Investment Column: Icap falter won't stop it being champion

Monitise; Telecom Plus

Our view: Buy

Share price: 482.1p (+1.4p)

A rarity from Icap yesterday: figures for the first quarter for once didn't really sparkle compared with the same period last year.

But let's be fair, back then the company, which facilitates the trading of a huge range of financial instruments between banks and other financial firms, benefited from a rash of market volatility caused by the "flash crash" back in May.

And this year there were an "unusual number of bank holidays" affecting the City of London – read, the Royal Wedding – further depressing revenues. So a 4 per cent fall is of little concern and in line with expectations. Activity has also picked up since the start of June and growth has returned. That can only continue.

As central banks' views on where interest rates should be diverge, Icap will benefit from the volatility and a pick-up in derivatives trading as banks try to call the market.

And although the prevailing push for regulatory change, including demands that trading in various financial instruments become more transparent, might look like a problem for inter-dealer brokers, such steps should actually benefit Icap by driving business through its doors. In fact, companies such as Icap are looking more and more like exchanges and there has been a flurry of consolidation activity in that sector.

Interestingly, it has yet to affect Icap's sub-sector. There are five main players, although Icap is the star. If there is a push to reduce that number, its power is such that it could sit back and watch while rivals get distracted by mergers, or it may simply gobble one or two up. The former is most likely, but Icap is fleet-footed enough to be opportunistic.

Given its quality, position and record, the 13 times forecast full-year earnings that its shares trade on is undemanding. Some analysts fancy smaller rival Tullett Prebon, trading on just eight times. But then, some pundits fancied David Haye to beat Wladimir Klitschko in their recent boxing match. We all know how that one turned out. In the end, class wins.

Telecom Plus

Our view: Buy

Share price: 37.5p (+3p)

Monitise is a leading player in the fast-growing world of mobile payments, with solutions that allow lenders and the like to offer their customers ways to bank on their mobile phones. And the growth in this market was reflected in the company's pre-close update, which was published yesterday. Annual revenues, Monitise said, were set to come in at around £14m, or more than double the amount reported last year. At the same time, it reported a "strong increase in operating profit and cash generation" over the second half of its financial year. Oh, and did we mention that the group is "well positioned to double revenue again" in the new financial year?

The company is clearly on the right track. The momentum is such that we would not be surprised if it keeps surpassing analysts' hopes. Before the bears grumble, we admit that it is easy to get carried away with technology. But we would add that, unlike some so-called "stars", Monitise actually is making money.

Telecom Plus

Our view: Buy

Share price: 681.5p (-17.5p)

Telecom Plus is a multi-utility reseller, providing gas, electricity, phone and broadband to residential and business customers. And, according to investors and analysts, it has been making a rather good job of it. The group announced its first-quarter numbers yesterday, revealing that it had experienced growth in customers, distributors and services. This came alongside strong cash generation, while management forecast a significant growth in profit-ability in the first half of the year.

In all, it added 7,388 new customers, bringing the total to 378,738. The number of services was up by 38,140. This gives the company good visibility on long-term profits.

Management expects organic growth to continue increasing over the coming months, driven by new distributors. The company is also investing heavily in overhauling its online operation. But while the performance has been impressive, so has the strength in its share price, up 47 per cent over the past six weeks.

Peel Hunt has the stock on a price of 20.8 times estimated full-year earnings, which is quite punchy, but, given the visibility on the road ahead, we believe there is more to come.