Morgan Stanley downgrades Informa but still sees attractions

16th Aug 2018 12:36

(Sharecast News) - Morgan Stanley downgraded Informa after its results did not impress last month, though there was still lots to like about the exhibitions organiser and business publisher.The first-half operating profits at the end of July missed the bank's forecasts across the group's four divisions, mostly from underperformance in exhibitions and the Knowledge & Networking arms. Group margins fell from 31.1% to 30%, with margins dropping in all four divisions.The UBM acquisition was also a "touch soft" that requires a strong acceleration in the second half to meet targets, but the analysts "still like" the addition as the "greater exposure to exhibitions improves the quality of EPS". And the balance sheet is in good shape.While Morgan Stanley upped its 2018 EPS number slightly but for 2019-20 analysts trimmed their EPS forecasts reduction circa 3%, after a 2% currency benefit, so nearer a 5% underlying reduction, mostly from a reduction in Informa margin assumptions and the incremental £10m investment planned to revive the fashion vertical at UBM.At a recent price of 800p, the analysts noted that Informa's shares trades at an overall premium to the sector at 15.3 times 2019 EPS versus the media sector at 15.4, with an EV/EBITDA of 12.1 versus the sector 9.7 and a free cash flow yield of 6.1% versus a sector at 7%."Against its closest peers and looking at the 2018-20 time period, Informa has the lowest multiples... but a slower EPS growth profile circa 7% pa versus 8% pa for RELX, 10% pa for Wolters Kluwer and 16% pa for Pearson."Morgan Stanley downgraded its rating to 'equal-weight' from 'overweight' and kept its price target at 850p.