One to Watch

DAIRY Crest is an integrated dairy business focused on two market-leading categories: foods and dairies. Unlike its competitor Robert Wiseman, the company has decided to target market-leading positions in branded and value-added markets. The company has five core brands: Clover, Country Life, Frijj, St Hubert and Cathedral City.

The core brands have delivered strong growth recently, driven by significant advertising and promotion spending. A good example is Cathedral City, which has seen retail sales move from 89 million in 2004 to 201m in 2009, yet the brand still only accounts for about 13 per cent of the UK cheddar market, which is dominated by own-label brands.

Dairy Crest has made excellent progress cutting debt, which should fall to less than 350m at the year end, representing a reduction of 140m over the past 18 months. Although capex will be required to modernise some of its dairies, management is confident it can reduce net debt by a further 20m in 2011.

The stock offers a yield of 5 per cent and management has committed to a progressive dividend policy. The shares trade on a P/E of only 8.4x2010E, below its ten-year historical average rating of 10x and at this level the risk appears to be on the upside.

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

Legal & General

89.9p -0.8p

Broker says SELL

CITI has maintained its "Sell" recommendation on Legal & General despite the insurer posting "better-than-expected" 2009 full-year results. The broker added: "Downside risks include higher annuity capital requirements, lower returns and asset market volatility. Upside risks include improving credit markets."

Greggs

493.2p -8.3p

Broker says BUY

SHARES in bakery chain Greggs still have further to rise, according to analysts at Evolution Securities, which reiterated its "Buy" rating. The broker said: "The Greggs share price has risen 16 per cent relative (20 per cent absolute) in the last month. There is still plenty more scope. The visibility of the growth is high: the Greggs format works and the roll-out programme is ramping up."