B2B: Preferred Play in Media
Positioning ahead of 2H
A report from Macquarie Equities Research (excerpted below) anticipates positive momentum for European b-to-b information companies and an improving outlook for industry evaluations globally.
We revisit the B2B investment case ahead of likely strong 1H results and the possibility of an improving macro-backdrop in 2H 2011. Within the subsector we rate both INF LN and UBM LN Outperform offering 28% and 48% upside to our target prices respectively.
Preparing for a more positive macro outlook. We are currently in the midst of a mid-cycle downturn but Macquarie economists believe trends may improve in 2H as the global inventory cycle stabilizes, the temporary impact from the Japan earthquake fades and Chinese monetary tightening ends. This should lead to steady increases in business spending. According to our proprietary quant analysis, since 1989 the B2B subsector has outperformed the market by 5% in mid-cycle re-acceleration phases.
Events trends continue to rise and drive our estimates. We still see further upside to market expectations for trade shows and conferences, particularly those in Asia and the Middle East.
Valuations are supportive. All B2B stocks have been caught up in the wider market sell-off and are now at the ~9x P/E levels last seen in 2009 (vs. mid-cycle average range of 14-16x). We believe results will provide positive confirmation of the strong underlying trends, while low valuations provide considerable upside.
Click here to read more from Macquarie.