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.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA celebration of British elections
  • Get to the point
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

SThree: Trainee Recruitment Consultant - Swiss Banking and Finance

£20000 - £25000 per annum + Uncapped commission: SThree: Can you speak German,...

Ashdown Group: Marketing Executive - 6 month FTC - Central London

£25000 - £30000 per annum + benefits: Ashdown Group: An exciting opportunity f...

Ashdown Group: Junior Project Manager (website, web application) - Agile

£215 per day: Ashdown Group: Junior Project Manager (website, web application ...

Guru Careers: Software Engineer / Software Developer

£40-50K: Guru Careers: We are seeking an experienced Software Engineer / Softw...

Day In a Page

Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before