Investment Column: Back Cenkos to wade through the treacle


Cenkos

Our view: Buy

Share price: 88p (-8p)

Life is not easy for the brokers who make their living looking after the smaller and medium-sized companies that bulge bracket investment banks largely turn their noses up at.

The market for flotations and M&A work has certainly improved from the dark days of the credit crunch, but the good times are a long way from being back. That is reflected in the way shares in Cenkos Securities have performed – and to add to those woes, yesterday chief executive Simon Melling announced he was stepping down.

Mr Melling wants to take a break, though he will run the business until a successor is found and is dismissive of talk of boardroom ructions. But he warns that, while the third quarter has only just started, trading can already be described as "treacly".

Still, Cenkos is fortunate in that it has a flexible cost base. It has resisted pressure to raise basic salaries along the lines of larger rivals. The pay of Cenkos staff is therefore closely matched to the company's performance. If it does well, they get a bonus. But there are none of the guarantees that caused so many problems among the big boys and this is not a company that presents "systemic risk" to the markets. For investors, that's no bad thing.

Still, though Mr Melling remains confident Cenkos can trade profitably throughout the remainder of the year, the shares remain a risky play. The small and mid-cap companies which Cenkos looks after are far more dependent on the performance of the stuttering UK economy than larger rivals, though Cenkos has worked to cushion that by developing business overseas, bringing a number of Asian companies to the UK market.

These shares are starting to look cheap at about eight times forecast full-year earnings. The dividend was cut last year, but should be raised if earnings improve, although yield is not something to count on. Mr Melling's impending departure, combined with the shaky economic climate, means the business faces significant uncertainties. But there is a buying opportunity here for those willing to roll the dice.



Genus

Our view: buy

Share price: 1,032 (-8p)

It is hard to avoid puns when taking a look at Genus, but the animal genetics company has been in rather a bullish mood recently. When it updated the market back in May, the Basingstoke-based group – which supplies both breeding pigs and high-quality bull semen to farmers – said it was on track to beat the previous 12 months, and yesterday's brief pre-close trading statement ahead of September's full-year results confirmed that view.

The company believes it will meet market expectations, with analysts predicting a £38m pre-tax profit. This is despite its customers having been hit by the rising cost of feed, with Genus saying farmers have managed to make up for this with increased output prices. For years the company's star asset has been a bull called Picston Shottle, but the Holstein Friesian is approaching retirement, as is Genus' chief executive, Richard Wood.

Announced in May, after 14 years at the helm – during which time he oversaw the floating of the company and its promotion to the FTSE 250 – Mr Wood is saying farewell in September.

For his replacement – Karim Bitar, the European head of the US drug maker Eli Lilly – the task will be to steer Genus' continued growth, set to be driven through expanding its presence in emerging markets as well as further technological innovations, with it hopeful on the ongoing development of a way to more efficiently separate male and female sperm.

Yesterday, the shares dipped 8p to 1,032p, but after gains of 20 per cent in 2011 – and more than 100 per cent over the last two years – we suspect some profit taking. The support behind the stock remains. Buy.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

As in 1942, Germany must show restraint over Greece

As in 1942, Germany must show restraint over Greece

Mussolini tried to warn his ally of the danger of bringing the country to its knees. So should we, says Patrick Cockburn
Britain's widening poverty gap should be causing outrage at the start of the election campaign

The short stroll that should be our walk of shame

Courting the global elite has failed to benefit Britain, as the vast disparity in wealth on display in the capital shows
Homeless Veterans appeal: The rise of the working poor: when having a job cannot prevent poverty

Homeless Veterans appeal

The rise of the working poor: when having a job cannot prevent poverty
Prince Charles the saviour of the nation? A new book highlights concerns about how political he will be when he eventually becomes king

Prince Charles the saviour of the nation?

A new book highlights concerns about how political he will be when he eventually becomes king
How books can defeat Isis: Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad

How books can defeat Isis

Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad
Judith Hackitt: The myths of elf 'n' safety

Judith Hackitt: The myths of elf 'n' safety

She may be in charge of minimising our risks of injury, but the chair of the Health and Safety Executive still wants children to be able to hurt themselves
The open loathing between Barack Obama and Benjamin Netanyahu just got worse

The open loathing between Obama and Netanyahu just got worse

The Israeli PM's relationship with the Obama has always been chilly, but going over the President's head on Iran will do him no favours, says Rupert Cornwell
French chefs get 'le huff' as nation slips down global cuisine rankings

French chefs get 'le huff' as nation slips down global cuisine rankings

Fury at British best restaurants survey sees French magazine produce a rival list
Star choreographer Matthew Bourne gives young carers a chance to perform at Sadler's Wells

Young carers to make dance debut

What happened when superstar choreographer Matthew Bourne encouraged 27 teenage carers to think about themselves for once?
Design Council's 70th anniversary: Four of the most intriguing prototypes from Ones to Watch

Design Council's 70th anniversary

Four of the most intriguing prototypes from Ones to Watch
Dame Harriet Walter: The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment

Dame Harriet Walter interview

The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment
Art should not be a slave to the ideas driving it

Art should not be a slave to the ideas driving it

Critics of Tom Stoppard's new play seem to agree that cerebral can never trump character, says DJ Taylor
Bill Granger recipes: Our chef's winter salads will make you feel energised through February

Bill Granger's winter salads

Salads aren't just a bit on the side, says our chef - their crunch, colour and natural goodness are perfect for a midwinter pick-me-up
England vs Wales: Cool head George Ford ready to put out dragon fire

George Ford: Cool head ready to put out dragon fire

No 10’s calmness under pressure will be key for England in Cardiff
Michael Calvin: Time for Old Firm to put aside bigotry and forge new links

Michael Calvin's Last Word

Time for Old Firm to put aside bigotry and forge new links