Each week, a professional investor tells MoneyWeek where he'd put his money now. This week: Jeremy Le Sueur, investment director, 4 Shires Asset Management.
Pearson (LSE: PSON), which owns the Financial Times, is a blue-chip media business, whose turnover is growing at about 5% a year. But the largest and most interesting part of the business is its education unit, where turnover has grown much more rapidly, to nearly £5bn, from £2.6bn five years ago. Over the same period, profits have risen from £400m to £800m. That sort of growth rate is usually associated with smaller or medium-sized stocks.
This quality has been masked by the need to restructure book publisher Penguin, and the FT group, which have both shifted away from paper and towards digital delivery (via ebooks and FT.com). But education is what will drive the business particularly the move towards digital education delivery and there are plenty of opportunities to grow, both through acquisition and organically.
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The stock trades on 17.8 times this year's earnings, falling to 14.8 and 13.3 times over the coming years. The long-term dividend growth rate is over 7% a year, and has hit 15% a year for the past three years. Digital education has many years of growth in it, and should offer high-quality earnings for years to come.
Charles Skinner, head of document management business Restore (LSE: RST) (formerly known as Mavinwood), is an experienced managing director of support-services companies. Restore's largest business lies in providing document storage for blue-chip clients. This high-margin business is growing turnover at between 5% and 7% a year.
The company also owns Britain's largest office-relocation business. By relocating to cheaper storage sites and consolidating smaller players in the industry, profits have been boosted. The business is growing profits at about 12%-15% a year, but is still on a prospective price-to-earnings (p/e) ratio of 12.3 times. What is interesting about Restore is its strong cash flow, high margins and return on capital employed.
Cameroonian oil and gas explorer Bowleven (LSE: BLVN) has made several significant discoveries in its offshore blocks. The Sapele field has increased the proven and probable resources in the field by potentially 200 million barrels of liquefied petroleum gas (LPG) or condensate alone.
The oil, condensate and gas (of which there are large quantities) is in shallow water, which cuts exploration and recovery costs (it is possible to use a jack-up rig rather than a more expensive semi-submersible one). The group is valued at around $0.50 per barrel of oil equivalent of recoverable reserves, yet the oil price is around $100 a barrel today.
A takeover bid from Turkmenistan explorer Dragon Oil collapsed without meaningful talks taking place. Instead, Bowleven has lined up financing with FTSE 100 oil-services group Petrofac, which will finance, design and build most of the first stage of the Etinde development.
Bowleven is now close to finalising engineering design plans to bring the first oil and gas into production in 2016, and has signed a deal with a fertiliser firm to take a quantity of gas each year. There is plenty of exploration upside left on its offshore and onshore blocks in Cameroon. As production is now within sight, the shares are likely to rise ahead of the first cash flow in 2016.
