Stock of the week: Informa
Informa publishes journals and books, and provides business information services to its subscribers. The company operates under four main divisions, the Academic Publishing segment publishes journals and books, the Business Intelligence segment provides industry research and company information, the Global Exhibitions and Knowledge & Networking segments organise events, exhibitions, and conferences for networking and engagement purposes.
The group has been in the news recently as a result of it making a formal recommended bid for UBM last week. We welcome this deal since the two groups have complementary geographic and business portfolios enabling economies of scale and cost synergy savings. Indeed, the acquisition of UBM plc should take the proportion of recurring revenues even higher to around two thirds of total revenues.
In its most recent trading update, the company said underlying revenues were climbing. There was solid growth in its B2B Events and Global Events divisions, modest growth in its Academic Publishing and Business Intelligence divisions while Knowledge & Networking still experienced a modest sales fall. Overall management remain confident of delivering full year targets and expect the acquisition of events and marketing group Penton Information Services to bring rewards soon.
Informa trades on a price to earnings multiple of roughly 15 times, which compares favourably with its peer group. It also pays a reasonable dividend yield around 2.5% and management have committed to grow this by 2-4% over the next two years. We believe that Informa shares will continue to head in the right direction and as a result, we recommend Informa as a ‘buy’ for investors who are looking for a balanced return, willing to accept a medium level of risk.