Bottom Line: Shandwick value

SHANDWICK may prove to be one of the last great punts in the media sector. At 35.5p yesterday, up 2p on the results and renegotiated debt facilities, it is on a historic multiple of 14.2 times last year's earnings per share before the tax credit.

But put in Warburg's earnings per share estimates of 4.5p this year and 6p next and the shares look even better value, on prospective multiples of 7.9 and 5.9 respectively.

These estimates are based on relatively conservative assumptions of operating income, or fee income growth, of 3 per cent this year and 4 per cent next and show the strength of the public relations company's operational gearing.

Obviously the joker in the pack is the likelihood of a rights issue, which could heavily dilute the existing shares. With a negative net worth of pounds 74.7m, this looks all too likely at a superficial level.

But the recently extended banking facilities give Shandwick a much wider range of options. With pounds 55m of its pounds 66m bank debt on a three-year facility, it can wait and see what happens.

If the share price doubles, Shandwick may well have a rights issue, but from a much higher base. If it does not, it may just choose to pay down debt from earnings. After all, interest rates are at their lowest for many years.