24th Feb 2015 13:09
LONDON (Alliance News) - Investec downgrades UBM to Hold from Buy due a limited upside for the shares following a strong recent run, adding that while it likes its B2B events business and the acquisition of US-based events and marketing services firm Advanstar, it also sees some execution risk and uncertainty.
The broker also raises its price target to 553p from 550p. Shares trade 3.2% lower at 534p.
Investec sees the Advanstar acquisition as a strategically logical for UBM, giving the company highly tax efficient scaled US event exposure and cutting the profit contribution of its PR Newswire arm.
However, the broker says UBM has paid up for a "lowish growth US asset" and has "arguably diluted the longer-term emerging markets story".
"Fashion is over 50% of sales," in Advanstar, says analyst Steve Liechti. "This is a well-established business, but our channel checks are mostly negative given customer service and competition concerns. Print at 13% of (high margin) profit is also an issue. These plus a 30%+ margin under private equity ownership imply some execution risk as UBM consolidates operations," says analyst Steve Liechti.
For the wider UBM business, Investec says risks remain in emerging markets, namely slower growth in China alongside new venue and competition issues as a near term risk to growth.
Investec also suggest PR Newswire could be ripe for sale. Though not currently on the market, the business now looks non-core, contributing 18% of pro forma profit, down from 22%. It reckons a sale could be well-received and sees a value of GBP472 million on the business, based on EBITDA multiples.
By Arvind Bhunjun; [email protected]; @ArvindBhunjun
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