Investment Column: Euromoney can make more for investors

Resolution; Dairy Crest
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The Independent Online

Our view: Buy

Share price: 423.2p (+20.2p)

Hardly a day goes by without us all hearing that bankers are set to make mega-money again this year, and all that just months after they nearly destroyed Western civilisation as we know it. Ok, maybe a little strong, but reports of bumper earnings are doing little to restore the industry's pulverised reputation.

Conversely, news that the banks are largely back in the black is music to ears of investors in groups like Euromoney Institutional Investor, the FTSE 250-listed publisher and conference organiser, which focuses much of its attention on financial markets. Indeed, the renewed confidence in the City has already found its way into Euromoney's shares, which have vaulted by more than 50 per cent in the last six months alone.

There were further gains yesterday when the group, which publishes the likes of EuroWeek and Metal Bulletin, issued better-than-expected preliminary results: adjusted pre-tax profits were down 6 per cent on last year, but customers are getting more confident, it said. The watchers at KBC, who say that their 'hold' stance is under review, reckon that,despite the recent surge in the share price, there's more to come.

"Historically Euromoney has commanded a mid-teens rating which no doubt it will enjoy again in future. At this stage, given more cautious statements elsewhere (Reed yesterday) 12 times next year's numbers would suggest a target price nearer £5 than £4." The dividend yield, at 3.2 per cent, is not too bad either.

Euromoney has cut costs by imposing pay freezes, forced holidays and redundancies on its staff, but is now seeing the benefit. Subscriptions are down, but it is looking to renewed advertising – led by the emergence of new banks such as the confusingly monikered Bank of America Merrill Lynch – and the healthier Asian markets to propel it forward next year. Buy.


Our view: Hold

Share price: 96p (-1.15p)

Resolution announced third-quarter sales yesterday, although they are basically Friends Provident's. The latter is now Clive Cowdery's vehicle for gobbling up a chunk of the UK life industry. An annual premium equivalent (10 per cent of one-off single premiums together with recurring annual premiums) result of £183m compared with the consensus forecast of £ 162m is pretty good. Down on last year but better than the last quarter and economic recovery should further improve things.

Friends' chief Trevor Matthews' contention that he ran a recovering business before institutional investors forced him into Mr Cowdery's hands, look to have some credibility. So Friends is bumping along well enough. But that's not what an investment in Resolution is all about. Mr Cowdery needs deals to make it really pay (and rake in another fortune). Where they might come from remains hard to fathom, although his lieutenant, John Tiner, talked a good game yesterday. Informal discussions are apparently underway but rivals (and potential targets) are not keen. So The jury is out. A rudderless Legal & General looks the best bet at the moment, but Resolution will face a fight if it comes down to it. On valuation grounds Resolution not pricey. MF Global has it trading at 73 per cent of its full-year forecast for the business's embedded value. While the risk-averse should avoid, those already there might as well hold on

Dairy Crest

Our view: Hold

Share price: 391.8p (-16.2p)

Dairy Crest, the company behind Cathedral City cheese and Clover, has enjoyed a strong run of late, with its shares up by around 80 per cent this year. Even investors who bought in at the beginning of September, when the stock was trading at around 300p, will be sitting a handsome profit. Besides improving results – the company posted a 20 per cent hike in pre-tax profits for the six months to end of September – the stock has been helped by growing confidence in the balance sheet. Indeed, the net debt figure in yesterday's statement was better than some had expected; Royal Bank of Scotland had pencilled in £405m, whereas the company reported first- half net debt at £380.4m, down 22 per cent from 2008. The broker now forecasts £360m at the year end, down from £382m previously; good news at a time when credit is hard to find. Weighing against this is the pension deficit, which has climbed from around £115m to £178m over the six months to September. This, coupled with the recent rally – the stock trades on 9.16 times RBS's full-year forecasts – means that, while we would recommend buying into any weakness, for now we can only justify a Hold stance.