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.
Subscribe to 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.
Sign up for MoneyWeek's newsletters
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.
-
Shein shifts IPO focus to Hong Kong
The development piles fresh pressure on London’s beleaguered stock market, which many had hoped would be boosted by Shein’s IPO
-
Scientists turn lead into gold – could it wreck the yellow metal's price?
Medieval alchemists have been vindicated after scientists turned lead into gold, but the results aren’t going to crash the gold price any time soon
-
Investment opportunities in the world of Coca-Cola
There is far more to Coca-Cola than just one giant firm. The companies that bottle and distribute the ubiquitous soft drink are promising investments in their own right.
-
Streaming services are the new magic money tree for investors – but for how long?
Opinion Streaming services are in full bloom and laden with profits, but beware – winter is coming, warns Matthew Lynn
-
Trainline: a cheap cash machine for investors
Opinion Trainline’s shares have slumped owing to concerns about growth, but the sell-off seems overdone
-
Look to British stocks to lead the charge as the Magnificent Seven falter
Opinion Gervais Williams, fund manager, The Diverse Income Trust, picks three British stocks where he'd put his money
-
'Pension funds shouldn't be pushed into private equity sector'
Opinion The private-equity party is over, so don't push pension funds into the sector, says Merryn Somerset Webb.
-
Greg Abel: Warren Buffett’s heir takes the throne
Greg Abel is considered a safe pair of hands as he takes centre stage at Berkshire Hathaway. But he arrives after one of the hardest acts to follow in investment history, Warren Buffett. Can he thrive?
-
Who will be the next Warren Buffett?
Opinion There won’t be another Warren Buffett. Times have changed, and the opportunities are no longer there, says Matthew Lynn.
-
Will Comstock crash – or soar?
Opinion The upside for Comstock, a solar panel-recycling and biomass-refining group, dwarfs the downside, says Dominic Frisby.