Bottom Line: Troubles forgotten
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Your support makes all the difference.A MERCHANT bank whose profits jumped from pounds 45m to pounds 112m, putting it back on course for a progressive dividend policy, must be doing something right. And Kleinwort Benson certainly seems to have put its troubles over management succession behind it.
But is it merely reaping the benefits of roaring stock markets which all the City players enjoyed last year? While it would be rash to bet on business in 1994 matching the vintage levels of 1993, it is also unfair to dismiss Kleinwort as merely a speculative play on stock market activity.
Kleinwort has invested heavily in its fund management side and has demonstrated that it is capable of picking up corporate finance business, especially privatisations, around the globe. Both divisions have good order books.
Kleinwort's shares - along with other merchant banks - have outperformed the market by almost 80 per cent over the past year as investors scented the profits that could be made from strong stock markets. But the 20p fall in the price yesterday suggests that they think most of the benefits have already been seen.
On a historic multiple of 11.2, rising to just 12 on forecasts of pounds 80m pre-tax profit for the current year, Kleinwort's rating is hardly demanding. Its civil war behind it and the management issue resolved, albeit by a fudge, its shares are 60p below their peak levels.
Buyers might want more reassurance that the markets will continue their upward path, but the rating means that holders should not have to worry unduly.
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