The Investment Column: Unsung Boosey gets noticed

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The Independent Online
The rise and rise of Boosey & Hawkes has been one of the stock market's unsung success stories over the past few years. Worth just 131p five years ago, the shares peaked at 755p in May. It is perhaps not surprising, on one of the best ratings and lowest yields around, that they should have run out of puff to close last night 3p lower at 725p.

There are plenty of reasons for Boosey to have attracted so much support along the way. It is unique in the British market, one of the three largest musical instrument makers in the world and the owner of one of the best catalogues of classical music copyrights, including such 20th-century giants as Bartok, Britten, Prokofiev, Shostakovich and Strauss.

As a long-term growth story, both of Boosey's operating businesses have enormous potential. The company has a tiny share of the enormous American market and is well placed to ride what should be very rapid growth in demand in Asia as the fast increasing middle classes in the Pacific Rim countries give their children the musical start they would have liked themselves. In publishing, formats such as digital cassette tapes should ensure volumes growing at well above the rate of inflation for years to come.

Not surprisingly, against that favourable backdrop, Boosey finds itself in enviable financial shape. Profits have been rising steadily since current chief executive Richard Holland took over in 1989. Cashflow swamps both earnings and capital expenditure, always a healthy sign, and the dividend is well covered.

So what's the catch? Quite simply,the market has finally woken up to the good news. Even after the recent weakness, the shares trade on a prospective p/e ratio of 32 this year, falling to only 29 to the end of 1997. The expected dividend income yield this year is a meagre 1.2 per cent.

With almost half the shares controlled by US publisher Carl Fischer, it does not require much demand to push up the price, and the shares have doubled in less than a year. That can work in reverse and, despite the good long-term outlook, the shares look vulnerable.