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Berenberg lowers target price on Informa over COVID-19 fears
12th Mar 2020 13:43
(Sharecast News) - Analysts at Berenberg lowered their target price on publishing firm Informa from 845.0p to 635.0p on Thursday, stating that COVID-19 had put the group "in the eye of the storm".
Berenberg noted that despite headwinds from demonstrations in Hong Kong, Informa still managed to produce a "strong set of results" that put it in the same category as premium-rated Wolters Kluwer and RELX.
"With these results vindicating management's decision to invest in new products and in portfolio change, we think Informa deserves to re-rate," said Berenberg.
However, the broker, which kept its 'hold' rating on the group' shares, said the coronavirus outbreak would all but certainly "take a bite" out of Informa's 2020 figures.
"While Informa is globally diversified, with a broad spread of underlying industries to which it is exposed, the whole of the events business - around two-thirds of group revenue - is potentially affected by restrictions on free movement and on group assembly," said the analysts.
The analysts did credit Informa with "doing a good job in the circumstances", but still warned that the net effect of the outbreak to its assumptions was a 24% cut in 2020 earnings per share estimate.
"If we assume that Informa bounces back to "normal" in 2021, the stock is undoubtedly cheap. The risk, though, is that the virus takes longer than expected to work its way out of the system and that this could put 2020E estimates further at risk," added Berenberg.
"In the context of this extreme near-term uncertainty, we doubt investors will place much weight on recommendations that rely on 2021 earnings multiples. For these reasons, we stick to our 'hold' recommendation, with a new price target of 635p, pending further clarity on development of the COVID-19 situation."
Berenberg noted that despite headwinds from demonstrations in Hong Kong, Informa still managed to produce a "strong set of results" that put it in the same category as premium-rated Wolters Kluwer and RELX.
"With these results vindicating management's decision to invest in new products and in portfolio change, we think Informa deserves to re-rate," said Berenberg.
However, the broker, which kept its 'hold' rating on the group' shares, said the coronavirus outbreak would all but certainly "take a bite" out of Informa's 2020 figures.
"While Informa is globally diversified, with a broad spread of underlying industries to which it is exposed, the whole of the events business - around two-thirds of group revenue - is potentially affected by restrictions on free movement and on group assembly," said the analysts.
The analysts did credit Informa with "doing a good job in the circumstances", but still warned that the net effect of the outbreak to its assumptions was a 24% cut in 2020 earnings per share estimate.
"If we assume that Informa bounces back to "normal" in 2021, the stock is undoubtedly cheap. The risk, though, is that the virus takes longer than expected to work its way out of the system and that this could put 2020E estimates further at risk," added Berenberg.
"In the context of this extreme near-term uncertainty, we doubt investors will place much weight on recommendations that rely on 2021 earnings multiples. For these reasons, we stick to our 'hold' recommendation, with a new price target of 635p, pending further clarity on development of the COVID-19 situation."