Clouds over BAA hide silver lining

PZ Cussons looks like good clean value; BWD proving it is not quite so grim up north

The Government may have felt the need to send tanks into Heathrow yesterday, and the measures to counter terrorism may have ratcheted up the indignities of airport security checks, but still the passengers keep coming.

The Government may have felt the need to send tanks into Heathrow yesterday, and the measures to counter terrorism may have ratcheted up the indignities of airport security checks, but still the passengers keep coming.

The phenomenal growth of low-cost airlines, the easyJets and Ryanairs, has been a particular boon to BAA, which owns seven of the UK's biggest airports. The number of passengers through its gates in January was 8.8 million, a jump of 10.7 per cent on the same month in 2001, and at Stansted, where the no-frills carriers tend to be based, growth was a whopping 30.5 per cent.

Nerves over what might happen to these figures if or when war breaks out in the Gulf has sent BAA shares down to their lowest levels since spring 2000, and down 27 per cent since we said the stock wasn't tempting last June. What appears to have happened since is that the company has fallen below the value of its assets – something that has happened only twice in recent years, during the first Gulf War in 1991 and in 1999 after the abolition of European duty-free shopping. Now is a good time to establish a shareholding.

There are reasons to be bearish, and it might be that the shares fall a little further. If regulators revise down their settlement on what BAA is allowed to charge for landing slots, there could be downgrades to profit forecasts. Ditto with a UK consumer downturn that would hit both passenger numbers and spending in BAA shops. Some analysts may also have to revise down estimates as a war with Iraq has an effect but, since this is hardly going to come out of the blue, the shares might actually respond very strongly to a short and successful conflict.

Similarly, the threat of cost overruns from the Terminal 5 project are overdone, since it has been seven years in the planning and started well. At these depressed levels, the stock is a buy.

PZ Cussons looks like good clean value

Paterson Zochonis, the unlikely sounding group behind iconic brands such as Imperial Leather, may have cleaned up confusion by rechristening itself PZ Cussons. But its refusal to get in a lather about investor relations means shoppers still know it better than most stock market watchers.

The group owns kitchen cupboard staples such as Morning Fresh washing up liquid and Carex handwash, and is expanding bath-side with Original Source shower gel.

While Cussons has been part of PZ since 1975, the group's African heritage means its first love is emerging markets. Messrs P and Z set up the company in 1884 to trade Manchester cloth for African palm oil from their base in Sierra Leone. Its biggest market is Nigeria, where it dominates local village stalls with African favourites such as Joy soap and Venus hair cream. Its business stretches the globe, with factories in countries as diverse as Poland, Indonesia and China and sales offices in Australia and the United Arab Emirates.

This strong developing market presence should provide plenty of future growth, though such markets are volatile and tricky to trade in. PZ keeps a cash balance to cover the long stock cycle while products are dispersed down dusty African tracks. In the six months to November, weak currencies, the Nigerian naira in particular, meant pre-tax profits fell 5.7 per cent to £21.3m. A poor year for equities also knocked £3.7m off its investment portfolio. Underlying trading, however, was strong, with operating profits up 18.3 per cent at £25.1m.

Both classes of shares are tightly held by the Zochonis family but the voteless "A" stock, at 677.5p, looks best value. Buy.

BWD proving it is not quite so grim up north

BWD securities is weathering a storm. The north of England investment manager is doing better than its own house broker, ING, which has had to close its historic office in Liverpool. BWD has offices in Leeds, Liverpool, Manchester and four other cities and has closed only Doncaster, which it inherited in an acquisition. There has been no cut, either, to the group's dividend, which yields 6 per cent on a share price up 25p to 305p yesterday.

BWD has evolved from a traditional stockbroking firm into a wider investment management group, offering financial planning, broking and portfolio management – and earning the loyalty of its private client customers as a result. BWD hasn't stopped them getting poorer as a result of the bear market but the total assets that it manages fell 13 per cent to £3.5bn in the year to November, compared with a stock market fall of 20 per cent. Unit trust sales have been strong.

In total, annual profits were down just £100,000 to £8.0m, when goodwill and last year's property profits are stripped out. The coming year is, as ever, dependent on the market, and it will undoubtedly be tough, but the company is about to get a handy cheque for £19m from selling its share administration business to Capita. Hold.