The Investment Column: Future's bright for special interest publishing

Amstrad; Pinewood Shepperton
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The Independent Online

Our view: Buy

Current price: 42.5p

When Stevie Spring took over at the helm of the special interest publishing group Future 12 months ago, the job might have looked like a hiding to nothing after five profit warnings in quick succession from February 2005.

It has been a while since the last warning, and although the shares have been treading water for the past year, it looks like drastic measures taken since Ms Spring took over are beginning to bear fruit.

"Special interest" publishing, in Future's case at least, isn't a euphemism for the top shelf in seedy newsagents. Future publishes a wide range of magazines and has a booming internet-based publishing business. Its portfolio ranges from entertainment titles, like Total Film and Metal Hammer, to arts and crafts titles such as Simply Knitting and Cross Stitcher.

Pre-tax profits for the first half of the current year came in at £6.3m, well ahead of forecasts although most of the group's internet investment is pencilled in for the second half. Although revenues fell by 5 per cent to £94.1m, net debt fell by another £3m to £29m, almost £10m below this time last year.

The magazine publishing industry is incredibly competitive - one glance at recent newsflow from the industry giant Emap is enough to prove that - but Future looks to be heading in the right direction after a long period in the doldrums. Its portfolio of specialist magazines should be able to retain circulation levels and the internet should develop further with the boardroom appointment of Seb Bishop, co-founder of Espotting Media.

This is not for widows and orphans, but for investors with a healthy appetite for risk, there is room for more upside. The company is valued on just 0.8 times sales, with a price to earnings ratio of about ten times forecast 2009 earnings. If the current momentum can be maintained the stock is worth a punt.

Amstrad

Our view: Sell

Current price: 133.75p

So The Apprentice is over for another year. But does the winner really know what they are getting into? Amstrad might once have been a power, with its cheap and cheerful personal computers and £1.25bn stock market valuation, but it is a long time since its glory days thanks to a series of product disasters that came to epitomise the failure of British high-tech industries.

True, at 133.75p, up 0.75p, the shares are in a much better shape than the 20p nadir they hit in the early part of 2003. But it's been downhill over the past six months and the business has to answer some serious questions going forward. Amstrad's main business is making set-top boxes used to decode digital TV signals and it has not been easy making sales in a saturated market.

Last time it reported, pre-tax profits fell 16 per cent to £10.5m while sales fell by nearly a fifth to £40.6m. The hope is that developing boxes for high-definition TV and HD personal video recorders will pick up the slack. But the second half is likely to be soft, getting them into the shops will take time, there are competitive pressures and the company is scarily reliant on one customer - BSkyB. Stripping out its cash pile, Amstrad trades on barely eight times this year's forecast full year earnings, but in real reality, not the televised variety, it would need Sir Philip Green and Bill Gates in the final two to turn around this one-trick pony.

From an investment perspective, even on a modest valuation, the shares are not worth the punt. Sir Alan, with regret, you're fired.

Pinewood Shepperton

Our view: Buy

Current price: 273.5p

Producing blockbuster movies is a fickle old game, thanks to the often chaotic funding structure and the habits and whims of stars. Studio owner Pinewood Shepperton yesterday warned that a number of major film projects would begin later than planned this year.

There were no clues as to which films have been delayed - and the hope is that production is delayed and not cancelled. Shareholders have to grin and bear it and hope that shooting on the 22nd Bond gets underway as planned in January.

Fortunately, Pinewood Shepperton has not been sitting on its hands. There has been a successful drive to attract less volatile television work such as The Weakest Link and My Family which now accounts for around 30 per cent of total revenue.

But the attraction for investors has always been the 200 acres of prime land owned by the three studios, at Pinewood, Shepperton and Teddington. That land is estimated to be worth £150m or 327p a share and work has started on unlocking the value through a tie up with Morley Fund Management.

Yesterday's warning should be considered a blip and a buying opportunity.

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