Investment Column: Johnson Matthey still has more to offer

Sportingbet; Hampson Industries

Our view: Keep buying

Share price: 1,877p (+37p)

When we turned positive on Johnson Matthey in the summer, the platinum refiner's shares were trading at under 1,600p apiece. Given the gains seen over the past few months, is it time to bank profits?

The bull case certainly received a boost yesterday, when Johnson, which doubles as the world's largest supplier of catalytic converters, issued a storming set of results. Half-year pre-tax profits were up by a heady 44 per cent to more than £164m, ahead of City forecasts. The strength was underpinned by the benign combination of higher platinum prices and demand for catalytic converters. The former is down to the rebound on the commodity markets, while the latter was underpinned by the recovery in the auto industry. Building on its strength, Johnson upped its interim dividend by 13 per cent to 12.5p, something which will have pleased income investors.

Management also struck a confident note on outlook, with performance over the second half expected to be broadly in line with the first six months of the year. That said, Johnson will face tougher comparisons, as auto sales over the second half of 2009 were propped up by Government incentive schemes. We do not consider that a reason to sell, however, as analysts remain fairly bullish on platinum prices, which should continue to help the business.

Moreover, Johnson still trades on undemanding metrics. Despite recent gains, the shares remain on multiples of under 15 times Deutsche Bank's forecast earnings for next year. As we highlighted in our last note, the historical range is between 15 to 17 times, meaning Johnson is still trading at the lower end of past trends. Recent gains demonstrate that the market has begun warming to this business – but the metrics show it has to yet give the stock the rating it deserves. Keep buying.


Our view: Avoid

Share price: 61p (+0.9p)

We've been bearish on Sportingbet, the internet bookie which lost nearly a quarter of its value after chief executive Andrew McIver said it was not for sale, for some time.

Any reason to change? The sporting betting business itself is ticking along nicely (but try and get an account and you'd wonder how), but poker is being hammered by the likes of Full Tilt and Pokerstars which still operate in the US and have been aggressively promoting their businesses here. Casino, too, has been battered by the recession. Still, in the first quarter the amount of money wagered increased by 11 per cent, net gaming revenues were up by 5 per cent ,while pre-tax profit grew £2m to £8.5m, meeting forecasts.

The risks are acquisition and regulation-related. Sportingbet would like to buy or merge with rivals which could add new territories or enhance its mobile offering. There are also ever-present dangers of some of the countries in which it operates taking exception to the company (it's happened to rivals). Spain and Greece could do with the revenues deregulating (and taxing) gambling would bring but it's what they do and how they do it that isn't clear. At nine times 2011 forecast earnings, the shares are inexpensive. But the risks are too high. Avoid.

Hampson Industries

Our view: Speculative buy

Share price: 28p (-1.75p)

Hampson Industries, the defence and aerospace parts group, signalled in August that first-half profits would fall "materially below current market estimates", sending its shares down 65 per cent. Yesterday's results for the six months to the end of September filled in the details – adjusted pre-tax profits down by 64 per cent, operating profits by 70 per cent, the interim dividend cancelled. The stock duly lost another 6 per cent.

But for canny investors, Hampson is starting to look like an opportunity. If only the newly installed chief executive – Norman Jordan, from Labinal – can put his plans into action, the company may put its troubles behind it.

In amongst the bad news were analyst-beating revenue rises of 4 per cent, indicating renewed signs of life in the market. Hampson's slashed trading profits of £7.8m were also still considerably higher than the £6m forecast in August. The group also recently won a record $53m (£34m) tooling contract from Boeing, renegotiated banking covenants, and is looking to pay down debts. It's still a big risk but we'd make it a speculative buy.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Michael Corleone, played by Al Pacino, goes back to his family's Sicilian roots in the first 'Godfather' film
Kim Kardashian speaks on the Today show about her step-father's transition
Arts and Entertainment
Kermit and his doppleganger Hyalinobatrachium dianae
Wenger and Mourinho square-up to each other earlier this season
All the action from today's Premier League, including Everton vs Man Utd and Chelsea vs Arsenal
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

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Business Analyst - Financial Services - City, London

£50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...

SThree: Trainee Recruitment Consultant

£18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is the o...

Day In a Page

General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence
Public relations as 'art'? Surely not

Confessions of a former PR man

The 'art' of public relations is being celebrated by the V&A museum, triggering some happy memories for DJ Taylor
Bill Granger recipes: Our chef succumbs to his sugar cravings with super-luxurious sweet treats

Bill Granger's luxurious sweet treats

Our chef loves to stop for 30 minutes to catch up on the day's gossip, while nibbling on something sweet
London Marathon 2015: Paula Radcliffe and the mother of all goodbyes

The mother of all goodbyes

Paula Radcliffe's farewell to the London Marathon will be a family affair
Everton vs Manchester United: Steven Naismith demands 'better' if Toffees are to upset the odds against United

Steven Naismith: 'We know we must do better'

The Everton forward explains the reasons behind club's decline this season
Arsenal vs Chelsea: Praise to Arsene Wenger for having the courage of his convictions

Michael Calvin's Last Word

Praise to Wenger for having the courage of his convictions