Bowled over by Allied Leisure

When we tipped Allied Leisure last year at 26p, we said there was a strong recovery under way, as a new management team got to grips with the problems at the former Wimpey franchisee, with Neil Goulden brought in from caterers Letheby & Christopher as chief executive. The bulk of the recovery looks to be over, with the shares, now 49.5p, having settled down in recent months. But there should be more to go for. The company's decision to focus on ten-pin bowling has seen the business acquire Granada's bowls division, for pounds 19.8m funded by a pounds 15m rights issue, to make it the biggest bowls operator in the country. Bowling is a cash-generative business, and the company's debt is being paid down faster than expected. The plan now is to seek out a new investment opportunity: current options include branded food outlets; machines, or multi-user leisure facilities. Future gains may not be as rapid, but the shares remain a firm buy.

Still on the leisure trail, Fitness First is coming to AIM via a placing at 80p a share, to raise pounds 7.54m after expenses. As the name suggests, Fitness First is a health and fitness club operator. It currently has six clubs, with plans to open up to eight more a year over the next three years. Started in 1993, the business reported sales of pounds 2.68m for the year to July 31, 1996, with a pre-tax profit of pounds 504,000. Fitness and health has had a mixed track record on the stock market; Pineapple was a disaster for investors, but David Lloyd Leisure made a packet for shareholders when it was sold to Whitbread for pounds 200m. Fitness First looks like a well- managed business, with a reasonable track record. On balance, the shares merit a buy.

ULTRA, a fast-growing defence and aerospace contractor in niche areas of these markets is a recent new issue, which was listed last month at 250p. The shares, now at 292.5p still justify a buy tag. Broker Merrill Lynch forecasts pre-tax profits of pounds 14.5m this year, rising to pounds 17m in 1997, with earning s per share growing at a rate of 254 per cent, from 4.3p in 1995, to 15.2p this year. That brings the forward multiple down to a not unreasonable 16 times earnings, and 14 times in 1997.

Merrill analyst Barnaby Wiener reckons that while a p/e of 16 may sound pricey, it is also cheap compared with similar stocks, such as Cobham and Fairey, both trading on a prospective 21 times. Buy.

Since when does a worthy US investment bank base its prospects for a company on an article in Vogue? When the company in question, of course, is Harvey Nichols - or Harvey Nicks as it is known among members of the Absolutely Fabulous crowd. Morgan Stanley analyst Victoria Melendez cites a lengthy excerpt from a piece in the October edition of the magazine, on what the fashion victims of Leeds are after: "Women in the North aren't interested in bargain hunting; they want the best and they don't mind paying for it. The day-to-day uniform among smart young women in Leeds is a pair of pounds 300 black stretch Dolce & Gabbana trousers, tiny white T- shirt, black stretch Robert Clergerie boots and a nylon handbag by Prada." Doubtless, one might find the odd such woman frequenting the shopping malls of Leeds, but there must be a lingering doubt as to whether there will be enough of them to fuel the new store's sales. A touch of scepticism over journalistic licence might also come in useful. The shares, (367.5p) look expensive, and rate a hold.

Reuters Holdings (764p) was back in the news on concerns over the Chancellor's plans to scrap tax credits on share buybacks. It caught the company at a bad time, when it had announced it would return pounds 613m to shareholders, but before it had confirmed the terms. The shares were off significantly, before recovering. But the underlying dilemma - of what to to do with the bunce - should not deter existing or prospective investors. The shares remain a buy.