Why is the FTSE 100 holding back from the 7,000 level while some of its stars are soaring? It’s the laggards that are putting the brake on the various London indices, and here are five of the culprits:
Centrica
The reason for the Centrica (LSE: CNA) slump is clear, with the already-slipping shares being dumped after the owner of British Gas and Scottish Gas slashed its final dividend due to the need to conserve cash. At 238p as I write, Centrica shares are down 28% over the past 12 months.
But with even the rebased dividend now looking set to deliver a 5.5% yield this year, Centrica looks cheap.
HSBC
HSBC Holdings (LSE: HSBA) has been in the news for all the wrong reasons, with allegations that it helped wealthy clients in Switzerland to evade tax looking pretty damning. The resulting price drop has helped push the shares down 16% from last September’s peak, to 557p.
But come on, the shares are now on a P/E of only around 10 with a 6% dividend forecast for this year, and the cash would be 1.6 times covered by earnings — that has to be too cheap, doesn’t it?
RSA
Shares in RSA Insurance (LSE: RSA) are down 16% since May last year to 421p, pushed lower after the firm failed to meet its forecasts for 2014. But it was a transformational year, which saw a £275m pre-tax profit just a year after RSA recorded a 2013 loss of £244m. The dividend was reinstated, albeit at a modest 0.5% yield, but the City has 3.4% penciled in for this year and 4.3% next.
Boss Stephen Hester said “We can look to the coming years with much sounder strategic and financial foundations“, and with EPS growth back and a 2016 P/E of 12, I reckon RSA is undervalued too.
Fresnillo
Fresnillo (LSE: FRES) took a sharp dip when 2014 results were released last week, and we’ve seen a 29% fall since late January to 652p. Despite record silver production and gold production in line with expectations, the yellow stuff’s plunge to five-year lows led to a performance described as merely “reasonable” by CEO Octavio AlvÃdrez.
With dividends very low and conditions not looking ripe for a new bull run for gold any time soon, I can see why people are shunning Fresnillo, and I join them.
PayPoint
PayPoint (LSE: PAY) shares have taken a 30% dip in 12 months, to 836p, after the shine started to dull on this growth star. Forecasts from the payment processing specialist have been cut back a little recently, and that often leads to a downwards rerating for growth favourites — and single-digit EPS rises forecast for the next three years won’t excite the multibagger-seekers.
But we’re now looking at a P/E of only 14.6, dropping to 12.7 on 2017 predictions, and dividend yields are already set to reach 4.5% and are rising. Looks oversold to me.