Best and worst stocks on 20 March 2018

With De La Rue (DLAR) the latest big name to lower profits guidance, it would be easy to assume that positive news has all but dried up.

Far from it. Step forward Bloomsbury Publishing (BMY), whose latest forecast that profits will be well ahead of expectations for the year to February 28 lifted shares by 8% and gave a wider boost to small-cap confidence.

Even more impressive is that this upgrade has nothing to do with Harry Potter, the child wizard who is still delivering big returns for the group more than 20 years after the first book in the JK Rowling series was published.

On this occasion, Bloomsbury owes its success to chef Tom Kerridge’s new book Lose Weight For Good, which has been number one in the Nielsen BookScan UK chart for four weeks since its publication on December 28.

In one week the title sold over 70,000 copies, more than any book has ever sold in the UK in a week in January, according to the Nielsen BookScan records.

The book contributed to “excellent sales” for Bloomsbury in January and February, as the company also benefited from lower than expected returns.

Numis Securities responded to the update by raising its 2018 profits and earnings per share (EPS) forecasts by 8% to £13 million and 13.9p respectively.

Source: interactive investor               Past performance is not a guide to future performance

With Bloomsbury also one of Numis’s key picks in the small-cap media sector, analyst Paul Richards raised his target price by 10p to 248p, implying 36% potential upside.

He is encouraged by “strong momentum” across Bloomsbury’s consumer and academic & professional businesses, which comes during the peak year for the company’s 2020 strategy to focus on being a digital B2B publisher.

Numis sees scope for upgrades to its current FY19 forecasts for profits and EPS of £13 million and 13p, although it will maintain these at this early stage of the year. Based on the 2019 forecasts, Numis has Bloomsbury trading on a projected price/earnings (PE) multiple of 13x with a dividend yield of 4.3%.

The picture contrasts with De La Rue, whose shares were 14% lower Tuesday at 518p after admitting that results will be at the lower end of the current consensus range of between £71 million and £73.5 million. The price had fallen as low as 476p, a level not seen since June 2016.

This information was revealed in the third line of a statement announcing that chief financial officer Jitesh Sodha will be leaving the group later this year.

Source: interactive investor               Past performance is not a guide to future performance

JP Morgan Cazenove reduced its operating profit estimate by 3% to £71 million, but noted that the range of consensus estimates was already quite tight.

In fact, Investec Securities believes the City has over-reacted to today’s news, presenting a buying opportunity. The broker reiterated its 700p price target, based on a projected PE multiple of 13.1x and dividend yield of 4.2%.

De La Rue is due to provide a full pre-close trading update in the second half of April. JP Morgan Cazenove cut its price target by 10p to 700p today.

De La Rue, which makes the new polymer notes for the Bank of England, last touched the 700p level in November last year. However, shares have yet to revisit the levels seen prior to a major profits warning in 2014, when the company slashed its half-year dividend due to overcapacity in its markets.

Under chief executive Martin Sutherland, who was appointed in October 2014, the Basingstoke-based firm has increased its focus on faster-growing and less capital intensive areas such as ID services and passports, as well as product authentication.

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