DE LA RUE (DLAR) 484P BUY
You may wonder why we are saying to buy
De La Rue. After all, it is the world’s largest printer of banknotes in a world which is increasingly cashless.
It also prints passports, but earlier this year lost out to Dutch rival Gemalto on a lucrative contract to design and manufacture the new blue British passport.
The shares aren’t far away from their decadelows of 2015, and to cap it all management are under fire from activists investors.
This last point is a positive. It often takes an outsider to shake things up when a company and/ or its management is under-performing.
Despite its troubles De La Rue is a very profitable company. Banknotes and passports need extremely sophisticated security features to protect against forgery, and that kind of technology is very valuable.
Its capital employed is actually negative because it has very low fixed assets and its gets its customers often pay upfront.
Its earnings yield is almost 22% as earnings before interest and tax (EBIT) was £123m for the full year to March 2018 and its enterprise value is £564m.
Investor sentiment is negative yet analysts are uniformly bullish with an average 600p price target. We think this is a good one to buy, albeit not for impatient investors. (IC)