City File: Banana split for Geest

DESPITE storm damage to the Windward Islands banana crop, stockbroker Panmure Gordon is bravely recommending investors hold Geest shares.

The importer revealed on Friday that Tropical Storm Debbie may have wiped out 22 per cent of its crop on 10 September. Its shares fell 30p to 211p on the news.

But it is hoping the European Union will allow it to bring in bananas from other sources under its Windward Islands quota.

'If they are allowed to do that, their second-half profits won't be too badly hurt,' said Michael Bourke, an analyst at Panmure.

Mr Bourke thinks Geest will reveal interim profits of pounds 16.3m on Tuesday, a sharp increase on the pounds 3.7m it made in the same period last year.

Banana prices have recovered to 50p a pound from 25p a year ago, and Geest's volumes increased 5.5 per cent in the first half.

SUPERMARKET shares are becoming a buy, says stockbroker Morgan Stanley.

The superstores are bouncing back from the deep discounting that slashed their margins in the second half of 1993.

Profits look set to rise by 10 per cent on like-for-like sales up 2 per cent, argues Morgan's retailing analyst, Nick Bubb.

'They've proven that they have more flexibility than the discounters,' he says.

Food stores also enjoyed a good summer with customers eager to buy high-margin items such as soft drinks and ice cream.

But p/e ratios are still cautious, Mr Bubb says. Tesco, which reports on Tuesday, is currently trading at a multiple of 13, compared with a market average of about 15.5.

The company is expected to report interim profits of pounds 242m, pointing to year-end results of pounds 567m. Buy.

THE impending flotation of Thorn Lighting has cast a fresh spotlight on one of the stock market's overlooked companies - Emess, which last week produced half-year profits up from pounds 1.1m to pounds 1.6m, in line with expectations.

But there is an intriguing anomaly at Emess: its commercial lighting division is reckoned on a trade sale valuation to be worth as much as the combined pounds 90m value of the group's ordinary and preference shares. That leaves the domestic lighting division in for nothing, which is clearly far less than it is worth.

The commitment to repay the preference stock will restrain growth, but the ordinaries are a solid buy at 33p.

BSG INTERNATIONAL, the motor components group, looks set for a profits surge.

Interim results this week are too early to show the first fruits of the Jessups takeover, and will come out at same- again profits of around pounds 8.5m. However, analysts expect that to lead to a full-year figure up from pounds 10.6m to pounds 14.8m, and another 50 per cent increase to more than pounds 21m next year.

Earnings per share should do even better, racing from 1.8p to 4.9p over the two years.

This makes it extraordinary that the shares should still yield no less than 6.2 per cent at their current 65p, only 5p above their 1994 low. Buy.

ARAN ENERGY shares could be an exciting play in the next few weeks, on strong hopes of a strike near BP's Schiehallion reservoir off the Shetland Islands. The sands are expected to be proved oil-bearing when results are announced around the turn of the month.

Aran, capitalised at just under pounds 100m, stands to rocket if the strike is confirmed. Worth a punt at up to 40p.

THIS week Hays, the personnel and distribution conglomerate, should reveal that profits for the year to June are up from pounds 66.6m to more than pounds 85m.

The division, which places accountancy personnel, should have done well as economic activity picks up. But the most interesting facet of its announcement is likely to be distribution, in particular in France and Germany where it transports food to supermarkets and chemicals to the car industry.

At 280p, on a prospective earnings multiple of 20, the shares are good value.

Tadpole Technology, the workstations computer maker, last week confirmed it was poised to win a substantial order from the US defence department.

The deal, predicted by Cityfile, will enable it to bring home the bacon from next year. Although delays in shipping some orders will to push Tadpole into a pounds 1.3m loss in the year to 31 September, taxable profits of pounds 10m are likely for 1995. The shares, at 387p, are a buy.