Rentokil is due to release its second-quarter results early in August and the market will be interested in just one thing - has City Link been sorted out? Rentokil's other two main divisions - the pest control business and its textile hire and cleaning services division - are both robustly profitable. The rat-catching operation recently announced it was being welcomed back into Libya, where a contract to clean the nation's cities of rats was interrupted by last year's civil war. The full-year outlook for the group should be positive. The consensus view of analysts is that turnover will exceed last year's 2.54bn pounds and the group should return to profit. "Shares in Rentokil Initial are not without risk and the troubles at City Link have left many investors bruised. If the parcels division remains a drag, the shares will continue to languish or could even fall further. But if the group's plan succeeds and City Link is brought back out of loss, even just to break even, then Rentokil looks undervalued," The Financial Mail on Sunday´s Midas column says. At 751/2p, the shares value the group at 1.37bn pounds or just under ten times forecast earnings. Despite the high-profile troubles, the group has been paying down debt, which now stands at just under 1bn pounds, and it signaled its confidence last year when it reinstated the dividend at 1.33p a share. The shares are a buy for the brave Midas concludes.As a forced seller, Lloyds Banking Group was never going to achieve a rich price for 632 of its branches under Project Verde. However, the headline figure for last week's deal with the Co-op Bank was disappointing.The sale was forced by the European Commission as a price for waving through the purchase of HBOS with state aid. The Co-op will initially pay £350m, and there is a deferred payment of £400m. This is significantly less than the £1.5bn to £2bn that was first mooted. However, it's not all doom and gloom for the bank 40pc owned by the taxpayer. There are likely to be earnings upgrades as Lloyds is only transferring £24bn of assets with the deal, compared with a previous indication of just under £70bn. The City is split on whether to buy the shares. Of the analysts monitored by Bloomberg, 16 say buy, 10 say hold and six say sell. However, the average price target is 39¾p, one-third above the current price. There is substantial long-term value here. The banking sector will continue to be roiled by events. These will come in the form of regulatory pressure, bad debts and issues relating to sovereign debt. Investors who want to buy the shares should tuck them away and forget about them - with time, gains could be substantial. But the short-term view is hold, writes The Sunday Telegraph´s Questor team.Vodafone's customers are tightening their belts. They are making fewer calls and choosing call plans more carefully. This spooked some investors. In the first 10 minutes of trade on Friday, volumes were 10% that of the group's three-month daily average - due to fears that a slowdown could crimp the group's cash-generating ability. The dividend is the reason to own the shares, so this is important. Dividend cover, as compiled by data group Morningstar, is forecast to fall from 2.61 in 2010 to 1.24 in 2013 and 1.22 in 2014. On Thursday, Fran Shammo, Verizon's chief financial officer, said that the board of the Verizon Wireless joint venture with Vodafone does not plan to discuss a dividend payment at its next quarterly board meeting. Despite the tough economic backdrop, Vodafone is still generating significant amounts of cash - and cost-cutting plans will be accelerated. With the shares yielding a prospective 7.4% rising to 7.7% and given the group's track record during the depths of the credit crunch, Questor is relatively unconcerned. A buy rating is maintained.ABPlease note: Digital Look provides a round-up of news, tips and information that is impacting share prices and the market. Digital Look cannot take any responsibility for information provided by third parties. This is for your general information only as not intended to be relied upon by users in making an investment decision or any other decision. Please obtain a copy of the relevant publication and carry out your own research before considering acting on any of this information.
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