Investment Column: SDL can translate into attractive returns

UK Coal; Stanley Gibbons

Our view: buy

Share price: 627p (+9.5p)

SDL is a company that makes sure things do not get lost in translation, and with a market cap of nearly £500m has become a significant player in the UK software industry. The company, which develops technology and offers support services to manage its clients' content across the world, yesterday put out an upbeat trading statement and announced a significant shift at the top of the company.

The update, in which SDL said it expected to beat analysts' estimates on revenues and profits by some 5 per cent, pleased investors. Revenues for the financial year are also expected to come in at £202.5m, up from £171.9m in 2009. Pre-tax profits will be in the range of £34.5m to £35.5m, up from £29.8m a year earlier.

Mark Lancaster, the group's founder, said the results came against a "difficult global environment", and the company was looking good for future growth. He also announced his move from chairman and chief executive to executive chairman, with chief financial officer John Hunter becoming new chief executive. Investec analyst Gareth Evans called it a "logical step" to free up Mr Lancaster to concentrate on strategic issues.

SDL has been looking beyond simple translation and wants to provide customers with a service that deals with everything from brand awareness to sales and after-sales support. Mr Hunter yesterday talked about continuing this "end-to-end" strategy that has seen significant contract wins including Saab, United Airlines, Fidelity Investments and LG.

SDL has performed strongly in the past year, particularly in critical emerging markets such as China and South Korea, as well as Japan and North America. At 19.6 times estimated 2010 earnings, the company is at a slight premium when compared with its peers. But quality doesn't often come cheap, so buy.

UK Coal

Our view: Speculative buy

Share price: 52p (-3.25p)

The financial crisis was hard on miners. Share prices fell as commodities slid in line with industrial demand. Traders scurried to find cover, bruising stocks in a number of companies – including UK Coal. Its shares went from above 500p in May 2008 to around 45p in November that year.

While they came back a bit in early 2009, the shares remain well below pre-crisis highs. At less than 60p, they are much closer to the nadir than the peak. On the surface, such an uninspiring recovery may be seen as an augury of further woes. But we view it as an opportunity. To be sure, the company has issues, not least a load of debt. Then there is a chunky property revaluation loss – besides mining, UK Coal has vast property holdings – of around £30m, which came to light in last night's trading statement.

Stacked against that are coal market fundamentals. Spot prices have been on the up, and are forecast to rise further. They are significantly higher than UK Coal's contracted levels. But analysts expect the company to start benefiting from a new contract pricing system this year, giving greater exposure to the spot price.

If UK Coal can keep production problems at bay, this stock may mount a real recovery. At less than 11 times forecast earnings for this year, they look cheap. A good speculative buy.



Stanley Gibbons

Our view: buy

Share price: 175.5p (+3.5p)

Stanley Gibbons, the stamp-collecting and memorabilia company, is likely to be celebrating more than most at the Royal Wedding this year, following its acquisition of the Benham Collectibles business in September.

The company expects the royal event to help lift Benham's revenues by as much as 40 per cent in 2011, citing how the business should benefit from sales of "associated first-day covers and the other commemorative collectible products". All this and profits for the year to 31 December 2010, which will be in line with expectations.

But shares in Stanley Gibbons, despite touching a 12-month high yesterday, still trade on a multiple of just 9.6 time forecast earnings, cheap for a defensive stock with a progressive dividend policy. Stanley Gibbons also believes there are "substantial opportunities" to lift overall sales and profits in 2011 and beyond via initiatives including the introduction of an Amazon-style community website.

It is also developing trading relationships in China, which has an estimated 30 million collectors. If Kate doesn't leave Wills at the altar, long-term happiness for investors beckons. Buy.

Suggested Topics
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?
SPONSORED FEATURES
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

Day In a Page

Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

Britain's 24-hour culture

With the 'leisured society' a distant dream we're working longer and less regular hours than ever
Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

The addictive nature of Diplomacy

Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

Fashion: Ooh, Lady Chatterley!

Take inspiration from DH Lawrence's racy tome with equally racy underwear
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

Charlie Austin: ‘If the move is not right, I’m not going’

After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones