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magazineTarsus to take off in second half
Events company Tarsus (TRS) could do better than anticipated in the second half and the valuation looks undemanding.
Buy now ahead of a pivotal second six months of 2017 and for a decent and rising dividend, hiked 11% at the half-year stage. At 299.3p the shares trade on an average price to earnings ratio for 2018 and 2019 of 14.2 based on Investec’s forecasts and offer a prospective yield of 3.5%.
This smoothes out the significant disparity in earnings per share between odd and even years as its two biggest events, the Dubai Air Show and Labelexpo, both fall in odd years.
There is also a significant weighting to the second half of 2017, which includes both of these shows, expected to account for 85% of adjusted pre-tax profit.
The hefty increase in the dividend and a big rebound in its Turkish business which saw revenues fall 15% in the first half but is expected to end the year flat, implies to us that the second half could be a bit better than the market expects and this could result in earnings upgrades.
Risks to weigh include a rebound in sterling which would impact the value of Tarsus’ predominately overseas earnings and net debt of £85.8m. Borrowings have built up partly as a result of M&A in China and the US which should in the long-term be a positive for the business.
Numis has a price target of 350p and we also see upside at current levels.
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