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Euromoney looks smart as it reaps benefits of earlier deals
There are three reasons why shares in media group Euromoney Institutional Investor (ERM) are worth buying now.
First, it is reaping the benefits from a series of bolt-on acquisitions and a rise in subscriptions from its data services.
Second, this success was reflected in a recent trading update, and has provided Euromoney with the firepower to make larger acquisitions
which could drive significant earnings growth. The group is currently evaluating deals in the American wealth and asset management sectors.
Third, the events business could provide an unexpected boost to earnings as people increasingly take advantage of the more relaxed travel and social distancing regulations.
On 1 October it said pre-tax profit for the year to 30 September would be significantly ahead of analyst expectations thanks to strong growth in subscriptions in pricing, data and market intelligence.
Three acquisitions made between 2018 and 2020, BoardEx, Wealth-X and Wealth Engine, have enabled Euromoney to build a leading data intelligence business which is now delivering significant returns for the group.
Chief financial officer Wendy Pallot has emphasised that untapped bank facilities coupled with the £35m of net cash on its balance sheet will enable the group to transition away from bolt-on acquisitions to larger deals.
In May, Fran Cashman was the first appointed CEO of the asset management division that brings together the Institutional Investor, BCA and NDR brands. An acquisition in the asset management space would build scale and scope to a business segment where the turnaround is continuing to progress ahead of plan.
Euromoney was badly impacted by Covid-related social distancing rules that forced it to cancel corporate events.
A trading update in July revealed that underlying growth for the events business declined by 48% for the nine months to June 2021. However, the easing of travel and social restrictions in recent months has created a more conducive environment for this segment of the business. Pallot highlighted the success of a recent event in London for the asset-backed securities industry, which bodes well for this part of Euromoney going into 2022.
According to Numis media analyst Steve Liechti Euromoney’s shares look left behind as the market debates and focuses on value/recovery and data/recurring revenue models. ‘Euromoney has both and some nice self-help,’
Numis forecasts 51.9p earnings per share for the year to September 2022, which means the stock is trading on a price to earnings multiple of 21.4. It offers a 1.9% prospective dividend yield.