Broker tips: Informa, Diploma, London & Stamford

10th May 2010 13:58

Panmure Gordon has been doing some stock screening on media stocks and the results have thrown up business publisher Informa as an interesting value opportunity."At the margin, we believe it is also relevant to highlight the recent Pearson/IDC transaction," where the implied exit multiple is around 16 times earnings, Panmure analyst Alex DeGroote notes. "The acquiror is US private equity, and there is some similarity to aspects of INF's [Informa's] own businesses given the high EBIT [earnings before interest and tax] margin, and subscriptions model (subscriptions=c.35% of INF revenue). If we back out the debt, and subscriptions-related EBIT on the same multiple as the IDC deal, the core of INF is on about 4x EBIT," DeGroote suggests, adding that Informa has been the subject of two private equity bids over the last few years at prices well above 400p per share.Interim results from component distributor Diploma got the thumbs up from Singer Capital Markets, which has retained its 'buy' rating on the shares.Though the share price is homing in on Singer's target price of 232p the broker is sticking with it.Singer analyst Andy Murphy notes that Diploma is trading on price/earnings ratio of 13.3 based on projected earnings for the year to September 2010, with the ratio falling to 12.1 the year after. "These are similar ratings to Bunzl, but the yield at Diploma is superior at 3.6% compared to 3.0% for the former. By way of further comparison, Electrocomponents and Premier Farnell, the two UK based component distributors, trade on premium PER ratings, but enjoy dividend yields of 5.3% and 4.4% respectively," the broker concludes.The acquisition of the Radial Distribution Limited portfolio from Warner Estates (in joint venture with HBOS) for £208.5m excluding costs by London & Stamford is a good purchase that would be hard to assemble on a piecemeal basis, broker KBC Peel Hunt thinks."London & Stamford is assembling a portfolio with demonstrably long and continuing uplift potential. Not all the other 'new' opportunist property listeds can say this," argues KBC Peel Hunt."The portfolio that London & Stamford has acquired is simpler to manage and involves little or no giveback to partners, e.g. no bank participation in the upside," the broker says.KBC has reiterated its 'buy' recommendation for the property company. "We expect management to continue to be vindicated in their investment strategy and accumulate further assets at the current run rate," the broker predicted.