I’ve been keeping an eye on UK shares to buy in October. Three companies I’ve been keen on for some time issued trading updates last week. And I liked what I read.
Despite their positive updates, their shares are still trading at discounts to their 52-week highs. Here’s what I like about these three businesses and their current valuations.
Cleaner energy future
I see platinum group metals (PGMs) miner Tharisa (LSE: THS) as a good play on a cleaner energy future. The automotive industry relies on the metals to control polluting emissions. Fuel cells and hydrogen purification are two of many other areas of demand.
Last week, the company reported record fourth-quarter production for its financial year ended 30 September. And it said it expects to further increase production in fiscal 2022.
Negatives and positives
Currently, a global semiconductor shortage has produced a drop in auto manufacturing. Due to this, PGM prices — and Tharisa’s shares — are off their highs of earlier this year.
Metals prices and operational risk can have a negative impact on the profitability of a miner like Tharisa. However, the company’s net cash balance sheet, increasing output, and the long-term cleaner energy future are all positives.
With the stock trading at a modest 10 times forecast 2022 earnings, I think now could be a good time for me to invest.
A recovery share to buy
I like that transport firm National Express (LSE: NEX) was growing strongly before Covid-19 struck. And that it’s won new contracts during the pandemic. I also think its proposed acquisition of Stagecoach is compelling.
Last week, it reported a continuing recovery in passengers and revenues. Other positives in the update included fully-hedged fuel through 2022 and into 2023, and wage agreements across the business.
Not on the open road yet
The company’s still being impacted to a degree by Covid-19 shutdowns. These have been localised and of short duration, but a winter resurgence of infections could be a drag on recovery. The company’s also having to work hard to mitigate the impact of an industry-wide driver shortage, and an ongoing tighter labour market in the US.
Still, for me, these risks to the pace of recovery are more than offset by National Express’ cheap rating. It’s another stock trading at an undemanding 10 times forecast 2022 earnings.
Attractive business
I think Avon Protection (LSE: AVON) also has an attractive business. It designs and manufactures life-critical respiratory mask systems, helmets and body armour for militaries and first responders.
The US Department of Defense (DoD) is an important customer. There’s some risk in this, but I reckon if you’re going to have a high exposure to any defence department, you couldn’t do much better than the US DoD.
It’s another share for me to buy
Avon issued a profit warning in August, due to order delays, supply-chain disruption, and the tight US labour market. It also reduced guidance for its financial year to September 2022.
But in an encouraging update last week, it said trading profitability for fiscal 2021 had been in line with the expectations set out in the August update. And that it goes into 2022 with a strong order book and commercial momentum.
I think this could be another good share for me to buy. It’s valued at around 20 times forecast 2022 earnings, but with growth of 25%+ pencilled in for fiscal 2023.
