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
ebooks
ebooksAn introduction to the ground rules of British democracy
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: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

Day In a Page

Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate
Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'
10 best statement lightbulbs

10 best statement lightbulbs

Dare to bare with some out-of-the-ordinary illumination
Wimbledon 2015: Heather Watson - 'I had Serena's poster on my wall – now I'm playing her'

Heather Watson: 'I had Serena's poster on my wall – now I'm playing her'

Briton pumped up for dream meeting with world No 1
Wimbledon 2015: Nick Bollettieri - It's time for big John Isner to produce the goods to go with his thumping serve

Nick Bollettieri's Wimbledon Files

It's time for big John Isner to produce the goods to go with his thumping serve
Dustin Brown: Who is the tennis player who knocked Rafael Nadal out of Wimbeldon 2015?

Dustin Brown

Who is the German player that knocked Nadal out of Wimbeldon 2015?
Ashes 2015: Damien Martyn - 'England are fired up again, just like in 2005...'

Damien Martyn: 'England are fired up again, just like in 2005...'

Australian veteran of that Ashes series, believes the hosts' may become unstoppable if they win the first Test