Thursday newspaper share tips: Stocktake on Tesco

The Telegraph’s Questor said the real issue for the supermarket giant isn’t the profit or any other financial results – it’s the debt mountain. It has a total debt load of £10.8bn, down to £8.6bn once cash reserves are taken into account.

The sale of Tesco’s South Korea business should reduce that down to around £5bn, but Questor highlighted that equity investors would be left with net assets of £6.2bn – a return of 15p per share if the business were to close today.

It said that the supermarket holds lots of risk and few attractions, and advised investors to sell.

The Times’ Tempus isn’t going quite that far, and advising traders to avoid it for now. While it also cited the company’s concerning debt level, it highlighted that the supermarket believes it can bring it down using cashflow. However with halfway profits nearly wiped out by interest costs and tax, it said that the next dividend is a long way off.

Tempus pointed out that shares are still trading at the bottom of their range and with a price earnings multiple well above 30, “this is for gamblers only”.

Meanwhile, Tempus is suggested Diageo’s stock should be bought long term. It tidied up of its brewing portfolio in Jamaica, Malaysia, Singapore and Ghana with Heineken, and there are a few more moves on the cards.

Commodities should help the company, and there’s hope that the US market may start growing again. The column said that while the shares are expensive compared to earnings, it has a 3 per cent yield and could be worth a long-term punt.