Investment Column: Standard should come clean on deal talk

Andor Technology; BGlobal
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The Independent Online

Our view: Hold

Share price: 205.9p (+1.7p)

Standard Life has been unusually busy on the acquisitions front recently, and yesterday finalised its third "bolt-on" deal in 12 months. For those unwilling to wade through the corporate gobbledygook in Focus Solutions' deal press release (you do wonder who writes these things), it is a technology operation that provides software used by salesmen to shift financial products. And it is not coming cheap.

Standard is paying a 33 per cent premium compared with the closing price of Focus before the company announced it was in talks. There is lots of talk about its strategic rationale (expensive acquisitions are always strategic). Still, the market obviously liked the deal, and the price didn't do any harm to a share that needed something to pep it up, having been on the skids for much of the past month.

One reason behind this is the fear that all these little deals could eventually lead to a big "transformative" deal in the coming months. After several years of difficulties, Standard is in reasonably healthy shape corporately, but you sometimes wonder where it is going. Management might feel the answer to that question is to go out and splurge a load of shareholders' cash on buying something. Were that not a worry, the shares might find some life, because Standard looks very cheap. The shares sit on a huge discount to Shore Capital's forecast of the company's 2010 net asset value per share – some 35 per cent. The forecast yield is also more than generous at 6.3 per cent.

We said hold the shares back in February, when they stood at 204.6p. Since then they haven't done much. Really, management needs to come clean on Standard's intentions and future strategy. If they won't, the shares aren't going to move much, despite being horribly undervalued. But keep holding in the hope they get the message.

Andor Technology

Our view: Buy

Share price: 371p (-8p)

Even the most snap-happy reader is unlikely to have heard of Andor Technology, which makes whizzy kit such as X-ray and time-resolved cameras for science labs. The specialist digital camera group was spun out of the physics department at Queen's University, Belfast, more than two decades ago and listed on Aim in 2004.

Its first years as a public company were somewhat troublesome, but Andor has turned its fortunes around and has seen strong growth in the past two years. Since January 2009 its share price has almost quintupled. The company posted its full-year results yesterday. In a tough year, chairman Colin Walsh said, Andor has increased sales, profitability and margins to record levels. The group reported pre tax profits had risen 50 per cent to £7.1m, with turnover up 29 per cent to £42.7m.

The management said that it was excited about the prospects for next year and will deliver full-year contributions from acquisitions Bitplane and Photonic. There is growth in the emerging markets, and some exciting new products in the pipeline. Andor trades at 17.3 times estimated 2011 earnings, according to the broker Altium, ahead of peers (with no dividend), but analyst Iain Staples believes that the shares could hit 450p. After an excellent trading record, we predict further gains. Buy.


Our view: Buy

Share price: 39p (+2.5p)

First, profits for the smartmeter specialist BGlobal lit a fire under the shares. But there is plenty more to come for the patient investor. Results for the six months to September show revenue up 114 per cent to £12.5m and, more importantly, adjusted pre-tax profits at £1.31m, compared with last year's £670,000 loss.

It has been a good year for the group, including its first acquisition – of software company Utiligroup – funded by an £8m share placing. BGlobal was also the highest-ranking Aim-listed company in Deloitte's Technology Fast 50 competition (as well as winning the northern category and coming sixth overall), thanks to its spectacular 4,447 per cent growth in revenues over the past five years.

The company is set to benefit from European green energy targets forcing us to look closely at energy use. And the changes to the Government's carbon reduction scheme, thanks to spending cuts, could also boost business. With energy prices and environmental pressures, BGlobal is in a sweet spot. Like energy prices, the stock is only going one way. Buy.