The Investment Column: Investors should wait to see if Amlin will be blown off course

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The Independent Online

Our view: Hold

Share price: 275p (-10.5p)

Lloyd's of London's largest underwriter, Amlin, has made the most of a tough year for the insurance sector. In spite of sustaining the worst US hurricane season on record last year - which cost the company more than £130m - it still managed to increase its full-year profits by almost 50 per cent, and easily convinced the market to back a £224m rights issue to help it launch a new Bermudan outfit.

US catastrophe and property insurance premiums have soared in the months since, and Amlin has increased its capacity to take advantage.

Continued benign conditions in the equity markets, coupled with a low level of natural disasters in the first half of the year, helped the group to another strong increase in underlying interim profits yesterday. In fact, only the weakness of the dollar took the shine off these numbers.

However, with increased exposure to the US catastrophe sector - albeit at higher prices - another heavy hurricane season this autumn could take a heavier toll on the company than before.

After a strong run over the past couple of months, the stock is now trading at 10 times this year's forecast earnings, making it fairly priced. Although Amlin is well-managed, and well-placed to take advantage of one of the only commercial insurance sectors where premiums are booming, its valuation, along with the uncertainty of this year's hurricane season (which is just beginning), mean investors should wait for a clearer picture. For those already aboard, hold on.


Our view: Buy

Share price: 208.5p (+3.25p)

SDL put out another set of forecast-busting results yesterday. First-half pre-tax profits rose 17 per cent to £3.6m, while sales soared 34 per cent to £45m. By the end of the year, City analysts expect profits to have hit £9.4m and sales £92m.

Why is SDL doing so well? Simply, the translation software and back-up services it provides are fast becoming a must-have for multinational companies. SDL's offering allows any international company to quickly and at very low cost translate a given text into whatever language it wants. Its clients include the likes of GlaxoSmithKline, Canon and Honda.

Given the growth SDL is enjoying at present, and the limited competition it faces, a valuation of 20 times forward earnings is not excessive.


Our view: Buy

Share price: 20p (+0.25p)

The stockbroker Corporate Synergy Group (CSG) has been around since 2002 but the business has only really started to motor over the past 12 months. In March, it pulled off the coup of buying the fund manager Rowan Dartington in a deal worth £13.4m (paid for by a share issue at 25p).

The tie-up made a lot of sense for CSG as it gave the group a more balanced earnings stream. Yesterday's interim results saw Rowan Dartington, which has about £650m of funds under management, contribute more than half of CSG's profits. For the six months to the end of June, underlying pre-tax profits jumped to £1.4m, from £670,000 in the same period last year, while sales increased from £3.8m to £8.8m.

Since the start of the year, the broker has worked on 12 floats, raising more than £100m. CSG boasts a client list of about 100 small companies, making it a top five adviser on the AIM.

Further acquisitions look likely. The group also hopes to move into market-making. With a cash pile of £17m, it has the balance sheet to do both. When CSG's cash is stripped out, the business, which is forecast to make a profit of £2.2m this year, is only valued at £10m.