Investment Column: Shareholders won't let LSE go for a song

Pursuit Dynamics; Brooks Macdonald


Our view: Buy

Share price: 1,030p (+33.5p)

Is there any point in discussing the London Stock Exchange's financials when considering the shares?

Even if yesterday's trading statement were dreadful (it wasn't) it would hardly matter – surely the only relevant issue is whether the LSE will be bid for and when?

But just for argument's sake, let's have a look at the numbers anyway. The exchange operator enjoyed a solid first quarter. Total revenue grew 14 per cent to £190.2m, while revenue from the main trading markets increased 4 per cent to £79.7m.

The level of trading in shares and derivatives was sluggish, but was offset by active trading in bonds thanks to the European sovereign debt crisis and a pick-up in flotations.

The summer period is usually slow, but chief executive Xavier Rolet had encouraging things to say about the flotation pipeline and other financials which should enable the company to continue posting decent numbers.

Now, we last looked at the shares in January, when we advised a hold at 873p. That has proved sound advice. But the fact is that the consolidation of Western exchanges into two big groups is not complete and Asia has barely started. Against this backdrop the LSE is and remains a major prize, with London still the largest European exchange by volume.

Over the years there have been some frankly stupid takeover bids, tabled at less than the shares' prevailing market price. Both Macquarie and Nasdaq told shareholders that they should take lowball offers for "certainty". Fortunately LSE investors were made of stronger stuff.

The sovereign funds that sit on the LSE's shareholder register bought in at a pretty price and will clearly block any deal that forces them to exit at a loss. So a bidder, whether Nasdaq (again) or an Asian exchange will have to pay up to bring them round.

Then there is the valuation. The group trades on a forward earnings multiple of 12 times, which is hardly demanding, and adds to the case for in buying once again.

Pursuit Dynamics

Our view: Buy

Share price: 325p (+6.25p)

Pursuit Dynamics made its name in with some whizzy technology, including its reactor system used in brewing and its atomising system for putting out fires which involves injecting high-speed gas into fluid.

The group's kit also helps fight against biological and chemical hazards. Yesterday, it revealed a 50/50 joint venture with Biomimetics Health Industries that uses Pursuit's atomising technology and Biomimetics' chemistry expertise. The life sciences group specialises in "nature replicating" products that kill contagious pathogens including MRSA and E.coli.

Pursuit's chief executive officer, Roel Piper, said this market offers the two companies "huge potential".

Crucially, the deal came just a week after shares leapt on news that Pursuit was trialling its PDX waste-to-energy technology at a Thames Water treatment plant in Reading. This could open up a whole new revenue stream for the company, according to City analysts, who backed the stock.

Together, the updates point to good prospects for growth. But what about the share price? Merchant Securities, whose analysts reckon that Pursuit will start to generate in the next financial year, put the stock on around 15 times forward earnings for next year. This is encouraging, not least because the share price has tumbled since peaking at 700p in December.

Brooks Macdonald

Our view: Hold

Share price: 1,272.5p (+18p)

Brooks Macdonald continued its run of strength yesterday, announcing that its full-year results would be ahead of forecasts. The wealth manager was able to outperform its own expectations even after a £545,000 Financial Services Compensation Scheme levy.

At the end of June, funds under management were £2.97bn – up 6 per cent from the end of March.

Brooks already has a reputation for efficiency that sees hefty chunks of new business flow through to the bottom line. It has also broadened its offering with the launch of Brooks Macdonald funds, which combines existing funds with specialist funds acquired when it bought the property specialist Braemar a year ago.

Still, the shares have had a good run. Moreover, they now trade at about 25 times estimated earnings, according to Bloomberg, and with most of the good news in the price we do not think they have much further to go.

PROMOTED VIDEO
Life and Style
fashionHealth concerns and 'pornified' perceptions have made women more conscious at the beach
Arts and Entertainment
tv
Sport
Ojo Onaolapo celebrates winning the bronze medal
commonwealth games
Arts and Entertainment
Rock band Led Zeppelin in the early 1970s
musicLed Zeppelin to release alternative Stairway To Heaven after 43 years
Arts and Entertainment
High-flyer: Chris Pratt in 'Guardians of the Galaxy'
filmHe was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star
Sport
Van Gaal said that his challenge in taking over Bobby Robson's Barcelona team in 1993 has been easier than the task of resurrecting the current United side
footballA colourful discussion on tactics, the merits of the English footballer and rebuilding Manchester United
Life and Style
Sainsbury's could roll the lorries out across its whole fleet if they are successful
tech
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Travel
The shipping news: a typical Snoozebox construction
travelSpending the night in a shipping container doesn't sound appealing, but mobile crash pads are popping up at the summer's biggest events
Arts and Entertainment
'Old Fashioned' will be a different kind of love story to '50 Shades'
film
Arts and Entertainment
Tracey Emin's 'My Bed' is returning to the Tate more than 15 years after it first caused shockwaves at the gallery
artTracey Emin's bed returns to the Tate after record sale
Arts and Entertainment
Smart mover: Peter Bazalgette
filmHow live cinema screenings can boost arts audiences
Environment
Neil Young performing at Hyde Park, London, earlier this month
environment
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

Project Manager (HR)- Bristol - Upto £400 p/day

£350 - £400 per annum + competitive: Orgtel: Project Manager (specializing in ...

Graduate / Trainee Recruitment Consultant - IT

£25000 per annum + OTE £40,000: SThree: Orgtel are seeking Graduate Trainee Re...

HR Business Partner - Banking Finance - Brentwood - £45K

£45000 per annum + Benefits: Ashdown Group: ** HR Business Partner - Senior H...

PA / Team Secretary - Wimbledon

£28000 - £32000 per annum + Benefits: Ashdown Group: PA / Team Secretary - Mat...

Day In a Page

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
How live cinema screenings can boost arts audiences

How live cinema screenings can boost arts audiences

Broadcasting plays and exhibitions to cinemas is a sure-fire box office smash
Shipping container hotels: Pop-up hotels filling a niche

Pop-up hotels filling a niche

Spending the night in a shipping container doesn't sound appealing, but these mobile crash pads are popping up at the summer's biggest events
Native American headdresses are not fashion accessories

Feather dust-up

A Canadian festival has banned Native American headwear. Haven't we been here before?
Boris Johnson's war on diesel

Boris Johnson's war on diesel

11m cars here run on diesel. It's seen as a greener alternative to unleaded petrol. So why is London's mayor on a crusade against the black pump?
5 best waterproof cameras

Splash and flash: 5 best waterproof cameras

Don't let water stop you taking snaps with one of these machines that will take you from the sand to meters deep
Louis van Gaal interview: Manchester United manager discusses tactics and rebuilding after the David Moyes era

Louis van Gaal interview

Manchester United manager discusses tactics and rebuilding after the David Moyes era
Will Gore: The goodwill shown by fans towards Alastair Cook will evaporate rapidly if India win the series

Will Gore: Outside Edge

The goodwill shown by fans towards Alastair Cook will evaporate rapidly if India win the series
The children were playing in the street with toy guns. The air strikes were tragically real

The air strikes were tragically real

The children were playing in the street with toy guns
Boozy, ignorant, intolerant, but very polite – The British, as others see us

Britain as others see us

Boozy, ignorant, intolerant, but very polite
How did our legends really begin?

How did our legends really begin?

Applying the theory of evolution to the world's many mythologies
Watch out: Lambrusco is back on the menu

Lambrusco is back on the menu

Naff Seventies corner-shop staple is this year's Aperol Spritz