been lower due to a slump in activity from oil and gas-related customers," Questor said.

It also pointed the global commodity slowdown, which had put a damper on Wolseley's Canadian and Nordics businesses, and noted the tough trading in Wolseley's home UK market.

"Here (in the UK), like-for-like revenues were down 0.4%, during the third quarter as repairs and maintenance remain weak. The company will report on a review of UK operations in August."

Nevertheless, Wolseley did post 2.8% like-for-like revenue growth.

"The concern is that the US juggernaut is showing signs of slowing and that leaves the shares trading on 15-times forecast earnings looking exposed," Questor noted.

"The company reports annual results on September 27, with the market expecting revenue of £14.3bn and pre-tax profits of £860m, giving 246p in earnings per share."

The issue for investors was the building supplies business had a track record of being extremely cyclical.

"Looking back to the previous peak in 2006, the shares fell almost 90pc during the next two years as the slowdown hit. Sell."