Tuesday tips round-up: Premier Oil, Devro

As is often the case, what upon first inspection appears to be attractive turns out not to be quite so when looked at in greater detail. That has turned out to be the case with the proposed merger between Premier Oil and Ophir Energy. The quandary facing the former is that it needs large amounts of cash to proceed with the development of the Sea Lion oilfield off the Falkands. Unfortunately, Ophir also needs considerable resources to see its investments off the east African coast reach completion. Then there is the matter of Premier Oil's Chief Executive, Simon Lockett, for whom the firm is now looking for a successor. Even so, the possibility exists of a farm-down of its stake in Sea Lion at some point further down the line. As well, the company has several other good assets and is selling off various non-core ones. The shares continue to trade at a larger discount to their net asset value (at 65%) than its peers due to the worries surrounding Sea Lion and its Chief. However, "at this level, they look like a respectable punt," writes The Times' Tempus. Sausage skin manufacturer Devro has been put through the meat grinder over the past year. Just yesterday the company warned that revenues and prices will be flat next year, whereas the former typically grows at a 5% clip each year. Thus, currency devaluations in Latin America have had the effect of curtailing consumer spending, alongside a ban on imports of European Union pork by Russia. Demand on parts of the Continent isn't doing much better. In parallel, the firm is investing in new more modern plant, mainly in the US. Combine the above two factors and profits will be reduces by £8m this year as a result. Even so, the stock is still changing hands at 14.5 times this year's depressed earnings. "The long-term growth is there, but a purchase looks only for the brave," Tempus says. AB