Investment Column: Fast-growing SJP is being undervalued

Enterprise Inns; Euromoney


Our view: Buy

Share price: 281p (+2p)

St James's Place is making a habit of beating expectations. The wealth manager reported yesterday that assets under management surged by £5.6bn to £27bn in 2010. They've doubled over the past five years. The company has always had a fairly wealthy client profile, but they seem to be getting richer, and increasingly willing to place large chunks of money with SJP after being visited by members of its 1,500-strong band of financial advisers (their numbers are up 6 per cent).

And yet despite this stellar performance, the company appears to get little credit from the stock market. What is going on? The problem that SJP faces is the continued uncertainty surrounding the 60 per cent stake in the company held by Lloyds. SJP was one of the few good things that came to the latter when it rescued HBOS. But with a new chief executive on the way, one who is likely to want to shake things up, that stake could soon be on the block. And there wasn't much guidance given yesterday.

SJP is rather unique and very reliant on its people. The uncertainty about the Lloyds stake and what might happen to it (and the effect on the business) is worrying investors. Which perhaps goes some way to explaining why these shares are so cheap. Because they are very cheap. They trade at a substantial discount to the estimated net asset value-per-share for 2010 (Panmure puts this at 332p) – this for a business that is touting growth rates of 15 to 20 per cent a year. The yield, at 1.7 per cent (forecast) is nothing to write home about but there is ample scope for that to improve. Companies like SJP have to spend money to make sales, but throw off cash in later years.

Fundamentally, SJP is a well-run and fast-growing business. The fact that the uncertainty is keeping the share price in check should be seen as a buying opportunity. Buy.

Enterprise Inns

Our view: Buy

Share price: 107.5p (-2.6p)

Enterprise Inns suffered a hangover after the snow forced many consumers to cancel parties and quaff their tipples at home over Christmas.

At its AGM yesterday, Britain's biggest pubs operator said net income per pub in its "substantive estate", which accounts for about 90 per cent of its 6,800 boozers, fell by 2 per cent in the 16 weeks to 15 January. While Enterprise said the cold snap hit its operating profits in the first quarter by £2m, even without the dire weather, Enterprise's average net income per pub would have been down by about 1 per cent. Coming a day after the managed pubs operator JD Wetherspoon toasted a 3 per cent rise in 12-week underlying sales, Panmure Gordon called Enterprise's performance "slightly disappointing".

However, Enterprise boasted that it had exchanged or completed on the sales of 105 pubs, which generated proceeds of £32m – a £4m profit over book value. The company also highlighted a "strong market" for sale and leasebacks on pubs in London.

We made it a speculative buy at 98.3p in July and continue to feel it is worth the risk, despite the tough outlook. Enterprise trades on just 4.4 times forecast full-year earnings, the bulk of its £2.92bn net debt is secured till 2032 and it continues to hive off the tale of its estate at decent prices, so buy.

Euromoney

Our view: Buy

Share price: 705p (-27.17p)

This week's closure of the teenage girls' magazine Sugar highlights the difficulties facing publishers in the current climate. Well, perhaps not all of them. Euromoney – whose publications including Euroweek and Hedge Fund Intelligence – is at the other end of the content spectrum. And it posted a 20 per cent uplift in its first-quarter numbers yesterday. Subscription revenues, the largest part of the business, rose by 13 per cent between October and 19 January compared with a year earlier. Advertising was up 24 per cent and sponsorship up 39 per cent.

It confirms the strong momentum from the second half of the last financial year continues. In a tough market, the move to invest in subscription-based electronic information services and target emerging markets has paid off. Revenues will grow over the year.

Yet, comparisons with 2010 will prove tough, with lower margins from its investment strategy, the absence of one-off cost savings and a lift in incentive expenses. Uncertainty also looms large over the whole sector. Euromoney is a solid business but the value of 15.5 times estimated full-year earnings looks about right, so hold for now.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
The Doctor and Clara have their first real heart to heart since he regenerated in 'Deep Breath'
TV
News
people
Life and Style
Apple showed no sign of losing its talent for product launches with the new, slightly larger iPhone 6 making headlines
techSecurity breaches and overhyped start-ups dominated a year in which very little changed (save the size of your phone)
News
The official police photograph of Dustin Diamond taken after he was arrested in Wisconsin
peopleDownfall of the TV star charged with bar stabbing
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
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

Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

Selby Jennings: Quantitative Research | Equity | New York

Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...

Selby Jennings: SVP Model Validation

Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

Day In a Page

A timely reminder of the bloody anniversary we all forgot

A timely reminder of the bloody anniversary we all forgot

Who remembers that this week we enter the 150th anniversary year of the end of the American Civil War, asks Robert Fisk
Homeless Veterans appeal: Former soldiers pay their respects to a friend who also served

Homeless Veterans appeal

Former soldiers pay their respects to a friend who also served
Downfall of Dustin 'Screech' Diamond, the 'Saved By The Bell' star charged with bar stabbing

Scarred by the bell

The downfall of the TV star charged with bar stabbing
Why 2014 was a year of technological let-downs

Why 2014 was a year of technological let-downs

Security breaches and overhyped start-ups dominated a year in which very little changed (save the size of your phone)
Cuba's golf revolution: But will the revolutionary nation take 'bourgeois' game to its heart?

Will revolutionary Cuba take 'bourgeois' golf to its heart?

Fidel Castro ridiculed the game – but now investment in leisure resort projects is welcome
The Locked Room Mysteries: As a new collection of the genre’s best is published, its editor Otto Penzler explains the rules of engagement

The Locked Room Mysteries

As a new collection of the genre’s best is published, its editor explains the rules of engagement
Amy Adams on playing painter Margaret Keane in Tim Burton's Big Eyes

How I made myself Keane

Amy Adams hadn’t wanted to take the role of artist Margaret Keane, because she’d had enough of playing victims. But then she had a daughter, and saw the painter in a new light
Ed Richards: Parting view of Ofcom chief. . . we hate jokes on the disabled

Parting view of Ofcom chief... we hate jokes on the disabled

Bad language once got TV viewers irate, inciting calls to broadcasting switchboards. But now there is a worse offender, says retiring head of the media watchdog, Ed Richards
A look back at fashion in 2014: Wear in review

Wear in review

A look back at fashion in 2014
Ian Herbert: My 10 hopes for sport in 2015. Might just one of them happen?

Ian Herbert: My 10 hopes for sport in 2015

Might just one of them happen?
War with Isis: The West needs more than a White Knight

The West needs more than a White Knight

Despite billions spent on weapons, the US has not been able to counter Isis's gruesome tactics, says Patrick Cockburn
Return to Helmand: Private Davey Graham recalls the day he was shot by the Taliban

'The day I was shot by the Taliban'

Private Davey Graham was shot five times during an ambush in 2007 - it was the first, controversial photograph to show the dangers our soldiers faced in Helmand province
Revealed: the best and worst airlines for delays

Revealed: the best and worst airlines for delays

Many flyers are failing to claim compensation to which they are entitled, a new survey has found
The stories that defined 2014: From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions

The stories that defined 2014

From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions
Stoke-on-Trent becomes first British city to be classified as 'disaster resilient' by the United Nations

Disaster looming? Now you know where to head...

Which British city has become the first to be awarded special 'resilience' status by the UN?