Sunday share tips: Ideagen, RSA
By Alexander Bueso
Date: Sunday 21 Jun 2020
(Sharecast News) - The Mail on Sunday's Midas column recommends that investors stick with Ideagen, pointing to software developer's big base of recurring revenues and brisk uptake of its products in the wake of the Covid-19 pandemic.
Over 6,000 customers worldwide use the software for regulatory purposes, quality control and compliance.
Among its clients are the World Health Organisation, seven of Britain's top accounting firms, and over three quarters of the largest drug groups globally.
Its client roster also includes hundreds of hospitals in the UK who rely on its wares and interest from America and the Middle East have surged in recent months, according to the tipster.
On top of that, approximately 80% of its sales are recurring thanks to the long-term contracts taken out by most customers, which helps to insulate the company in times if uncertainty.
Furthermore, most of the cash generated gets ploughed right back into the business but its chief executive, Ben Dorks, is steadfast in his commitment to paying a dividend, with 0.3p per share penciled in for 2020.#
"Ideagen has grown by leaps and bounds over the past six years and the shares, at £1.80, have proven to be a rewarding investment," said Midas.
"Investors may want to sell a few and bank some profit, but they should retain most of their holdings as this business should continue to grow."
The Sunday Times's Emma Dunkley says readers should 'hold' onto RSA despite the multiple headwinds, both the known and potential, facing the insurer over the near-ter, including its suspended dividend, a looming decision at the High Court and the possible exit of its boss, Stephen Hester.
Analysts at Panmure Gordon agreed, pointing to the recent share price drop in the wake of the pandemic.
Other analysts meanwhile believed that Hester had done such a good job in turning around the firm's fortunes that it could be a takeover target, given its present rude health.
Linked to the above, RSA had recently resolved its pension deficit, Dunkley pointed out.
Regarding the High Court decision, the insurer is one of eight firms who have come under fire for not paying out to some policyholders for business interruption.
On the dividend front, the final payout for 2019 was shelved in order to buttress the company's capital reserves but with a pledge to restart payments when "prudent".
As for Hester, in the opinion of Panmure Gordon, having managed the feat of turning around the insurer, his job was now done, so it would be understandable if he left over the next 12 months.
"With dividends suspended and the outcome of the FCA case up in the air, pending a hearing expected next month, investors may want to sit tight - despite the likelihood of Hester's exit in the medium term. Hold."
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