Euromoney Institutional Investor PLC (LSE: ERM) is a global business-to-business information services company. It provides actionable data, analysis, intelligence and access through three divisions in markets where information and market participants are valued. Its clients are financial institutions, actors in the extraction, trade and use of raw materials, professional and technological service providers as well as companies.
In a world where businesses must increasingly use information and data in sophisticated ways, Euromoney is well positioned with a strong portfolio of brands, dominated by persistent subscriptions built into the workflow. The stock is slightly undervalued according to the GF Value Line and has a Piotroski F-Score of 6.
The company’s largest division with 41% of revenue in 2021 is Financial and Professional Services (data and market intelligence), where subscriptions account for 63% of sales. This division includes the flagship publication Euromoney, which was founded in 1969 to map the liberalization of cross-border capital flows and is the leading publisher in global banking and financial markets.
The asset management division, with 33% of turnover, has been in difficulty in recent years. The company decided after a strategic review to keep the division and turn it around. It is comprised of Institutional Investor, a leading publishing and events company, BCA Research and Ned Davis Research, both macro-research driven research and data services. BCA’s flagship product is The Bank Credit Analyst, which has been published continuously since 1949.
During the recent presentation of the annual results, management stated that this division’s turnaround was ahead of schedule. The company has invested in sales and marketing, automatic renewals, and product management and development. He also appointed for the first time a CEO for this combined division. New products in this area include more thematic research and a ramp-up of investment solutions where assets under advisory grew from $ 1.3 billion in September 2020 to $ 1.9 billion in September. This year.
Turnaround involves the shift from siled customer relationships to cross-selling and a customer-centric experience of redefined access and intelligence. Essentially, before, many customers were buyers or potential buyers of all three products, but they were served and sold in a disjointed fashion. The integration of sales teams should lead to superior results.
The smallest division by revenue, Fastmarkets, has perhaps the greatest room for growth. In 2021, it represented 26% of Euromoneys turnover. The company focuses on reporting on commodity prices in the metals and mining, forestry products and agriculture sectors. About 94% of its revenue comes from subscriptions. Price reporting agencies publish market prices for commodities to bring transparency to what would otherwise be dark markets. Fastmarkets has become a well-established part of the global commodities industry with its data embedded in transactions in the markets they serve. At each step of the raw material supply chain, the company has prices for raw, intermediate and final products that producers, traders and consumers can use for pricing contracts. The division has been active in accelerating the energy transition growth area, where it can serve the EV battery, battery storage, wind and solar markets, leveraging its energy products. existing renewables: cobalt, lithium, steel, copper, lumber, cadmium, gallium, molybdenum, wood, pulp and agricultural raw materials. It seems likely that the Fastmarkets division will further anchor itself in renewable energy supply chains by addressing changing customer needs through pricing, news and analytics.
Euromoney is a majority subscription company. Subscriptions as a percentage of total reported revenue in 2021 increased to 70%, down from 65% in 2020 and 50% in 2019. Events represent 18% of revenue, and the final 12% is categorized as Other.
The company’s fiscal year-end is September 30. It recently released its annual report and accounts for 2021. Year-over-year revenue has increased slightly with good growth in subscriptions, other revenue and acquisitions, but the Covid-19 pandemic has had a impact impact on events.
Events saw a return to growth in the second half of the year. Revenue from the events was £ 35.1million (£ 47.12million), up from £ 16.8million in the previous year period. This reflected 50 mixed events (in-person and virtual) versus only virtual events in the second half of 2020. This is a fairly good performance given the travel restrictions linked to Covid.
Euromoney has a clear strategy. The key points of management to generate high quality profitable growth are as follows:
Overall, the company aims to provide clarity in dark markets to help its customers compete. Niche, value-added products give the company a wide competitive divide and strong customer relationships contribute to the strength of the subscription model.
The markets seem to be wondering about the recovery of the investment research pole and the impact of Covid-19 on event activity. Management seems to recognize this and is making improvements to the companies.
Euromoney will provide a trading update on January 27th.
I am long Euromoney Institutional Investor because I have a different perception of the company and its perspectives. For a data and information company that maintains its portfolio and modern distribution methods, a Shiller price-to-earnings ratio of 14 strikes me as too cheap.
This article first appeared on GuruFocus.