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Broker tips: Polypipe, Informa

By Iain Gilbert

Date: Tuesday 19 Mar 2019

Broker tips: Polypipe, Informa

(Sharecast News) - Analysts at Peel Hunt downgraded their recommendation on stock in Polypipe following the recent sharp run-up in the share price.
On Tuesday, the manufacturer of pipe of and water management systems for the residential, commercial and public sectors posted a strong 4.2% jump in full-year like-for-like sales, but margins took a hit, in part as it ran into capacity constraints in the fourth quarter, as sales picked up sharply after a flat first half.

Although the company had already made extra investments in order to alleviate those, and despite price increases for customers and the full-year contribution of the Manthorpe and Permavoid businesses which it acquired in the second half of 2018, the analysts did not expect to make any major changes to their estimates for the company's 2019 profits before tax and earnings per share.

Barring further acquisitions, the broker also expected net debt to reduce to about 1.4 times operating profits.

Even so, it kept its target price at 455p.

But above all, the shares had had a "very strong run" year-to-date, gaining 32%, Peel Hunt pointed out as it downgraded the stock from 'buy' to 'add'.

Morgan Stanley upped its stance on shares of events company Informa to 'overweight' from 'equalweight' on Tuesday as it highlighted decent trading and a lowly rating versus peers.

MS noted that following its merger with UBM, Informa shares hit 850p but then performed poorly on the back of a disappointing first half, with weaker margins in all four divisions, and concerns about the cyclical nature of the exhibitions business and its exposure to the Middle East and China.

However, the shares have performed better into 2019, it said, as the FY18 results showed the rate of margin decline halving from H1.

Looking ahead to this year, the bank cited a number of positives, including an improvement in the margin story as it's the first year of major UBM cost savings. In addition, it said sentiment on global trade appears to be improving, which is good for the company's exhibitions business, which represents 51% of sales and 55% of EBITA.

"In particular, sentiment on China (circa 11% of Informa revenue and circa 15% of EBITA) has improved, while in the US Informa's Exhibitions appear to be trading and re-booking well," the bank said.

Meanwhile, the academic division looks robust, with the smaller size and humanities and social sciences focus of Taylor & Francis shielding it from the issues impacting Elsevier.

Morgan Stanley has an 840p price target on Informa.


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