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.

Life and Style
health

Do you qualify – and how do you get it?

News
Food blogger and Guardian writer Jack Monroe with her young son
people
News
i100
News
Privately schooled, Oxford educated and a former editor of arguably the world's poshest magazine 'The Lady', it's perhaps unsurprising that Rachel Johnson rarely mixes with ordinary Proles.
people

The Mayor of London's sister, Rachel Johnson, apologises for shocking tweet about the PM

PROMOTED VIDEO
News
ebooksNow available in paperback
Environment
The plant ‘Nepenthes zygon’ was donated to Kew in 2004
environmentNepenthes zygon had been growing for almost a decade and helping to keep down cockroaches
News
This artist impression shows a modern-day Atlantis
news
Arts and Entertainment
booksPhotographer snapped celebrities for 40 years - but it wasn’t all fun and games
News
i100
Sport
Aguero - who single-handedly has kept City's Champions League dreams alive - celebrates his dramatic late winner
footballManchester City 3 Bayern Munich 2: Argentine's late hat-rick sees home side snatch vital victory
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

Citifocus Ltd: Product Development - Asset Management

£Attractive: Citifocus Ltd: High calibre individual with significant product d...

Citifocus Ltd: Credit Ratings - Banking Sector

£Negotiable: Citifocus Ltd: Leading global bank seeks experienced credit analy...

Citifocus Ltd: Economic Crime Investigation & Analysis

£Attractive Package: Citifocus Ltd: High calibre individual with a high degree...

Citifocus Ltd: Snr Risk Analyst - Capital & Liquidity

£Attractive: Citifocus Ltd: High calibre individual with superior academics an...

Day In a Page

Homeless Veterans Christmas Appeal: Drifting and forgotten - turning lives around for ex-soldiers

Homeless Veterans Christmas Appeal: Turning lives around for ex-soldiers

Our partner charities help veterans on the brink – and get them back on their feet
Putin’s far-right ambition: Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU

Putin’s far-right ambition

Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU
Tove Jansson's Moominland: What was the inspiration for Finland's most famous family?

Escape to Moominland

What was the inspiration for Finland's most famous family?
Nightclubbing with Richard Young: The story behind his latest book of celebrity photographs

24-Hour party person

Photographer Richard Young has been snapping celebrities at play for 40 years. As his latest book is released, he reveals that it wasn’t all fun and games
Michelle Obama's school dinners: America’s children have a message for the First Lady

A taste for rebellion

US children have started an online protest against Michelle Obama’s drive for healthy school meals by posting photos of their lunches
Colouring books for adults: How the French are going crazy for Crayolas

Colouring books for adults

How the French are going crazy for Crayolas
Jack Thorne's play 'Hope': What would you do as a local politician faced with an impossible choice of cuts?

What would you do as a local politician faced with an impossible choice of cuts?

Playwright Jack Thorne's latest work 'Hope' poses the question to audiences
Ed Harcourt on Romeo Beckham and life as a court composer at Burberry

Call me Ed Mozart

Paloma Faith, Lana del Ray... Romeo Beckham. Ed Harcourt has proved that he can write for them all. But it took a personal crisis to turn him from indie star to writer-for-hire
10 best stocking fillers for foodies

Festive treats: 10 best stocking fillers for foodies

From boozy milk to wasabi, give the food-lover in your life some extra-special, unusual treats to wake up to on Christmas morning
Phil Hughes head injury: He had one weakness – it has come back to haunt him

Phil Hughes had one weakness – it has come back to haunt him

Prolific opener had world at his feet until Harmison and Flintoff bounced him
'I have an age of attraction that starts as low as four': How do you deal with a paedophile who has never committed a crime?

'I am a paedophile'

Is our approach to sex offenders helping to create more victims?
How bad do you have to be to lose a Home Office contract?

How bad do you have to be to lose a Home Office contract?

Serco given Yarl’s Wood immigration contract despite ‘vast failings’
Green Party on the march in Bristol: From a lost deposit to victory

From a lost deposit to victory

Green Party on the march in Bristol
Putting the grot right into Santa's grotto

Winter blunderlands

Putting the grot into grotto
'It just came to us, why not do it naked?' London's first nude free runner captured in breathtaking images across capital

'It just came to us, why not do it naked?'

London's first nude free runner captured in breathtaking images across capital