Informa Group PLC (LON:INF) shares edged higher on Monday as analysts at Kepler Cheuvreux upgraded the stock to ‘buy’ from ‘hold’ after an “encouraging” trading update.
The publishing and events organiser last week said underlying revenue rose 3.9% in the first 10 months of the year, putting it on track to meet its full-year target for underlying growth of at least 3.5%.
Recently acquired UBM delivered underlying revenue growth of 2.3% for the period.
READ: Informa is confident of hitting full-year targets
Kepler said 15-20% of the combined Informa and UBM portfolio is exposed to China. However, the outlook for the UBM business remains unchanged with “many of the leading shows growing as fast as anything that Informa has to offer”, Kepler said, leaving its target price of 810p unchanged.
“The fashion vertical within UBM continues to decline at about 10% and is one of the reasons that it will take time to close the gap between UBM’s portfolio of events and that of Informa’s overall,” the broker added.
Kepler noted that the trading update did not give the revenue/earnings contribution from activities to be disposed of including agribusiness, IGM, credit and FX markets information within the Business Intelligence (BI) unit.
It said,“agribusiness is 10-15% of the BI portfolio and IGM is one of the top 5-6 revenue generators within BI’s Finance business, which is one-third of the BI portfolio, so probably circa 15-20% of the BI portfolio, or circa £70mln, circa 2.5% of group sales”.
“Presumably these disposals, designed to focus Informa on BI verticals where its market share is higher (like Pharma, Retail Banking, Maritime) will be accretive to divisional and group organic growth,” Kepler added.
The stockbroker also highlighted that the exhibitions industry continues to grow at around 4-4.5% and bookings for 2019 events are up on the same stage last year.
Shares in Informa rose 2% to 725p in morning trading.