Informa gains on Berenberg upgrade to 'buy'

It said the company’s strategy of portfolio improvement has delivered greater progress than investors give it credit for. Recent acquisitions in Exhibitions and investment in Academic Publishing/Business Intelligence have left Informa with a higher-quality business, with the scale to better exploit growth opportunities across existing and new markets.

“This is not reflected in the valuation, so we upgrade to buy, Berenberg said. “At 13x 2018 earnings, yet offering around 9% earnings per share compound annual growth rate and with a 3.3% dividend yield, we believe Informa is mis-priced.”

The bank said the acquisitions of Hanley Wood and Penton Information Services have built a diversified geographic operating base, at scale, for Global Exhibitions.

In addition, the purchases boost the footprint of the US division, which has a market with an improving outlook and better pricing power fundamentally.

Berenberg said that once the Penton acquisition is finalised, exhibitions will represent 28% of group revenue, making it broadly the same size as the company’s academic publishing and business intelligence divisions. It will also ensure that exhibitor/attendee revenues are roughly a third of the group, matching the contribution of subscription revenues.

“As a starting point, we believe this greater balance and diversification across the divisions will benefit group growth: exhibitions provide a greater ability to capture revenue growth in any period of macro-economic expansion (we now forecast group organic growth in the 3-4% range from 2017).

“Furthermore, as our recent meetings with industry experts suggest, exhibitions should become more resilient in periods of weaker economic growth given that the increasingly fragmented media landscape means key opportunities for professionals to meet face to face have ever-greater scarcity value.”

At 0830 BST, Informa shares were up 2.2% to 683p.