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
Property
pets
Arts and Entertainment
tvThe C-Word, TV review
Arts and Entertainment
The Ridiculous Six has been produced by Adam Sandler, who also stars in it
filmNew controversy after nine Native American actors walked off set
Sport
Danny Jones was in the Wales squad for the 2013 World Cup
rugby leagueKeighley Cougars half-back was taken off after just four minutes
Life and Style
The original ZX Spectrum was simple to plug into your TV and get playing on
techThirty years on, the ZX Spectrum is back, after a fashion
News
Tiger Woods and Lindsey Vonn are breaking up after nearly three years together
peopleFormer couple announce separation in posts on their websites
Sport
football
Life and Style
Google celebrates Bartolomeo Cristofori's 360th birthday
techGoogle Doodle to the rescue
Arts and Entertainment
Haunted looks: Matthew Macfadyen and Timothy Spall star in ‘The Enfield Haunting’
tvThe Enfield Haunting, TV review
News
news
News
The Mattehorn stands reflected in Leisee lake near Sunnegga station on June 30, 2013 near Zermatt, Switzerland
news
ebooks
ebooksA celebration of British elections
  • 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: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Senior SEO Executive

£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

Recruitment Genius: Online Customer Service Administrator

£16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...

Recruitment Genius: Digital Marketing Executive

£18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...

Day In a Page

Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

Everyone is talking about The Trews

Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living