The Investment Column: A good time to hitch a lift with Hogg Robinson

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The Independent Online

Our view: Worth a punt

Share price: 95.5p (+5.5)

Barely 10 days after investors forced Hogg Robinson to pack its bags and abandon its initial public offering, the business travel specialist is back. Yesterday the group managed to book a no-frills ticket in the support services sector after a last-minute sale more than halved the price it was seeking from shareholders.

The big question, is has Permira turned a sow's ear into a silk purse? Or has its former private equity owner, which was left with a 20 per cent stake, sold shareholders a pig of a stock?

Hogg Robinson's shares listed at 90p, compared with an initial price range of 140p to 220p. Because it doubled the number of new shares it issued to 200 million, it raised £220m, leaving it with plenty of cash to cut its debt, pay off its pensioners and fund future acquisitions.

The group, which was bought by Permira six years ago, hates to be called a travel group, despite making most of its money by booking flights on behalf of companies around the world. It sees itself providing a broadspectrum of corporate services, from managing events to dealing with employees' expenses. One of its more glamorous tasks this summer was flying the England football team and their WAGs around Germany. It also operates charter flights for the National Basketball Association in the US.

It makes money by charging its clients, three-quarters of whom have signed up for three to five years, fees for each booking it makes on their behalf. It operates in five global territories, relying on the UK for 30 per cent of its business, Europe for another 30 per cent, with the rest split between the US and Asia. Last year it made earnings before interest, tax and amortisation of £40.4m on £297m of sales. Slashing its price means the shares trade at 10 times forward earnings - a 30 per cent discount to its new sector. Worth a punt when unconditional trading starts on Thursday.


Our view: Hold

Share price: 260p (unch)

Where there's muck, there's brass. So goes the old saying. Biffa, the waste management services operator which yesterday was de-merged from parent Severn Trent, certainly confirms it. The group made a profit of £66m last year and this figure is tipped to rise to £74m.

Severn Trent shareholders will get one Biffa share for every one they hold in the parent company. The split, announced in April, is designed to give the management of each business more focus, and will hopefully see them deliver greater value. Because Biffa has historically operated with independent central functions, the separation is a straightforward affair, and implementing it is expected to result in minimal disruption and little extra cost.

The shift towards recycling waste and rising landfill prices means that the industry in which Biffa operates is growing at between 5 and 10 per cent a year. As the UK's number two player, it is well placed to benefit from this trend. Recent private equity acquisitions in the sector have been completed at a premium to the group's current valuation, making Biffa shares worth holding on to.


Our view: Buy

Share price: 696.5p (+1.5p)

The phenomenal growth at YouGov, the polling and market research group, continues. Yesterday it unveiled record annual results. Profits soared 310 per cent to £4.1m in the 12 months to the end of July 2006, way ahead of the £3.8m City analysts were expecting.

In the current year, YouGov is tipped to produce a pre-tax profit of £4.9m, but given the momentum behind the business this could well prove to be too conservative an estimate.

YouGov is just the kind of company that the UK needs to keep coming up with if it is to pay its way in the modern world. It has little in the way of fixed assets. It merely trades information. The group's key asset is a panel of 107,000 internet respondents, designed to mirror the UK population. Using them, it says it can predict anything from the winner of the next election to who will come out on top in the next series of Pop Idol.

The group has quite a record for accuracy. Therefore it is no surprise that corporations are queuing up to have YouGov conduct market research on their behalf. The number of clients it has rose from 130 to 211 last year, helping revenues to more than triple. The great thing about its business model is that it is easily scalable. YouGov simply needs to find more corporations or public bodies who want to ask its panellists questions or launch more products like BrandIndex, which provides clients with online tracking of 1,149 consumer brands.

It can also grow abroad, and is doing so at quite a pace. In just over a year, YouGov's operations in the Middle East have gone from zero to nearly half of total turnover. Few analysts now doubt that the kind of online market research the AIM-listed group conducts is set to grow as a proportion of total research done. Despite trading at a hefty 25 times forward earnings, the stock is well worth tucking away.