Broker snap: De La Rue outlook 'excellent'

26th Jan 2010 10:24

Banknote printer De La Rue today reported strong trading in its third quarter and analysts at Ambrian feel the dynamics driving the outlook remain 'excellent'.The broker, which rates the shares a 'buy', points to a combination of market position, reputation, customer relationships and intellectual property, providing an 'extremely high-quality' earnings stream.'On 13x 2010 forecast earnings and a 4.4% prospective dividend yield, the shares appear undervalued vs current market investment metrics and the historic premium to the market the group has rightly commanded,' read a note this morning. 'The sale of the 20% stake in Camelot may accelerate the timing of the next cash distribution to shareholders, and would be a catalyst to investor interest quite apart from the re-rating we consider the shares deserve.'Jonathan Jackson at Killik Capital agrees that the yield remains attractive, but thinks the defensive characteristics of the business are already discounted in the current rating.It suggests taking profits and investing the proceeds in other, more-attractively valued defensive/yield plays such as GlaxoSmithKline, Royal Dutch Shell, National Grid and FirstGroup.Meanwhile, Panmure Gordon maintains its target price of 959p and 'hold' recommendation for now given the shares of late have started to exceed this.'While the shares look to be a "safe bet" with a decent yield of 4%, we believe the shares are up with events, hence our neutral stance for now.'