With most eyes on the FTSE 100 these days, it’s easy to overlook bargains among the smaller companies making up the FTSE 250.
Shares in infrastructure investor and manager John Laing Group (LSE: JLG) have gained 63% to 304p since the firm relisted on the FTSE in 2015, and dividends are already expected to yield 3.1% this year and next.
There’s a 20% fall in EPS forecast for this year, but that still leaves the shares on a forward P/E of only 7.4 for the year, dropping as low as 6.8 on the 9% EPS rise predicted for 2018. Unless there’s something seriously wrong with the company, that looks like a serious over-reaction to me and a very likely bargain buy.
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Latest update
First-half results are due in August, and the company has just put out a pre-close update, showing investments made so far in 2017 of £111m spread between Australia and France. Total investments for the year are expected to amount to around £200m.
Realisations of £151m have been made too, via the sale of projects in Poland, Hungary and the UK, with the firm’s guidance for the year remaining stable at £200m.
Laing’s outlook appears impressive to me, with chief executive Olivier Brousse saying: “We plan to continue to scale-up our model based on our expertise as an originator, investor and manager of greenfield infrastructure projects.“
There’s a pension deficit of around £30m, but that’s falling, and I don’t see any serious debt problems — so I really can’t understand the reason for the low valuation of the shares. All I can put it down to is the Brexit hit on property and infrastructure firms in general, and John Laing doesn’t appear to be especially vulnerable.
Banking opportunity
I reckon we’re in a great period for contrarian banking investments right now, eschewing the big (and widely watched) names and focusing on smaller upstarts — like the UK’s ‘challenger’ banks, and overseas ones with impressive-looking potential.
I looked at Georgia-based BGEO Group recently, and I’m feeling attracted to compatriot TBC Bank Group (LSE:TBCG) too. TBC has only been listed on the London Stock Exchange since August 2016, yet already the shares have climbed by 50%, to 1,571p. And on forecasts, they’re still looking very cheap indeed.
We have an 18% EPS rise on the cards for this year, followed by a further 11% in 2018, and that gives us P/E valuations as low as 7.7 and 6.9 respectively — and very tasty-looking PEG multiples of just 0.4 and 0.6, where anything under 0.7 is typically seen as an attractive growth valuation.
Progressive dividends
And there are dividends too, with forecast yields of 3.4% and 4.3% for this year and next, so why are the shares so lowly-valued?
The obvious reason is Georgia, and it’s understandable if investors are shying away from emerging markets in general and the ex-Soviet region in particular — governments can be unstable, and we can’t guess at what political crises might emerge.
But I’d argue that banking in Georgia surely can’t be riskier than it was in the UK just before the crash, and I see TBC as an attractive candidate for those seeking growth and not afraid of a little bit of risk along the way — but I’d only include it in a diversified portfolio.
