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Why Ashmore Group plc, GlaxoSmithKline plc, Keller Group plc & GKN plc Look Set To Charge Higher!

Today I am looking at four London beauties due for a positive re-rating.

Ashmore Group

I believe that shares in Ashmore (LSE: ASHM) are due for a bounce as conditions in key emerging market improve. The business has suffered from weakened client activity over the past year, but with cyclical problems now abating and the financial services play boosting its exposure to new regions — Ashmore recently announced it will apply for a licence to invest directly in the Saudi Arabian stock market — I expect profits to march steadily higher.

The City expects Ashmore to see earnings rise 9% in the year ending June 2015, creating a P/E multiple under the benchmark of 15 times that indicates decent value, at 14.1 times. And despite a projected 4% dip next year the firm still boasts a decent multiple of 14.9 times. On top of this, estimated dividends of 17.1p per share for this year and 17.8p for 2016 create jumbo yields of 5.8% and 6%.

GlaxoSmithKline

Pharmaceuticals giant GlaxoSmithKline (LSE: GSK) has pulled out all the stops to transform its R&D pipeline and battle the ongoing problem of patent expirations across key drugs. The Brentford firm has a terrific record of getting its product from lab bench to pharmacy shelf, assuaging fears over the long-term impact of exclusivity losses, while growing healthcare demand from developing territories should further boost revenues growth in my opinion.

Despite these factors, GlaxoSmithKline remains an absurdly-undervalued stock in my opinion, even though a predicted 16% earnings slip this year creates a slightly-high P/E multiple of 17.3 times. Indeed, an expected 10% rebound in 2016 jolts the ratio to just 15.4 times. And the pills play’s pledge to pay out a dividend of 80p per share for the next three years produces a market-mashing yield of 5.8%.

Keller Group

I am convinced that Keller (LSE: KLR) should enjoy stellar profits growth as construction activity ratchets through the gears. In particular, Keller has brilliant exposure to the US — around two-thirds of group earnings are generated from this territory — and is confident in the outlook for the world’s number one economy, exemplified by the $40m acquisition of North American diaphragm wall builder GeoConstruction just last month.

Despite Keller’s brilliant growth record, the market still seems to have underpriced the London business, and expected expansion of 15% and 12% in 2015 and 2016 correspondingly creates ultra-attractive P/E multiples of 12.2 times and 11 times. And Keller’s cheapness is illustrated by PEG numbers below the value yardstick of 1 through to the close of next year. And for income hunters, predicted payouts of 27.4p per share for this year and 29.9p for 2016 create handy yields of 2.7% and 2.9%.

GKN

With engineer GKN’s (LSE: GKN) core operations firmly in the sweet spot of automobile and aircraft construction, I believe that earnings are poised to surge higher in the years ahead. The Redditch firm is a major supplier to blue-chip manufacturers across the world, and just this month secured a long-term contract with Boeing to supply parts for its 737 MAX, 777X and 787 Dreamliner planes.

Overhanging problems in the defence and agricultural spaces are expected to push earnings 8% lower in 2015, although this still leaves GKN dealing on a dirt-cheap P/E ratio of 12.7 times. And a predicted 11% rebound next year drives this figure to just 11.6 times. Meanwhile, projected dividends of 8.9p and 9.6p per share for these years create tasty yields of 2.5% and 2.7% respectively, sweetening the investment case.

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Royston Wild owns shares of GKN. The Motley Fool UK has recommended GlaxoSmithKline. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.