Wednesday newspaper share tips: Grafton Group, John Laing Group

UK and Ireland-based construction materials group Grafton continues to build its margins and expand its international footprint, with the shares’ current valuation offering a “good” entry point, The Times’s Tempus said.

Like its rivals, the company has not been able to provide an explanation for the unexpected weakness evident in the repair and maintenance market in late summer.

Nonetheless, at last count margins had risen from 5.3% to 5.7% and management continues to believe 7.0% is achievable over the next two to three years. That translated into a 17% jump in pre-tax profits to £118.9m.

Its business in Ireland is also firing on all cylinders.

Belgium continues to be its weak underbelly, but the recent acquisition of Isero in the Netherlands is far more promising, with margins at between 8.0% to 9.0%.

Having come back a long way since last spring, at 666p the shares are selling at 14 times’ earnings, which looks like a good entry point.

Buy for the long-term, Tempus recommended.

John Laing, the developer, is increasingly looking like a safe haven amid the turbulence of global capital markets, Tempus said.

The company, which buys into public-private partnerships and renewable energy projects, helping to build them before selling them on for a profit, provides greater upside through its shares than picking up the stock of the infrastructure funds which it sells to.

If it can maintain its rate of divestments then its pledge to distribute between 5.0% to 10.0% of the proceeds to shareholders translates into a dividend yield of about 3.5%.

Nevertheless, can it find further PPP projects into which to invest? John Laing is casting its net further afield and looking at projects in North America and Australasia. In the States, governments are looking at the idea as an alternative when it comes to replacing ageing infrastructure.

“I like them for their clear defensive properties and that decent yield. Decent income and safe, defensive stock, buy,” Tempus concluded.