Companies: HVN    RPS   

‘Harvey Nash’s rating does not fully reflect its strategic position, defensive qualities and net cash,’ wrote analyst Francesca Raleigh following strong finals to January from the fully listed recruiter. Despite a savage sector derating, she regards the shares as a buy, reiterating that the business is well placed in the UK and Ireland, due to IT skills shortages and its market leadership.

Flagging up geographical diversification – 35 per cent of the business is in continental and Northern Europe, where the economies are sound and IT skills shortages abound – she sets a 61p target for the 41p shares. Based on her forecast of further profits growth from £7.6 million to £9.5 million and earnings of 9.1p (2007: 7.3p) this year, the shares trade on a lowly prospective price-to-earnings ratio of just 4.5.

Time to top up RPS holdings
Raleigh urges investors to add to holdings in corporate client RPS in the light of its £1.2 million takeover of Texas-based GeoCet. This profitable, bolt-on acquisition is a market leader in environmental compliance and ‘adds to the service offering’ in the energy sector.

Raleigh, arguing that RPS should trade closer to 370p than 316p, forecasts RPS earnings of 18.3p for the current calendar year, from profits of £55.6 million. Following this acquisition, she has upgraded her December 2009 earnings estimate by one per cent to 21p, from profits of £64.1 million, placing the shares on a 2009 multiple of 15 times. Raleigh also sees ‘scope for further upgrades from acquisitions and trading’.