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STM Group

  • BY: Andrew Hore |
  • POSTED: 12/11/2008 |

House broker Daniel Stewart has pointed out the attractions of STM Group but it does not address the real reason behind the share price decline.

The offshore trust and company management services provider has Equity Special Situations Ltd as a 16.7% shareholder.

ESS shares were suspended on 15 October. It obtained an injunction against Landsbanki, which was selling stakes in companies that ESS had provided as security. It is unclear which stakes these were and there is no indication that the STM shares were involved. However, it has caused confusion and uncertainty. 

The value of security provided by ESS to other creditors is insufficient to cover the debts. Meeting repayments has been difficult. ESS is talking to its creditors about how it can repay the amounts owed. This could lead to further sales of investments.

STM is a solid business but the uncertainty is likely to hold back the share price.

At 44.5p a share, STM is valued at £19m.

Daniel Stewart forecasts 2008 profits of £2.8m, which puts a value on the company of just over seven times prospective earnings. The forecast multiple falls to just over six in 2009. STM’s revenues are relatively predictable and the main changes are likely to come from earnings enhancing acquisitions.

A dividend of 0.6p a share is forecast for 2008. 

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