Investment Column: Shaftesbury's exposure to London's West End will keep it propped up

Hogg Robinson; Gem Diamonds

Our view: Hold

Share price: 501.5p (+19.5p)

The Chancellor's Autumn Statement confirmed that the UK is lodged in the doldrums. And European leaders are still attempting – and still failing – to solve the sovereign debt crisis. But there are bright spots.

One of the brightest is the commercial property market in the capital. It has been doing rather well of late, something that was in evidence when Shaftesbury published its full-year results yesterday. The company, which is focused on the West End, with more than 500 properties in and around Carnaby Street, Covent Garden, Chinatown, Soho and Charlotte Street, said its adjusted net asset values per share rose by nearly 12 per cent to 463p on the reporting benchmarks set by the European Public Real Estate Association.

Although that is the key metric for property firms, other indicators were also positive, including, from an investment point of view, the final dividend. The directors recommended 5.75p per share, which is ahead of last year's 5.25p per share. But despite all this, you can almost hear the bears grumbling about the economy, about what is going to happen next year.

Well, given the concentration of its portfolio, it should be remembered that Shaftesbury depends on the West End economy. And the thing to remember about the West End is that it is more resilient than the country as a whole. London, as Shaftesbury's chairman, John Manser, said, "continues to prosper and grow". "Its resilience reflects London's status as the leading tourist and global financial centre and the largest city in Europe," he added.

We agree, though, given the events in Europe, that we have become a tad cautious. If the euro crumbles, the resulting financial mayhem will hit London – we have little doubt about that. That could unsettle Shaftesbury's shares, which are not cheap.

The stock trades at a premium to the net asset value figure quoted above, which contrasts with the discounts in the wider sector. Although this premium is well deserved, in our view, and although Shaftesbury is certainly not one to sell, it could lead to some profit-taking if something (or rather something else) goes horribly wrong in Europe. Wait and watch for now.

Hogg Robinson

Our view: Buy

Share price: 55p (+0.5p)

The travel industry has suffered a year of severe turbulence in the travel industry; the tour operator Thomas Cook has been particularly badly affected. But shares in Hogg Robinson, the corporate travel management company, have soared this year, as investors have checked into its global growth story and reduced debt levels.

This partly reflects the geographical spread of Hogg Robinson's client base in 120 countries. But it is also a consequence of the broad range of services that the company provides to big corporates such as the HSBC and Pfizer, which are keen to keep a tight control of their travel expenses in an economic downturn.

The company's client retention rate is above 90 per cent, and its services range from handling reservations to data management on its proprietary technology. Hogg Robinson added a number of new clients, including the financial services companies AIG and Allianz, in the half year to 30 September, which helped it to increase its pre-tax profits by 22 per cent to £18.7m.

This enabled it to grow its interim dividend by 20 per cent to 0.6p. Further good news for potential investors – given the bleak time it suffered when its shares sank to less than 4p in December 2008 in the last recession – was that Hogg Robinson slashed its net debt by £16.9m to £68.9m over the half year.

Overall, we think Hogg Robinson, which trades on a modest forward earnings ratio of just seven, is well placed to steer its way through the global economic storm.

Gem Diamonds

Our view: Buy

Share price: 200p (-1.1p)

 

To decide whether or not to back Gem Diamonds, you need to look at the trends in the broader diamond market. And happily for the company, which said yesterday that it was pushing ahead with the expansion of its Letseng mine in Lesotho, we had some positive indications about the the goings-on in the wider market the other week.

As the analysts at Northland pointed out, the jewellery retailer Tiffany & Co recently quashed the speculation surrounding a possible slowdown in Chinese demand for diamonds with its trading update.

That bodes well for the wider market. The news on expanding Letseng, meanwhile, bodes well for Gem's ability to capitalise on the growth in the market. Again, Northland highlighted the limited production upside relative to a rival like Petra Diamonds; expanding Letseng will help in the near term, even if, as the analysts also point out, Gem "lacks the diversity of mine structures and deposits of Petra". So, buy for now, but keep a close eye on it.

News
people
Arts and Entertainment
'New Tricks' star Dennis Waterman is departing from the show after he completes filming on two more episodes
tvOnly remaining original cast-member to leave crime series
Sport
Frank Lampard and his non-celebration
premier leagueManchester City vs Chelsea match report from the Etihad Stadium
Sport
Esteban Cambiasso makes it 3-3
premier league
PROMOTED VIDEO
Sport
Mario Balotelli celebrates his first Liverpool goal
premier leagueLiverpool striker expressed his opinion about the 5-3 thriller with Leicester - then this happened
News
people'I hated him during those times'
News
Britain's shadow chancellor Ed Balls (L) challenges reporter Rob Merrick for the ball during the Labour Party versus the media soccer match,
peopleReporter left bleeding after tackle from shadow Chancellor in annual political football match
Arts and Entertainment
Female fans want more explicit male sex in Game of Thrones, George R R Martin says
tvSpoiler warning: Star of George RR Martin's hit series says viewers have 'not seen the last' of him/her
News
i100
News
Dame Vivienne Westwood has been raging pretty much all of her life
peopleMemoir extracts show iconic designer 'felt pressured' into going out with Sex Pistols manager
News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
fashionAlexander Fury's Spring/Summer 2015 London Fashion Week roundup
Arts and Entertainment
Lauryn Hill performing at the O2 Brixton Academy last night
musicSinger was more than 90 minutes late on stage in Brixton show
News
i100
News
Rumer was diagnosed with bipolarity, attention deficit hyperactivity disorder and post-traumatic stress disorder: 'I was convinced it was a misdiagnosis'
peopleHer debut album caused her post-traumatic stress - how will she cope as she releases her third record?
News
people''Women's rights is too often synonymous with man-hating'
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

Senior BA - Motor and Home Insurance

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

Market Risk & Control Manager

Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...

SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Head of Audit

To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

Day In a Page

Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam