The Investment Column: Moneysupermarket bounces back to restore confidence

Panmure Gordon; DTZ
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The Independent Online

Our view: Hold

Share price: 139.25p (+9p)

Moneysupermarket.com floated in July as the stock market crashed having already slashed the price of the shares from 210p to 170p to get the issue away.

The shares had a brief run to higher levels but were brought sharply back to earth by the credit crunch which also raised concerns over the long-term strength of the business. But a trading update restored confidence and even gave the shares a much-needed lift.

Chester based Moneysupermarket allows people to make online comparisons of prices of everything from mortgages and savings rates to flights, mobile phones, and utility bills. The information is compiled from hundreds of financial institutions and other providers who pay a cut for business directed their way.

There are some positive performances for the latest six months especially in areas such as home services giving consumers the opportunity to compare prices for broadband, telephones and utilities where revenue grew 140 per cent and travel, up 85 per cent, although from a low base.

While the money sites, giving mortgage and savings price advice, were ahead at 30 per cent that was sharply down on the first half. The firm says there is evidence of some providers tightening their lending criteria and raising their prices while lenders specialising in the dreaded sub-prime area left the market completely. Revenue from the intermediary area, providing mortgage information for financial advisers, was down 25 per cent.

The company dipped its toe into the market in Germany spending 600,000 on a comparison website focussing on motor insurance.

Moneysupermarket says revenue for the year just ending will be around 160m, in line with forecasts and 60 per cent ahead of last time, while earnings before all charges will come in around 51m.

The figures provided comfort to the markets although the company's admission that it is difficult to predict what might lie ahead because "visibility continues to remain limited" will put a brake on any major re-rating. The shares gained 16p at 146p where they trade on a modest 13.8 times next year's forecast earnings. Not expensive, but it may be too early to chase the shares. Hold.

Panmure Gordon

Our view: Buy

Share price: 83.5p (+5.5p)

Broker Panmure Gordon's decision to buy a small US investment bank to provide a new pipeline of business for the London market looks well timed.

The firm has been reliant on the UK small and medium-cap market. But the AIM market, after unprecedented growth since 2005, is now in hibernation. Fund managers are sitting on their hands waiting for sunnier days. During the year Panmure acquired ThinkEquity, a US investment bank specialising in telecommunications, media and technology. The deal was seen as part of a strategy to get an early- stage involvement with US firms keen on floating or doing business in London.

A number of senior bankers have been hired which along with other reorganisation will cost around 2.4m for the current year. But that is looking like money well spent.

In a trading update, Panmure says the enlarged group is on course to meet expectations of around 13.6m. But the real excitement should come next year when a growing contribution from the US end should lift profits to over 18m.

Panmure says that growth stocks, one of ThinkEquity's favoured areas, are beginning to outperform. The US firm has seen its buy recommendations outperform the market with rises of 28 per cent.

A number of transactions are being worked on by joint teams. Assuming no cultural differences occur, the marriage looks sound and should help reduce Panmure's dependency on the fickle end of the London market.

The shares have slumped from 188p this year and at 83p look ripe for recovery.

DTZ

Our view: Avoid

Share price: 268p (-28p)

Property consultants DTZ had already lost over 65 per cent of its value this year but there was clearly further to go. A warning that the global credit crunch was making life a lot more difficult lopped a further 33p off the price at 262p. On Monday, rival Fletcher King shed 26 per cent after it warned that institutions had virtually deserted the commercial property market.

DTZ, which bought rival Donaldsons in July for 60m to beef up its strength in the retail property field, has been building up a global network of acquisitions.

The performance in the first half was inevitably affected by the turmoil in the UK and US which has paralysed the property market. Disruption in the syndicated debt market has made it more difficult to complete very large transactions.

Even so it still seems determined to press on with expansion in the US on the basis, it seems, that acquisitions will now be cheaper.

To add to its woes, there is now a danger that continental Europe will become infected by the upheaval in financial markets and a further reduction in property values looks highly likely.

First-half profits are down from 15.4m to 11.7m although after stripping out costs the underlying picture is flat. The worry is that the second half could fall off a cliff. Avoid.

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