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
PROMOTED VIDEO
News
ebooksNow available in paperback
News
The 67P/CG comet as seen from the Philae lander
scienceThe most important scientific breakthroughs of 2014
Arts and Entertainment
Ian McKellen as Gandalf in The Hobbit: The Battle Of The Five Armies
film
Sport
football
Arts and Entertainment
Sarah Koenig, creator of popular podcast Serial, which is to be broadcast by the BBC
tvReview: The secret to the programme's success is that it allows its audience to play detective
News
Ruby Wax has previously written about her mental health problems in her book Sane New World
people
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

Ashdown Group: Marketing Services Manager - (communications, testing, DM)

£32000 - £35000 per annum + benefits: Ashdown Group: Marketing Services Manage...

Guru Careers: Finance Account Manager

£Neg. (DOE) + Excellent Benefits: Guru Careers: A Finance Account Manager with...

Ashdown Group: Java Developer - Hertfordshire - £47,000 + bonus + benefits

£40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...

Ashdown Group: Direct Marketing Manager - B2C, Financial Services - Slough

£45000 - £55000 per annum + Benefits: Ashdown Group: An exciting opportunity h...

Day In a Page

Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

Paul Scholes column

It's a little-known fact, but I have played one of the seven dwarves
Fifa's travelling circus once again steals limelight from real stars

Fifa's travelling circus once again steals limelight from real stars

Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas