Three complicated businesses with hidden value
Professional investor Edward Wielechowski of the Odyssean Investment Trust picks three businesses which are trading at values lower than the sum of all their parts.
All investors are looking for “value”, but this can be far from easy to find. One approach is to look carefully at individual stocks. Often opportunity is hidden within a complex story where high-quality sections of a business are overlooked, leaving the shares trading below a “sum-of-the-parts” value. Combine this with a strong market position that will attract potential buyers and you can have confidence in finding value regardless of the market environment. Some of our investments at Odyssean excite us for exactly these reasons.
Chemring: the value in cybersecurity
Chemring (LSE: CHG) is a leading provider of countermeasures, sensors and energetics products, used mainly by the defence industry. Chemring has a strong record, but we still see significant value in the group. A cybersecurity consultancy called Roke sits within its sensors unit. Roke has world-leading intellectual property and supports governments and companies in high-end cyber and electronic defence missions. Roke is delivering around £80m a year in revenues, is growing at double digits, and enjoys high profit margins. Based on cyber-focused peers, we believe Roke could be valued at four times its revenues (at least) were it a standalone company. This supports a significant portion of Chemring’s current share price – excluding Roke, the rest of the group trades on less than 1.5 times sales. With significant interest in the sector, and recent deals done at two times sales or more, the market seems to be undervaluing the sum of Chemring’s parts.
Euromoney: Covid-19 comeback story
Euromoney (LSE: ERM) is a leading business-to-business provider of data and events services. A complex group with a wide service range, it has significant recurring revenue and looks well placed to see a recovery in “in-person” events as post-Covid-19 reopening continues. We believe the market is overlooking the significant value of the group’s Fastmarkets business, which provides unique pricing data on a variety of commodity markets. This is a high-recurring revenue, high-growth business unit in a market where strategic buyers and private equity are highly active. Informa’s recently announced sale of its intelligence division will provide a relevant reference valuation point for Fastmarkets. Note also that historically, deals have been done at 20 times earnings before interest, tax, depreciation and amortisation (Ebitda) or more. Euromoney as a whole currently trades at around 11 times Ebitda, suggesting overlooked value.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Wilmington: hidden value in training
Wilmington (LSE: WIL) provides training and information services focused on the governance, risk and compliance needs of various markets. The new management team is refocusing and improving the business, which is well placed to benefit from the Covid-19 reopening. It operates a number of business units and brands across a range of markets, with the risk that its complexity is obscuring the value here. For example, Wilmington recently sold its loss-making training business AMT for £23m to a strategic buyer who valued its unique content and market position. We believe similarly overlooked strategic value exists in some of the group’s other business units. With a net cash balance sheet, high revenue visibility and strong cash flow, the sum-of-the-parts value of the group appears underappreciated.
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
-
How inheritance tax trick is helping families save ‘six-figure sums’
Happy to skip a generation to save thousands on inheritance tax? A deed of variation could be the estate planning tool you need.
-
Nationwide: House prices unexpectedly dropped in August
House prices fell by 0.1% in August in a surprise drop, according to Nationwide, as “affordability remains stretched”
-
Are wealthy whisky enthusiasts leaving Britain?
Collectables Wealthy whisky enthusiasts are heading to tax-friendly countries such as Dubai, where there is more disposable income to spend on collectable luxuries like rare whisky.
-
'The rise and fall of Kodak is a lesson for the tech giants'
Opinion The long decline of Kodak – a once-dominant company – shows why no business is safe from disruption, says Matthew Lynn
-
8 of the best properties for sale with kitchen gardens
The best properties for sale with kitchen gardens – from a 17th-century timber-framed hall house in Norfolk, to an Arts & Crafts house in West Sussex designed by Charles Voysey with a garden by Gertrude Jekyll
-
Why investors can no longer trust traditional statistical indicators
Opinion The statistical indicators and data investors have relied on for decades are no longer fit for purpose. It's time to move on, says Helen Thomas
-
Investors rediscover the virtue of value investing over growth
Growth investing, betting on rapidly expanding companies, has proved successful since 2008. But now the other main investment style seems to be coming back into fashion.
-
8 of the best properties for sale with shooting estates
The best properties for sale with shooting estates – from an estate in a designated Dark Sky area in Ayrshire, Scotland, to a hunting estate in Tuscany with a wild boar, mouflon, deer and hare shoot
-
The most likely outcome of the AI boom is a big fall
Opinion Like the dotcom boom of the late 1990s, AI is not paying off – despite huge investments being made in the hope of creating AI-based wealth
-
What we can learn from Britain’s "Dashing Dozen" stocks
Stocks that consistently outperform the market are clearly doing something right. What can we learn from the UK's top performers and which ones are still buys?