Canaccord cuts Euromoney's rating but raises target price

Canaccord Genuity on Monday cut its rating on Euromoney Institutional Investor to ‘hold’ from ‘buy’ but raised its target price to 1,165p from 1,128p.

Euromoney reported a “broadly reassuring” trading update last week confirming that full year earnings will be more or less in line with expectations, Canaccord said. Reported revenues are forecast to drop 1%, modestly ahead of estimates, while normalised pre-tax profits are predicted to be reach at least £100m, compared to Canaccord’s £100.9m forecast.

“Euromoney has been buffeted by conflicting forces," Canaccord said. "As a significant US$ earner, it has enjoyed a favourable shift in foreign exchange rates (fourth quarter revenues were down 5% underlying, but up 2% reported, showing a 7% benefit from the stronger dollar).”

The broker added: “Euromoney is in the throws of strategic change, as it endeavours to engineer a shift away from more cyclical low quality activities (training, small conferences, print titles) towards higher visibility and preferably structural growth activities (digital data products etc).”

Euromoney has already shut down more than 10% of its Events activities by revenue, and sold some advertising-orientated Energy publishing businesses. However, it has struggled to sell off its lower quality assets.

Canaccord believes high quality digital information businesses will be “hard to find at valuations that Euromoney will be prepared to stomach”.

“We see further bolt-on deals, but see little likelihood of anything transformational, in the short term.”

Shares rose 3.52% to 1,148p at the close.