Since then it has made a strong recovery to 147p with most of the gains coming

Since then it has made a strong recovery, to 147p, with most of the gains coming in 1995. Despite this, there are fans out there who believe the shares are seriously undervalued. As Mark Loveland, of stockbroker Dresdner Kleinwort Benson (not, it should be noted, the company’s house broker), points out in an enthusiastic recent research note, sales and earnings per share growth could average 12 per cent and 15 to 20 per cent a year respectively over the next three years. If that were to be true, then the shares are seriously undervalued, trading only 8.7 times current year forecast earnings. A more realistic valuation urged by Mr Loveland is 235p.The question investors need to ask, however, is why the company has failed to grow pre-tax profits in any significant way over the last 10 years In 1989, pre-tax profits were pounds 6.16m. Last year it filed a figure of pounds 5.57m, after hitting the buffers in 1992.With chairman David Phillips owning 50 per cent, management looks set to remain in the same hands for some time.The company has formed close relationships with its suppliers, and the industry boom can only boost its prospects.

It is also catching more high- margin business by helping manufacturers install and configure software on certain systems, as well as doing the final assembly work on some lines.There are good reasons for the shares to continue making progress But remember the maxim: once bitten, twice shy.. A little over a year ago, the outlook for Slough Estates, Britain’s largest industrial landlord, was dull. But since then there has been a strong uplift to its fortunes. At its last results, in January, the company boasted a 7 per cent rise in pre-tax profits to pounds 75m. Its net asset figure per share of 285p showed a 7.1 per cent gain. And for once, its discount to net asset value has disappeared: the shares, at 288p, now trade on a small premium to NAV – more than up on most of its peers. A year ago, the shares were trading at a 15 per cent discount.
Even so, sensible investors would be well advised to look back at its track record.

Ten years ago, the shares were about 210p: a less than sensational level of growth.And likewise, the shares have underperformed the leading blue chip index of stocks. Many claim property stocks are little better than a surrogate for gilts; on this outlook, and given how gilts historically have underperformed inflation, there seems to be some truth in this judgment.Much of the damage came in 1992, when property values had been ravaged by recession. The worst is behind the company; the question is how long the uptrend in property values and rental income can continue. Slough’s finance director Dick Kingston is confident, and sees no reason to suppose that matters will not continue in this vein for a while.Slough’s portfolio has shown some decent gains. It rose 4.8 per cent, with the best gain, of 5 per cent, from office space. Industrial warehouse values rose 3.2 per cent; this compares to a 0.6 per cent gain for the national average, and 1.8 per cent for offices.An interest rate rise should have little impact, although it would put a drag on rising values.

For now it sounds like more of the same, and Slough might reach a point where it has recovered credibility to justify its premium to NAV.Further support of this outlook comes with its development programme, with pounds 150m to be invested this year, marking the largest ever expansion by the company in the UK.Slough has earmarked pounds 60m-worth of disposals to part-fund this expansion, and with gearing last reported at a manageable 52 per cent, its balance sheet should not be stretched. Of the developments under construction, 71 per cent have been sold or pre-let. The company has concluded a significant deal in Hammersmith, with the sale of development land to Disney for office space. Developments under way include the Glasgow Buchanan Galleries shopping complex, where it has pre-let space to Habitat and Next There should be more to go for: buy.. Voter apathy about the general election may spill over into the stock market this week as investors see little reason for jumping headlong into purchases ahead of polling day.

“We’re in for a dull couple of weeks of very light trading,” said John Parrot, head of research at Commercial Union Asset Management.
Two noteworthy events this week will be the start of trading in Alliance & Leicester, the first building society to convert to a bank this year, and Friday’s report on economic growth for the first three months of this year.Lethargy has already set in. Trading on the London Stock Exchange declined 19 per cent last week from the past three months’ daily average of 900 million shares.Trading is likely to be volatile as market makers dig deep into inventory to fill orders. Stocks are set to fall, as investors factor in a post- election interest rate increase, and its dampening effect on equities.”The UK has multiple problems of rising interest rates, a strong currency and a maturing earnings momentum,” said Roger Monson, equity strategist at Daiwa Europe.Mike Butler, a trader at Panmure Gordon, said that if Labour wins, stocks could weaken on questions about the party’s commitment to privatisation and market reforms.Alliance & Leicester will begin trading on Monday, with analysts’ estimates of the share price varying wildly.London market makers said on Friday that the shares were trading at 512p on the grey market, above expectations. That’s good news for the other banks and mortgage lenders, such as Lloyd’s TSB.”In terms of both ratings and demand, it’s good for the other stocks,” said Mr Parrot. “There will be some institutions that will not be able to buy as many shares as they want and they’ll need to buy the alternatives.”The flotation of four building societies this year is expected to create a body of shares worth about pounds 20bn.British Petroleum shareholders will stay alert for earnings reports from Exxon and other oil marketers starting tomorrow. Net income for oil companies is expected to rise about 10 per cent on average, according to analysts, thanks in part to higher crude prices, which reached $24.56 a barrel in early January.Oil has since fallen below $20 a barrel, and investors will be listening for cautious remarks about the outlook.Copyright: IOS & Bloomberg.