Interactive Investor

Insider: an ‘undervalued’ share and buying at Silence Therapeutics   

7th December 2020 08:52

Graeme Evans from interactive investor

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All the big hitters are piling into this stock, while a high-flying biotech gains further backing.

Insurance tycoon Sir Peter Wood endorsed GoCompare's likely new owner on Friday by adding Future (LSE:FUTR) shares and declaring the FTSE 250 stock “undervalued at current prices”.

Sir Peter, who as chairman holds a 29.7% stake in the GoCo Group (LSE:GOCO) price comparison site business, bought £2 million worth of Future stock. His move came in the week Future CEO Zillah Byng-Thorne and recently-appointed finance chief Rachel Addison acquired £100,000 and £50,000 of shares respectively, alongside smaller deals by two non-executive directors.

Their purchases follow a sharp retreat for Future shares in the days after the Marie Claire, WhatHiFi and PC Gamer publisher unveiled a surprise deal to buy GoCo in a cash and paper offer initially worth £590 million.

The City's underwhelmed reaction overshadowed better-than-expected full-year results, as Future's deal-making CEO Byng-Thorne continues to deliver strong margin progress from the transition to digital. Since taking the helm in 2014, she has built an impressive portfolio of over 200 brands, with 70% of revenues now outside of print.

Shares had been one of the best performing this year after trebling since March to more than 2,000p in mid-November. They've since fallen back as far as 1,634p, with Sir Peter last week buying his shares at prices between 1,740p and 1,798p and Byng-Thorne at as low as 1,680p. 

Sir Peter, who founded Esure and Direct Line, said on Friday: “I bought shares in Future yesterday because I believe they are undervalued at current prices. As I said previously, I believe Future has good prospects and is well run by an outstanding chief executive.”

His purchase offers a swift response to those who speculated Sir Peter might look to sell down the Future equity he is set to receive as part of the GoCo takeover. He will be left with about 5% of Future shares and receive £41.3 million in cash once the deal completes in the new year.

Sir Peter sees ownership by Future as an ideal way to accelerate GoCo's growth plans and reduce customer acquisition costs. For Byng-Thorne, the combination is an opportunity to capitalise on rising consumer demand for informed and value-driven purchasing decisions.

She called it a fantastic deal and urged shareholders to judge the merits in six months’ time.

Why are Future shares undervalued?

The market's scepticism comes as the Financial Conduct Authority considers whether insurers should be made to treat new and existing insurance customers the same, which could deal a blow to the appeal of price comparison sites.

That issue aside, Investec's media team believe the businesses are more complementary than the current share price implies. On Monday last week, the broker reiterated its buy recommendation and increased the price target for shares from 2,110p to 2,280p.

They added: “We believe the focus should be as much on what GoCo's tech and consumer data can do for Future in e-commerce and cookie mitigation, as on what Future driving audience growth can do for GoCo's market share.”

Counterparts at Barclays (LSE:BARC) reckon it will take time for management to prove the merits of the new strategic direction, particularly as GoCo offers Future no opportunity to leverage a US audience.

The US generated almost half of the company's revenues in the most recent financial year, with its titles and brands able to reach about a third of the country's online population. Future is increasingly adopting a US-first strategy, including through the use of the .com domain.

Barclays upgraded its 2021 earnings per share forecast by 5% in the wake of the results and said the benefits of the GoCo deal meant Future is currently trading on 14 times 2022 earnings. “This looks attractive to us and we remain overweight,” they said a fortnight ago.

Silence Therapeutics creates a big noise in 2020

Founding AIM stock Silence Therapeutics (LSE:SLN) is getting noticed by US investors after the company completed a dual listing on Nasdaq in September, and appointed a new chief executive to work out of its New York office at about the same time.

Biopharma industry veteran Mark Rothera bought shares in Silence for the first time as boss at the start of last week, with the US$103,000 (£76,500) of Nasdaq-listed stock acquired at about 18.20 US dollars. The company's US shares closed on Friday at $17.25.

Rothera was previously CEO of Orchard Therapeutics, which was transformed from being a small UK-based company with two clinical-stage programmes into a leading gene therapy company listed on Nasdaq and worth more than $1.7 billion at its peak.

Silence's AIM-traded shares enjoyed a stunning return to form in 2019, surging from 47p to 540p by the end of the year, after it secured a collaboration with US firm Mallinckrodt Pharmaceuticals for the commercialisation of RNAi Therapeutics.

The technology is designed to inhibit or ‘silence’ the expression of disease-causing genes, allowing cells to revert to their healthy state.

Its cash position was given a further boost earlier this year following an agreement to receive up to $60 million from AstraZeneca no later than the first half of 2021. Mallinckrodt and Astra are both shareholders in the company, with stakes of more 6% and 5% respectively. Silence's London shares closed on Friday at 444p. 

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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