One to watch: API Group

Published on Monday 7 March 2011 21:15

API, a UK holding company involved in the manufacture and distribution of speciality foils and films, is a company in change.

It has not made a profit since 2005 but its fortunes should improve now that it has sold its loss-making foil operation in China.

This disposal extracts the company from its weakest part of the business and frees up management time to focus on its American and European packaging and foil operations. Here, the company is enjoying strong demand from its laminated products, which represent over 70 per cent of gross earnings; the tobacco and drinks sectors are particularly important.

API has had a torrid time over the past five years, hit by contract losses and flabby demand in the US; at the same time, Europe saw some very poor performances from the company's non-holographic foils.

There are still issues over high raw material costs but API's current rating seems to owe more to its past travails than its future prospects. The shares may not move smartly back to over 100p where they were in 2005, but endorsing a measure of faith in the company could prove rewarding.

API Group

17.5p unch

Scotsman says BUY

• The value of your investment could fall and you may get back less than you invested. Take professional advice if you have any doubt about the suitability of this company for your portfolio.

BROKER SNAPS

Vedanta Resources

2,365p -87p

Broker says SELL

Andrew Gibson, head of research at Galvan, said that while Vedanta posted record profits in January, "uncertainty regarding the future of its 5 billion proposed takeover of Cairn India is likely to lead to further share price underperformance until the deal is completed one way or another".

Psion

90p -1p

Broker says BUY

Evolution securities has a 150p target price for Psion. Analyst Simon Strong said: "We believe the dearth of formal guidance for the expected financial performance for 2011 will keep earnings expectations down and ultimately provide for potentially greater upside surprise."