Tuesday tips round-up: Alent, HSBC, Ultra Electronics

Alent suffered a disappointing first half and is holding out the prospect of better news in the second, according to The Times' Tempus column. It was affected by the Chinese new year in the first quarter and the shutdown in that country's electronics industry, which represents about 40 per cent of revenues coming from Asia. The company produces copper damascene that goes into silicon chips, a high margin product representing 5.0 per cent of sales. One unnamed Asian chipmaker decided to substitute some of Alent's product with a cheaper alternative from a rival. The company admits that it has no idea how to resolve this. It could cut prices to become competitive but is understandably keen to maintain pricing discipline. As a consequence, though, margins across the group fell unexpectedly by more than a percentage point and profits fell in the first half.HSBC Chief Executive Stuart Gulliver has ticked just about every box that could be reasonably expected of a big bank in this environment as it is well capitalised, streamlining, improving return on equity and reaching cost-income targets. But it just needs to find organic growth, the Financial Times' Lex column reported. The bank has been getting most of its profits from Asia. Two-thirds of first-half pre-tax profits came from Hong Kong and the rest of the region. Hong Kong is second only to the UK in size yet its pre-tax profit contribution this year so far has been nearly twice the size of the UK's. The operative words, however, could be "so far". HSBC's own economists recently slashed Hong Kong growth forecasts to 2.5% from 4.7% this year after cutting Chinese forecasts by a tenth. While China's economy could improve, the bank should be prepared for risks.Geopolitical events are developing in Ultra Electronics' favour as the attention of the US turns towards the Pacific and the growing strength of China, Tempus said. "This is good news for sales of Ultra's anti-submarine warfare equipment, up by 8.0% in the first half". The US Navy has also just signed a five-year contract, worth about $500m to the company, to supply sonar buoys for its aircraft and helicopters. Ultra's order book declined by 7.0% at the end of June but it is not as alarming as it seem as 4.0% of the fall is because of the non-repetition of huge previous orders to provide IT at Oman's new airport, and the rest of the decline reflects a delay in winning work on the upgrade of the Warrior IFV (infantry fighting vehicle) for the British Army. The shares, up 45p at £18.86, sell on almost 15 times earnings; immediate upside may be limited, but they remain a firm long-term hold.RDPlease 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.