ABERDEEN ASSET MANAGEMENT
Half-year pre-tax profits £270.2m
No one seemed very inclined to believe a Financial Times report yesterday that Martin Gilbert has hoisted the For Sale board over his fund management creation Aberdeen Asset Management. The shares crept up only 3 per cent to 362p. This was hardly takeover fever.
A robust denial from the company certainly scotched any chances that a deal is imminent and made it look much more likely this was the figment of an over-excited investment banker in search of a fee. That said, if anyone wanted to pounce on Aberdeen, this might be an opportune time. The company has been badly bruised by the emerging markets slump. Quarter after quarter it has reported embarrassingly heavy net client withdrawals. Its shares are down by 29 per cent from the peak in April.
Among FTSE 100 rivals, it has underperformed Schroders by 35 per cent in the past year and Legal & General by 29 per cent.
Investors fear an interest rate rise in the US will suck more cash out of emerging markets towards America, while also hitting their exchange rates. The oil and commodities bear market has added to the pain, as countries such as Saudi Arabia liquidate shareholdings to pay the bills.
Although Aberdeen invests little directly in China, it is a massive investor in the economies that cluster around the People’s Republic, which have all suffered directly because of its slowdown and indirectly because of the soured business sentiment.
The redemptions could keep going for some time, though some believe the tide will turn once the US Fed gets its first rate rise out of the way. Certainly the pendulum has already swung a long way in spite of the strong long-run track record of emerging markets equities. If nothing else, investors will want to keep something invested there for reasons of diversification.
Aberdeen can afford to be patient. It has no debts, net cash of about £700 million and a cash pile in excess of its regulatory requirements of £200 million — even after the (unfortunately timed) buybacks earlier this year. There is also some scope for cost-cutting.
Its shareholders should be patient too. The shares trade on an undemanding multiple of 12 times forecast earnings for the year just ended and yield 5.7 per cent. Even without a bid, they offer value.
MY ADVICE Sit tight
WHY Aberdeen can ride out the emerging markets rout until pendulum swings back
GEORGIA HEALTHCARE GROUP
Market share 22% Rev per bed $40k
Fancy investing in hospitals in Tblisi? You will be. Georgia Healthcare Group, which operates 35 hospitals in the former Soviet republic, is floating on the London share market and expects to be admitted to the FTSE All Share Index in due course. That means anyone with a simple tracker fund will soon indirectly own some of its shares, whether they want to or not.
GHG is being partly offloaded by Bank of Georgia Holdings, another Georgian entity that chose to float in London, in 2006, and which as a FTSE 250 constituent has done rather well. Advised by Citigroup, GHG is offering about $100 million to $150 million of shares for sale next month, with some of the money raised used to renovate two hospitals, finance 30 walk-in clinics and pay down some debt.
Private healthcare is booming in Georgia, though from a very low base. Per capita health spending is a tiny $217. The economy is also doing comparatively well, considering the baleful influence of its neighbour and sometime enemy Russia. GHG also appears to be doing well, growing revenues by more than 20 per cent each year for four years.
The offer price range has been set at 215p to 315p per share. That would give it a market value of between £257 million and £347 million. It made profits after tax of about £4 million in the most recent six months, according to the chief executive, Nikoloz Gamkrelidze. The earnings multiple is therefore high, even at the bottom of the range, while the dividend is non-existent. It is only seven years since Georgia was effectively at war with Russia.
MY ADVICE Only for the brave
WHY Exciting, but pricey for such an unstable home patch
WPP
Net sales £7.56bn Staff 127,000
WPP is a curious beast. The advertising agency group is hugely global and highly personal at the same time. Judging its prospects is an exercise in macro-economic forecasting, its health largely determined by the performance of the consumer products companies in more than 100 countries in which it operates.
But in one respect, investors are acutely aware of what Standard Life Investments calls the company’s “Sorrellcentricity” — its huge dependence on one man, its creator Sir Martin Sorrell, who is 70.
The macro indicators look fair, with Europe in particular showing strong signs of recovery. WPP is confident of hitting its 3 per cent target for organic sales growth and 0.3 percentage points for margin expansion.
There seems no reason why it shouldn’t deliver pre-tax profits for the full year of £1.635 billion. After the 2 per cent share price fall yesterday to £14.48p it trades on almost 16 times this year’s earnings and yields a prospective 3 per cent.
The great unknown beginning to unsettle some investors is what happens after Sir Martin goes. WPP needs to address succession planning (or the perceived lack of it).
MY ADVICE Hold
WHY A success story with an inadequate succession story
And finally . . .
Shares in Eden Research fell 7.5 per cent to 12.25p after it changed its nominated adviser and broker. The organic compounds group has replaced WH Ireland with Shore Capital, raising speculation it may be considering a fundraising, although it gave no explanation for the change. Eden, which was admitted to AIM in May 2012, specialises in terpenes — chemicals that occur naturally in plants and animals. It has received EU approval for its first product, 3AEY, a fungicide that targets grape rot. The shares rose to 24p in August.
