Britain’s biggest events company, Informa PLC (LON:INF), was one of the top blue-chip risers in London on Tuesday after being upgraded by analysts at Morgan Stanley.
The company, which runs the World Tea Expo and publishes Lloyd’s List, saw its value fall by more than 20% in the second half of 2018 following the completion of its £4bn takeover of business-to-business events organiser UBM.
The fall was exacerbated by margin declines in the first six months of the year, while there were also concerns over the group’s exposure to the Middle East and China, where growth started to show signs of tailing off.
READ: Informa confident for 2019
Shares have picked up so far in 2019, though, as margin declines slowed, earnings forecasts remained unchanged and dividend expectations were lifted.
Looking at the year ahead, Morgan Stanley expects the first round of “major” savings from the UBM acquisition will boost profits, while global trading sentiment “appears to be improving” – good news for Informa’s various exhibitions.
“In particular, sentiment on China (c11% of Informa revenue and c15% of EBITA) has improved, while in the US Informa’s Exhibitions appear to be trading and re-booking well,” read a note to clients.
The analysts added: “Albeit growth is a bit tepid (Informa has c6% pa eps growth 2018/21 versus c8% for Wolters, RELX and Pearson and 16% for Ascential) the stock looks lowly rated versus peers.
“Even at our 840p price target Informa's 2019e/20e price-to-earnings ratio of 16.5x/15.7x would still be at a discount to its publisher peers and at a small free cash flow yield premium (5.6%/6.4%).
Alongside their 840p price target, Morgan Stanley analysts have moved the stock up to ‘overweight’ from ‘equal weight’. That’s a ‘buy’ in old money.
Shares climbed 2.1% to 736.4p on Tuesday, valuing the company at £9.2bn.