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Gordon Brown's Comprehensive Spending Review has put the oft-troubled transport sector back under the spotlight.

His new White Paper sets out the Labour Government's spending plans for the next three years, and the Department of Transport's budget is not to be sniffed at. It is expected to increase by around '12 per cent a year in average annual real growth terms' – or, if you prefer the figures, from £7.7 billion this year to £11.6 billion by 2005-6.

On top of this is cash (around £1 billion per year) to fund the London Underground's public-private partnership modernisation programme and a raft of other national and local programmes.

With more cash available, the listed companies in this area – railway, bus and coach operators, logistics firms and vehicle hire groups – all stand to benefit.

Brave investors after bargains will notice that the prospect of a serious cash injection comes at a time when many profitable and/or cash-rich transport companies feel beleaguered.

Planes, trains and automobiles

GB Railways is worth poring over because it is a venture that expects to move into profit in the current year. Shares in the business recently raced ahead after it made a bid for the 'Wales & Borders' passenger rail franchise, in a partnership with Connex. Company secretary and executive director Max Steinkopf says: 'The franchise would be very beneficial to us, but we're only at the indicative stage and we don't even know if we've been short-listed yet.'

The company pared back pre-tax losses from £3.3 million to £1.2 million in the year to March, and you can pick up the shares for 72.5p. This values the business at just £6.2 million, slightly higher than its £5.5 million cash in the bank at year-end.

Equally alluring is Plymouth-based Sutton Harbour, which operates the city's historic harbour and airport. It reported a sixth straight year of core profits growth in a 'challenging' period to March. Underlying profits, excluding property sales, were up 14.6 per cent to £1.4 million, while headline profits rose very slightly from £1.58 million to £1.59 million.

Disappointingly, BA has announced service and personnel cuts, including some flights from Plymouth. But other airlines are being invited to take up the spare capacity. A spokesman at house broker Rowan Dartington (which is currently finalising forecasts for 2003) says the company is 'a very safe counter – a safe port in the storm'.

He adds: 'We're broadly looking at flat profits this year, but the marina is secure, the fishing side has recovered and it is well asset-backed.'

This firm will not be the first to benefit from a bull market, but it seems a safe secure bet.

Logistical support

On the Full List, Robin Byde, transport analyst at Old Mutual, singles out outsourced logistics venture Wincanton as one of his favourites.

In its first full year of independence following a demerger from Uniq in May 2001, pre-tax profits put on 14.6 per cent to £30.6 million. This topped broker Credit Suisse First Boston's £29.5 million forecast, and investors can expect a clean £32 million for 2003. The broker maintains its 'Buy' stance and says 254p is a fair target.

Another fully-listed play well positioned is automotive logistics services group AutoLogic, which was transformed in 2001 following some significant acquisitions. These include CAT, which provides the bulk of Renault's vehicle logistics support around the globe; Autocar and Ansa, firms that handle all of Ford's finished vehicle distribution requirements in the UK; and Axial, a company which has recently boosted AutoLogic's European coverage.

Their presence filtered through to calendar 2001 figures in March. Turnover jumped 136 per cent to £469.6 million and profits before tax, goodwill and exceptional items rose 52 per cent to £20.9 million. For 2002, analysts have pencilled in a £31.5 million profit and earnings of 46.6p.

The shares have slipped from almost £6 to 438p over the past year. On a price/earnings ratio of 9.4, they look very cheap. 'Unlike a lot of the others, it has a genuine niche market with high technical barriers to entry,' argues Byde.

Meanwhile prospective investors should not be afraid of the meatier mid-250-listed growth plays. There is real value to be had, with morose markets marking down Firstgroup and National Express to ratings of less than ten.

At 241.75p a share, passenger transport firm Firstgroup is trading on just 9 times 2003 forecast earnings, falling to 8.5 next year.

Bus and rail group National Express also looks cheap at 590p. On Williams de Broe's 2002 estimates, its shares are rated at just 9.26 times earnings, dropping to 8.25 for next year. National Express' first-half figures to June are due in September. Analysts say both are well run with straightforward accounts.

Another second-liner that stands out is light commercial vehicle hire group Northgate. Recent 2002 results showed that the company is well on track to double the size of the UK business by 2004. Pre-tax profits rose 17 per cent to £31.7 million, as interest costs fell 13 per cent to £13.4 million.

Northgate has made its first continental European acquisition. The firm has taken a 40 per cent stake in Fualsa, one of the largest van rental companies in Spain, for £9.8 million cash, with options to take the remaining 60 per cent by 2006. Spain is one of the fastest growing markets in Europe.

For 2003, house broker Credit Suisse First Boston expects a 12.6 per cent profits leap to £35.7 million, giving earnings of 40.2p. At the current 478p, the shares are trading on an undemanding forward price/earnings ratio of 11.9. The house broker says the shares should be nearer £6. Buy.