Moreover, with the company closing in on its end February financial year-end, and a trading update in late December indicating that the performance for the first 10 months of the financial year has been good, then this suggests that Bloomsbury should be able to deliver the 7 per cent growth in pre-tax profits to around £13m based a rise in revenues from £111m to £120m that analysts predict. On this basis, expect normalised EPS of about 14.3p and an increase in the payout per share from 6.05p to between 6.29p to 6.4p, implying that the shares are rated on 10.5 times prospective earnings and offer a decent 4.2 per cent dividend yield. They are also rated on a 10 per cent discount to book value. And if analysts are right in their assumptions, the company’s net cash pile will end this month north of £9m, a sum worth 12p a share, so the forward PE ratio drops to a very modest 9.5 times earnings net of cash on the balance sheet.
Of course, post-Christmas book returns and ebook sales will have a major bearing on whether those estimates will be met when the company releases its full-year results on 19 May, as will completion of rights and services deals under negotiation, as has been the case in previous years. However, if Bloomsbury hits those numbers, then there is clearly value in the shares right now.
It’s worth noting too that the small acquisition of certain LexisNexis and Jordan family law publishing assets of RELX and Jordan Publishing, a deal that completed a few weeks ago, is consistent with Bloomsbury's strategy to increase its proportion of non-consumer revenues. The aim is this segment to account for half the business. It makes sense as non-consumer revenues (mainly law and academic) are far more predictable, have lower related costs of sale, generate higher margins and are less reliant on retail bookshop sales. These titles also offer the further benefit of subscription annuities. In other words a growing proportion of the publisher’s sales are becoming more predictable, a fact that is not being factored into the lowly valuation of the company.
That’s not to say that the company is not enjoying its fair share of success on consumer titles. The Silk Roads by Peter Frankopan, John Le Carre’s biography by Adam Sisman, and the Illustrated Harry Potter and the Philosopher's Stone by J.K. Rowling are just some of the top sellers in recent months. In fact, sales of that Harry Potter book, priced at £30, have been positively magical in some countries around the world, highlighting the longevity and cash returns still to be made from the valuable franchise. Furthermore, this is the first of seven such titles which will appear annually over the next six years, so the little wizzard has potential to weave its magic for some time to come.
The bottom line is that if Bloomsbury delivers on analysts’ forecasts then its share price could deliver some magical gains over the coming months. And that’s why I rate the shares a decent trading buy at 150p, both on fundamentals and from a charting perspective, targeting fair value between 175p to 185p. Buy.
MORE FROM SIMON THOMPSON...
I have written articles on the following 64 companies since the start of this year:
■ Grainger: Buy at 243.5p, target 280p; Dart: Take profits at 580p; Crystal Amber: Hold at 159p; Redde: Take profits at 203p; Burford Capital: Run profits at 196.5p; Renew: Run profits at 404p; Plethora Solutions: Speculative buy at 4.5p ('Stock check', 5 Jan 2016)
■ Elegant Hotels: Buy at 118p, target price 130p to 135p ('Check in for a profitable stay', 6 Jan 2016)
■ Safestyle: Run profits at 272p ahead of pre-close statement on 25 Jan 2016 ('Clear cut gains', 6 Jan 2016)
■ Epwin: Run profits at 143p, new target 170p ('Epwin on the acquisition trail', 6 Jan 2016)
■ GLI Finance: Recovery buy at 37.5p ('GLI shelves fundraise and its chief executive', 6 Jan 2016)
■ LXB Retail Properties: Buy at 97.5p, new six-month target 120p; Urban&Civic: Buy at 286.5p, target 325p; Conygar: Buy at 172p, target 200p ('Hot property, 7 Jan 2015)
■ Somero Enterprises: Buy at 139p, target 185p; 1pm: Buy at 70p, target 82p; First Property: Run profits at 53p; Avation: Buy at 145p, target 200p ('Small-cap value plays', 11 Jan 2016)
■ 32Red: Run profits at 147p; Netplay TV: Buy at 7p ('Chipping in', 12 Jan 2016)
■ Cambria Automobiles: Buy at 87p, new target 95p; Vertu Motors: Buy at 76p, target range 85p to 90p ('Motoring ahead', 12 Jan 2016)
■ Global Energy Development: Hold at 24p ('Cash rich, but unloved', 12 Jan 2016)
■ KBC Advanced Technologies: Bank profits and sell in the market at 183p ('Tech watch, 13 Jan 2015)
■ Sanderson: Buy at 75p, target range 85p to 90p ('Tech watch, 13 Jan 2015)
■ Trakm8: Buy at 300p, new target 400p ('Tech watch, 13 Jan 2015)
■ Amino Technologies: Buy at 120p, new target range 155p to 160p ('Amino has the ammunition', 14 Jan 2015)
■ easyHotels: Buy at 89p, initial target 100p ('easyHotels ramps up expansion', 14 Jan 2015)
■ Stanley Gibbons: Hold at 58p ('Stanley Gibbons fundraise', 14 Jan 2015)
■ Miton: Buy at 28p, target 35p; Moss Bros: Buy at 97p, target 120p to 130p; Bioquell: Buy at 140p, minimum target 170p; UTV Media: Trading buy at 184p ('An awesome foursome', 18 Jan 2015)
■ Equity market strategy ('Bear Market signals', 25 Jan 2015)
■ STM: Buy at 47p, target 80p; Stadium: Trading buy at 103p; Fairpoint: Run profits at 150p, target range 200p to 220p ('Exploiting market anomalies', 1 Feb 2015)
■ Character: Buy at 505p, target 600p; 1pm: Buy at 67p, target 82p; and Entu: Hold at 68p ('A trio of small cap plays', 2 Feb 2016)
■ Inland: Buy at 83p; Henry Boot: Buy at 220p, target 260p; FTSE 350 housebuilding sector: Trading buy ('Playing the housing market', 3 Feb 2016)
■ Flowtech Fluidpower: Buy at 109p ('Undervalued and ripe for a re-rating', 4 Feb 2016)
■ Safestyle: Run profits at 253p ('Awaiting news on a cash return', 4 Feb 2016)
■ Bowleven; Volvere; French Connection; Bioquell; Juridica; Mind + Machines; Oakley Capital; Gresham House; Gresham House Strategic; Walker Crips ('Bargain shares', 4 Feb 2016)
■ AB Dynamics; Inspired Capital; H&T; Netplay TV; Mountview Estates; Crystal Amber; Arbuthnot Banking; Record; Pittards; Stanley Gibbons ('How the 2015 Bargain share portfolio fared', 4 Feb 2016)
■ IS Solutions: Buy at 120p, target 150p ('Big data, big profits', 8 February 2016)
■ 32Red: Run profits at 133p, easyHotel: Run profits at 99p; Burford Capital: Run profits at 230p; Bilby: Buy at 136.5p ('Hitting record highs', 9 February 2016)
■ BP Marsh & Partners : Buy at 157p, new target 190p ('Primed for investment gains', 10 February 2016)
■ Gama Aviation: Hold at 270p ('Gama hits guidance', 10 February 2016)
■ Bloomsbury Publishing: Buy at 150p, target range 175p to 185p (‘Book into a trading play’, 11 February 2016)
■ PV Crystalox Solar: Speculative buy at 8.2p (‘Lights brighten at PV Crystalox Solar’, 11 February 2016)
■ Simon Thompson's book Stock Picking for Profit can be purchased online at www.ypdbooks.com, or by telephoning YPDBooks on 01904 431 213 and is being sold through no other source. It is priced at £14.99, plus £2.95 postage and packaging. Simon has published an article outlining the content: 'Secrets to successful stockpicking
