Investment Column: Experian deserves credit for growth


Our view: Buy

Share price: 796p (-1p)

Experian, the world's biggest credit reference agency, crunched out some impressive financial data yesterday, narrowly beating profit forecasts.

The group said pre-tax profits were up by 13 per cent to £679m over the year to March, which was its 10th consecutive year of record earnings.

Turning to the key territories, Experian was boosted by a "gradual recovery" in the financial services sector in North America, as banks started to ramp up underwriting programmes and sought to grow their credit portfolios. It also received a major boost from emerging markets, notably its expanding presence in Brazil and rising demand for credit services in Turkey and Russia.

This drove total revenues higher by a healthy 10 per cent, despite pockets of weakness in the UK and Ireland.

On the more important measure of operating profit, the good news for potential investors is that it grew its bottom line across all territories. Experian also cheered investors by raising its full-year dividend by 22 per cent to 28 cents.

We are of course mindful of the fact that Experian's shares have powered ahead recently, and that they now trade on a forward earnings multiple of 16 times, putting them at a premium to rivals such as Equifax.

That said, however, given the company's impressive track record, and in light of the growth in the markets it operates in, we believe Experian is a sound long-term investment.

Heritage Oil

Our view: Buy

Share price: 232.4p (-1.8p)

It has hardly been a vintage year for Heritage Oil. The explorer started 2011 with its stock at around 450p, but it quickly headed south and is now trading almost 50 per cent lower.

The most dramatic fall came in January, when the group plummeted around 30 per cent in just one session on news that one of its wells at its Miran West structure in Kurdistan had found gas, when investors had been hoping for oil.

Since then, Heritage's ongoing tax dispute with the Ugandan government over its sale of a number of blocks in the country to Tullow Oil has helped to weight it down. At stake is the $404m that Uganda claims it should get in capital gains tax, and earlier in the week Heritage started arbitration proceedings to reclaim the sum.

Yesterday's interim management statement may not have contained any major revelations, but it does act as an opportunity for investors to refocus on the company. It is pretty clear that the market has priced in a pretty bearish outcome, despite the company's confidence in reclaiming all the Ugandan money, and certainly the $283m of it held in an escrow account. We think there is ample space for upside gains.

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