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Sunday newspaper tips: WH Smith, Scottish Mortgage, Arix Bioscience
Shares in WH Smith were a 'buy' for the Sunday Times' Inside the City column.
As many rival high street brands crash and burn the stationer-newsagent-bookshop has increased shop numbers 12% to more than 600 since the financial crisis, in the same time revenue have shrunk 37% to £610, but profits have surged 41% to £62m, helped by trimmed costs, subletting to the Post Office and letting the carpet become infamously threadbare as management have carefully rebalanced to focus on the 'travel' business, which runs outlets in airports and railway stations.
With 839 shops at last count, of which 286 are joint venture and franchises, Travel is more profitable than the high street business fourfold by selling space. The aim is to win more oversea airport units and provincial UK train stations where a coffee shop can be included in the mix. "All of this should help WH Smith to close the valuation gap with its nearest rival, the travel food business SSP, and continue its strong record of paying back surplus cash to shareholders," the column says.
The Scottish Mortgage Investment Trust was a 'buy' for Questor in the Sunday Telegraph. While Britain and its benchmark stock market index does not offer investors one of the ginormous digital platform companies like Facebook or Google that has helped the S&P 500 rocket almost two thirds higher in the past five years. Scottish Mortgage offers UK investors access to the best of global technology, which has climbed into the FTSE 100 itself not long ago.
The trust's market cap of £6.6bn belies its dour-sounding name, which these days is a misnomer as there are limited links to Scotland or mortgages in the portfolio. Scottish Mortgage is managed by Edinburgh-based fund manager Baille Gifford. Instead, almost half of the portfolio's assets are based in North America, which has helped deliver a total return for investors of 223% over the five years to last September, compared with 102% for the FTSE All-World index. Scottish Mortgage has a premium portfolio and is a useful way to invest in fast growthing, global assets rather than waiting around for Britain to grow its own Google.
Arix Bioscience shares were tipped by Midas in the Mail on Sunday. Arix, which is chaired by former Amgen finance chief Jonathan Peacock, floated on London's main market just over a year ago at 207p with the mission of backing biotech firms that have been spun out of universities, bringing a portfolio of five initial investments. Each of these five is focused on different conditions and each is at a different stage in its development, with all of them having an Arix director on their board.
Arix has agreed strategic partnerships with a quartet of major drug groups - Hong Kong-listed Fosun, Japan's Takeda, France's Ipsen and Brussels-based UCB. These larger partners are invested in Arix equity and invest in the portfolio businesses alongside Arix, with the intention of potentially acquiring them in the future. One of the portfolio companies, Autolus recently floated on New York's Nasdaq, while another, Iterum Therapeutics, has just submitted its application to float too, with analysts suggesting it could be valued at more than £400m, giving Arix's share a value of at least £35m.