One to watch: FirstGroup

Following the takeover of Laidlaw in 2007, FirstGroup is the biggest outsourced provider of student transportation in the US and owns Greyhound, the only national provider of intercity coach transport in North America.

While FirstGroup's UK operations have proven relatively resilient in recent years, its North American business has been beset by problems.

However, under a new management team, we believe these issues are being addressed. Margins at its school bus business, hit by increasing costs and public spending cuts, fell significantly over the past few years. Cost savings of $65 million and improved operating practices should help these stabilise.

A recent trading statement indicated Greyhound revenues grew by almost 4 per cent in the quarter to June, an encouraging sign following the lacklustre performance seen in the previous two years.

FirstGroup's stock appears undervalued. Improving performance in North America and opportunities for new franchise wins in the UK should benefit the company over the next year.

FirstGroup

347.8p -4.4p

Scotsman says BUY

• This article is for information and discussion purposes and does not form a recommendation by the manager to invest or otherwise.

BROKER SNAPS

Lookers

50.25p +1.25p

Broker says ADD

AHEAD of today's interims from Lookers, Arden Partners cut its full-year pre-tax profit forecast for the car dealer to 35 million from 36.5m. Arden said: "We expect to see the shares bounce, with management likely to put its best foot forward to justify the rejection of the recent 70p Trefick consortium bid."

Desire Petroleum

20p +0.75p

Broker says REDUCE

EVOLUTION Securities said there was "no rationale" for Monday's rebound in Desire Petroleum's share price after fellow Falkland Islands-focused oil and gas explorer Rockhopper deliver a positive update on its Sea Lion well. Evo noted: "Sea Lion could extend into Desire's acreage – at a stretch."