Tuesday tips round-up: Premier Oil, TUI

Sooner or later the larger oil companies will look to take advantage of the recent drop in the price of crude to buy-out some of the smaller independents. One of those potential take-over targets is Premier Oil. The company is also attractive as it has nearly completed the re-organisation of its portfolio, which will raise $300m. Then there is the expected start to production at its 60%-owned Solan field west of the Shetlands. More significantly, the outfit has found a less expensive way of developing its Sea Lion field off the Falklands without a partner. That had been holding the stock price back. Despite all of the above, the shares are trading at a steep discount to their estimated net asset value. “Buy for the long-term,” says The Times´s Tempus.

TUI continues to face non-negligible risks in the form of a higher pound and continuing overcapacity in the airline industry. However, the firm is holding out the promise of €170m in merger benefits. Indeed, the nil-premium merger between TUI Travel and its German majority shareholder, TUI, will lead to the creation of a company that will dominate its sector. Worth pointing out, the balance sheet will be extraordinarily strong. Once an online accomodation business and its 22% stake in Hapag-Lloyd container shipping are disposed of the firm may be left with €2.5bn of cash on its hands. Then there is the stock´s 6.2% dividend yield. The shares are worth holding even if only for that income, Tempus says.