Today I am looking at three London lovelies that should be attracting the attention of savvy value hunters.
Banco Santander
Shares in global banking behemoth Santander (LSE: BNC) have understandably taken a pasting over the past week as the Greek economic crisis has dominated the front pages — indeed, the Spanish firm is currently trading at levels not seen since the summer of 2013. Still, for more optimistic investors I believe the bank could prove a lucrative pick in the years ahead.
Firstly, Santander’s reduced exposure to bombed-out areas like the Spanish property sector leaves on much steadier footing than it was in the aftermath of the 2008/2009 financial crisis. Indeed, the bank’s continued success in European markets like the UK — not to mention hulking presence in massive growth markets like Latin America — make it a terrific selection for those seeking strong earnings growth, in my opinion.
The City expects the bottom line at Santander to expand 11% in both 2015 and 2016, leaving the business dealing on P/E ratings of just 11.4 times and 10.3 times for these years, just above the benchmark of 10 times that represents unmissable value. Meanwhile an expected dividend of 20 euro cents per share this year creates a decent yield of 3.3%, a readout which I expect to march higher thereafter in line with earnings.
Marks & Spencer Group
High Street stalwart Marks & Spencer (LSE: MKS) was recently trading lower in Tuesday’s session following a disappointing trading update. This showed like-for-like general merchandise dip 0.4% during April-June, reversing the rare 0.7% uptick in the previous three-month period. Still, this reversal was largely down to unseasonal weather during the period, the company said, raising hopes that Marks and Sparks’ turnaround story may still be broadly in tact.
And this belief would be grounded with good reason, I believe — sales in the critical internet sector leapt a stonking 38.7% during the period, while demand for Marks & Spencer’s premium Food remained extremely strong. With the retailer also expanding aggressively into lucrative Asian markets like India, China and Turkey, I expect earnings to rocket higher in the years ahead.
This view is shared by the number crunchers, who expect sales to edge 7% higher in the year ending March 2016 and 9% higher the following year. Consequently Marks & Spencer sports attractive earnings multiples of 15.3 times and 14 times for these years. On top of this, prospective dividends of 18.8p per share and 20.6p for 2016 and 2017 respectively create tasty yields of 3.5% and 3.8%.
Babcock International Group
Wider risk aversion across financial markets has also weighed on Babcock International (LSE: BAB) over the past month, but I believe this weakness represents a fresh buying opportunity for opportunistic investors.
The London firm saw revenues leap more than a quarter during the year concluding March 2015, to £4.5bn, its expertise across many hot engineering sectors allowing it to traverse the effect of reduced spending from the oil sector. And Babcock International’s terrific relationship with its customers allowed it to secure 90% of contract rebids during the period, helping its order book almost double to £20bn. The firm also won an exceptional 40% of new contracts that it had bid on.
The City is therefore rather upbeat on Babcock International’s prospects, and anticipate a 12% and 11% earnings jump in 2016 and 2017 correspondingly, creating very decent P/E ratios of 14.1 times and 12.7 times. Projected dividends of 26.1p per share for this year and 29.2p for 2017 are handy-if-unspectacular, creating yields of 2.4% and 2.7%, but I expect these to head skywards in the coming years as profits take off.
