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
Travel
travel
Arts and Entertainment
The cast of The Big Bang Theory in a still from the show
tvBig Bang Theory filming delayed by contract dispute over actors' pay
Sport
England celebrate a wicket for Moeen Ali
sportMoeen Ali stars with five wickets as Cook's men level India series
News
Morrissey pictured in 2013
people
PROMOTED VIDEO
Voices
A family sit and enjoy a quiet train journey
voicesForcing us to overhear dull phone conversations is an offensive act, says Simon Kelner
News
peopleGuitarist, who played with Aerosmith, Lou Reed and Alice Cooper among others, was 71
Travel
travel
News
Robyn Lawley
people
News
people
News
i100  ... he was into holy war way before it was on trend
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Arts and Entertainment
High-flyer: Chris Pratt in 'Guardians of the Galaxy'
filmThe film is surprisingly witty, but could do with taking itself more seriously, says Geoffrey Macnab
News
people
Life and Style
food + drinkVegetarians enjoy food as much as anyone else, writes Susan Elkin
Life and Style
lifeDon't get caught up on climaxing
Life and Style
tech
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

1st Line Support Technician / Application Support

£20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...

Team Secretary - (Client Development/Sales Team) - Wimbledon

£28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...

Accountant / Assistant Management Accountant

Competitive (DOE): Guru Careers: We are looking for an Assistant Management Ac...

Senior Investment Accounting Change Manager

£600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...

Day In a Page

Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

The day America’s love of backyard tigers led to a horrific bloodbath

With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

How Samuel Beckett became a French Resistance spy

As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
We will remember them: relatives still honour those who fought in the Great War

We will remember them

Relatives still honour those who fought in the Great War
Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

Kodak's last-ditch bid to keep celluloid alive

Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

Acting in video games gets a makeover

David Crookes meets two of the genre's most popular voices
Could our smartphones soon be diagnosing diseases via Health Kit and Google Fit?

Could smartphones soon be diagnosing diseases?

Health Kit and Google Fit have been described as "the beginning of a health revolution"
Ryanair has turned on the 'charm offensive' but can we learn to love the cut-price carrier again?

Can we learn to love Ryanair again?

Four recent travellers give their verdicts on the carrier's improved customer service
Billionaire founder of Spanx launches range of jeans that offers

Spanx launches range of jeans

The jeans come in two styles, multiple cuts and three washes and will go on sale in the UK in October
10 best over-ear headphones

Aural pleasure: 10 best over-ear headphones

Listen to your favourite tracks with this selection, offering everything from lambskin earmuffs to stainless steel
Commonwealth Games 2014: David Millar ready to serve up gold for his beloved Scotland in the end

Commonwealth Games

David Millar ready to serve up gold for his beloved Scotland in the end
UCI Mountain Bike World Cup 2014: Downhill all the way to the top for the Atherton siblings

UCI Mountain Bike World Cup

Downhill all the way to the top for the Atherton siblings
Save the tiger: The animals bred for bones on China’s tiger farms

The animals bred for bones on China’s tiger farms

The big cats kept in captivity to perform for paying audiences and then, when dead, their bodies used to fortify wine
A former custard factory, a Midlands bog and a Leeds cemetery all included in top 50 hidden spots in the UK

A former custard factory, a Midlands bog and a Leeds cemetery

Introducing the top 50 hidden spots in Britain
Ebola epidemic: Plagued by fear

Ebola epidemic: Plagued by fear

How a disease that has claimed fewer than 2,000 victims in its history has earned a place in the darkest corner of the public's imagination
Chris Pratt: From 'Parks and Recreation' to 'Guardians of the Galaxy'

From 'Parks and Recreation' to 'Guardians of the Galaxy'

He was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star