Investment Column: Genus offers seeds of farming recovery

Stobart Group; Dimension Data


Our view: Buy

Share price: 724p (+4p)

The betting must be that there are few people who can claim to have ever met a farmer who says business is booming, but an update yesterday from animal breeding outfit Genus would suggest otherwise. The company said that it had traded in line with expectations during the first four months of the year, and that in some markets, particularly Latin America and China, sales of products such as dairy semen, of all things, was booming.

It is also worth nothing that there was plenty of support among analysts for the group. They pointed to the recovery in porcine markets as a reason to get excited, with those at Panmure Gordon arguing that the tone of yesterday's statement was more positive than previous updates.

Backers of the group have seen only a mild increase in the share price in recent months, and the dividend yield, at 1.7 per cent, is nothing out of the ordinary. Agricultural markets have suffered in recent years, and investors would be right to be nervous about the recent performance of the shares, which have limped along, managing to put on just 4 per cent in the last quarter. Undoubtedly, there are more exciting shares on the market. Nonetheless, a number of analysts yesterday upgraded the company. The team at Panmure Gordon said that the stock would reach highs of 800p, while those at Morgan Stanley aimed a little higher, arguing that the stock could climb to 810p.

We agree with the bulls. Hitting the 800p target would see the shares trading on a multiple of 20 times forecast full year earnings, which while not cheap, is not excessive either. We would argue that Genus has been somewhat overlooked by the market and that the recent high marks from analysts will boost the stock. Buy.

Stobart Group

Our view: Hold

Share price: 155p (+4.9p)

Stobart is one of the more visible of Britain's mid cap stocks – with the garish green livery of its lorries a fixture on Britain's road network. The group has also pushed into other areas including trains and planes – we may even see the Stobart name on passenger jets flying out of Essex if boss Andrew Tinkler gets his way.

From a strictly financial point of view there was much to like about yesterday's trading update. Pre-tax profits surged to £34m from £22m while net debt was cut by £57.9m since the interim date and by £23.8m since the last year end. The normalised profit number was a less impressive £28.6m, but the earnings are still rolling in and were in line with expectations.

Analysts too were giving the group some praise. Investec noted recent contract wins, gains on assets and a strong performance. Indeed the group's resilience during the credit crunch is highly creditable and as the economy recovers, it should continue to pick up. Wade in then?

Well, perhaps. Stobart is an unusual company and has raised eyebrows in the past with deals involving companies owned by its directors. Investors very much have to accept it for what it is and settle in for the ride, which may have a few bumps. The shares are not exactly cheap at the moment either, trading on 15 times the forecast numbers for 2011, although the yield is healthy enough at 4.7 per cent. But overall, the business does have momentum, so we say hold.

Dimension Data

Our view: Hold

Share price: 100.5p (+6.5p)

Dimension Data's revenues were down 3.7 per cent in constant currency in the six months to the end of March, which was generally viewed as "solid" by the analyst community.

Management blamed weak trading conditions in telecoms operator Plessey and lower revenues at Express Data. It also said the numbers were up against a particularly strong first half in the previous financial year, before the global financial crisis really took hold. But it wasn't all bad news. The FTSE 250 listed technology group's main strength was in the US and its move to managed services looks to have paid off as revenues rose 10 per cent in the first half.

Dimension, a global partner of Cisco, is also generally optimistic and believes clients are ready to spend on IT and IT services again after the downturn. They added that single digit revenue growth for the full year is achievable.

Altium Securities has the stock on a price of 17.3 times estimated full year 2010 earnings and management is bullish about a forecast of 10 per cent revenue growth in the next three to five years. However, all that said, at the moment, there is little here to change our feelings that this looks steady as she goes. So hold.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Sport
Australia vs New Zealand live
cricket Follow over-by-over coverage as rivals New Zealand and Australia face off
News
Zayn has become the first member to leave One Direction. 'I have to do what feels right in my heart,' he said
peopleWe wince at anguish of fans, but his 1D departure shows the perils of fame in the social media age
Life and Style
Researchers found that just 10 one-minute swill-and-spit sessions are enough to soften tooth enamel and make teeth vulnerable to erosion
health
News
i100
Arts and Entertainment
The Regent Street Cinema’s projection room in the 1920s
film
News
Leah Devine is only the ninth female to have made the Young Magician of the Year final since the contest began more than 50 years
peopleMeet the 16-year-old who has set her heart on being the first female to win Young Magician of the Year
News
Jonathan Anderson was born in Northern Ireland but now based between London, where he presents a line named JW Anderson
peopleBritish designer Jonathan Anderson is putting his stamp on venerable house Loewe
News
Andy Davidhazy at the beginning (left) and end (right) of his hike
video
News
Taylor Swift is applying to trademark song lyrics from 1989
people
Voices
The popularity of TV shows such as The Liver Birds encouraged Liverpudlians to exaggerate their Scouse accent
voicesWe exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
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: Retirement Coordinator - Financial Services

Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

Recruitment Genius: Annuities / Pensions Administrator

Negotiable: Recruitment Genius: You will be the first point of contact for all...

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Ashdown Group: Learning and Development Programme Manager

£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

Day In a Page

Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor
How to make your own Easter egg: Willie Harcourt-Cooze shares his chocolate recipes

How to make your own Easter egg

Willie Harcourt-Cooze talks about his love affair with 'cacao' - and creates an Easter egg especially for The Independent on Sunday
Bill Granger recipes: Our chef declares barbecue season open with his twist on a tradtional Easter Sunday lamb lunch

Bill Granger's twist on Easter Sunday lunch

Next weekend, our chef plans to return to his Aussie roots by firing up the barbecue
Joe Marler: 'It's the way I think the game should be played'

Joe Marler: 'It's the way I think the game should be played'

The England prop relives the highs and lows of last Saturday's remarkable afternoon of Six Nations rugby
Cricket World Cup 2015: Has the success of the tournament spelt the end for Test matches?

Cricket World Cup 2015

Has the success of the tournament spelt the end for Test matches?
The Last Word: Justin Gatlin knows the price of everything, the value of nothing

Michael Calvin's Last Word

Justin Gatlin knows the price of everything, the value of nothing