The Investment Column: Hiscox a safe long-term bet as profits hit record

Hiscox; WH Ireland Group


Our view: Hold for now

Share price: 224.5p (+5.5p)

The insurance group Hiscox is clearly better than most people think it is. The firm, which specialises in a range of markets, including fine art and kidnapping, posted consensus-busting first-half numbers yesterday, saying that its regional speciality businesses had outperformed.

True, and with pre-tax profits hitting a record £109m, the group has done better than most of its rivals in the last six months. However, the stock has been dragged down, argues chief executive Bronek Masojada, as the insurance sector as a whole has been caught in the mire of the wider financial services sector. In fact, Hiscox offers very good value for money, he suggests, and with the dividend up 6.5 per cent, investors should pile in.

Among analysts, however, there is not universal agreement with Mr Masojada's opinion. Those at Cazenove argue that Hiscox is already fairly valued, pointing out that "the stock is trading on 0.9 times [estimated] 2007 tangible net asset value versus 0.9 times for the sector, generating a return on equity of 15 per cent versus the sector on 16 per cent. In price-earnings ratio terms, the stock is trading on 6.7 times [estimated] 2007 earnings per share versus a sector average of 6.2 times."

Those at UBS, the house broker, and KBC Peel Hunt disagree, saying there is still upside in the stock – a quick 10 per cent is possible, says KBC.

In fairness, the shares have done well recently and are up about 10 per cent in the last month despite being down on this time last year. However, as the stock managed a modest climb of just 2.5 per cent yesterday, on what were very good numbers, it would appear that most in the market believe that investors will make little in the short term.

Investors should see Hiscox as a safe buy, even if they are not going to make huge returns in the next few months, especially as the second half of the year coincides with the potentially hugely expensive hurricane season. A longer-term punt, however, could prove to be profitable. Hold for now.



WH Ireland Group

Our view: Sell

Share price: 99p (-2.5p)

Despite all the bad news about the financial services industry, savvy investors will know all too well that there will be a time, when they reach their nadir, to buy the likes of Bradford & Bingley and Royal Bank of Scotland shares.

Sadly, now is not that time, if the Manchester-based brokerage WH Ireland is anything to go by. The firm's interim numbers published yesterday showed that the group made a £685,000 loss in the six months to the end of May, after posting a £3.8m profit in the same period last year.

Investors will also note that the group has cut its interim dividend from 2p to 1p, although its chief executive, Laurie Beevers, says this is "prudent" given the conditions of the wider market.

Mr Beevers reckons that there is scope for an improvement in the share price in the autumn, largely due to it being under-valued. He also believes that next spring could mark the start of the whole market's rival. Many investors will be hoping that he is right, but will take note that he also says that the two months since the end of May have been dreadful.

WH Ireland is a well run group that follows its own dependable model and is undervalued, as evidenced by the number of potential suitors interested in buying it over the last 18 months. However, as a brokerage group, it is dependant on the financial markets, which the group itself says, at least in the short term, are pretty dire. Sell.



Infrastructure India

Our view: Buy

Share price: 93.5p (unchanged)

There is not a listed company in the land that is not making a huge hullabaloo about its business or investments in India, if it has any, often to try to get the focus away from whatever it is up to in the UK.

Infrastructure India, an investment group that works entirely in the country and that only listed in June, issued its maiden trading update yesterday, saying that everything was fine and also that it has put money into two projects: a hydroelectric plant and a toll road.

Investors that like to take comfort from having lots of numbers to pore over will be disappointed: not even the analysts at house broker Kaupthing have a share price prediction.

Instead, they stress that the value is based on the individuals in charge including Gary Neville, who was on the board of PFI group John Laing, which was sold to Henderson for just over £1bn in 2006.

Indeed, that is the plan for Infrastructure India. Before too long, it will be back to the market for more money and it will also raise debt.

The money is earmarked for more energy and transport projects where contractors are encouraged to take on equity in the enterprise, mitigating the company's risk. After that, expect to hear news of a sale.

A punt now would be a risk for investors, but if the group's plans come off, and it is subsequently taken private, today's buyers could do very nicely. Buy.

Travel
travel
Voices
A family sit and enjoy a quiet train journey
voicesForcing us to overhear dull phone conversations is an offensive act, says Simon Kelner
Arts and Entertainment
The cast of The Big Bang Theory in a still from the show
tvBig Bang Theory filming delayed by contract dispute over actors' pay
Sport
England celebrate a wicket for Moeen Ali
sportMoeen Ali stars with five wickets as Cook's men level India series
PROMOTED VIDEO
News
Morrissey pictured in 2013
people
News
peopleGuitarist, who played with Aerosmith, Lou Reed and Alice Cooper among others, was 71
Travel
travel
News
Robyn Lawley
people
News
people
News
i100  ... he was into holy war way before it was on trend
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Arts and Entertainment
High-flyer: Chris Pratt in 'Guardians of the Galaxy'
filmThe film is surprisingly witty, but could do with taking itself more seriously, says Geoffrey Macnab
News
people
Life and Style
food + drinkVegetarians enjoy food as much as anyone else, writes Susan Elkin
Life and Style
lifeDon't get caught up on climaxing
Life and Style
tech
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

1st Line Support Technician / Application Support

£20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...

Team Secretary - (Client Development/Sales Team) - Wimbledon

£28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...

Accountant / Assistant Management Accountant

Competitive (DOE): Guru Careers: We are looking for an Assistant Management Ac...

Senior Investment Accounting Change Manager

£600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...

Day In a Page

Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

The day America’s love of backyard tigers led to a horrific bloodbath

With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

How Samuel Beckett became a French Resistance spy

As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
We will remember them: relatives still honour those who fought in the Great War

We will remember them

Relatives still honour those who fought in the Great War
Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

Kodak's last-ditch bid to keep celluloid alive

Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

Acting in video games gets a makeover

David Crookes meets two of the genre's most popular voices
Could our smartphones soon be diagnosing diseases via Health Kit and Google Fit?

Could smartphones soon be diagnosing diseases?

Health Kit and Google Fit have been described as "the beginning of a health revolution"
Ryanair has turned on the 'charm offensive' but can we learn to love the cut-price carrier again?

Can we learn to love Ryanair again?

Four recent travellers give their verdicts on the carrier's improved customer service
Billionaire founder of Spanx launches range of jeans that offers

Spanx launches range of jeans

The jeans come in two styles, multiple cuts and three washes and will go on sale in the UK in October
10 best over-ear headphones

Aural pleasure: 10 best over-ear headphones

Listen to your favourite tracks with this selection, offering everything from lambskin earmuffs to stainless steel
Commonwealth Games 2014: David Millar ready to serve up gold for his beloved Scotland in the end

Commonwealth Games

David Millar ready to serve up gold for his beloved Scotland in the end
UCI Mountain Bike World Cup 2014: Downhill all the way to the top for the Atherton siblings

UCI Mountain Bike World Cup

Downhill all the way to the top for the Atherton siblings
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