Demerger of DX has investors focusing on Business Post

Fund managers have been reassessing their holdings of Business Post Group in recent days.

The principal reason is the expected demerger of DX, the mail company, from Hays, the recruitment consultancy, at the beginning of next week.

DX has been canvassing support among institutions, with many fund managers coming away impressed, supporting the view that they might be interested in switching parts of their holdings.

Numis Securities highlighted the possibility that BPG’s shares would continue to underperform, in the short-term at least, arguing that DX could be a more liquid and better-value stock. Numis said the 20 times March 2005 earnings meant Business Post was fully valued at present.

The Kane family, headed by Peter Kane, founder and present chairman, own about 64 per cent of the shares, making it a fairly illiquid stock.

Many investors have complained that for all its attractions, BPG’s shares can be hard to come by.

In spite of all the recent griping, Business Post has its fans. Although the shares were down 5 1/2p to 552p yesterday, they have risen by more than 200 per cent since July 2001.

Its main attraction is that, so far, it is the only company able to use the Royal Mail’s delivery network.

Hopes were high that the share price rise this year could see BPG enter the FTSE 250 index. Although it was placed on the reserve list to occupy the slot vacated by the delisting of DFS, the furniture group, it lost out to Workspace Group, the recruitment company.

Ben Thefaut, of Arden Partners, the broker, said BPG’s status as the first-mover in the deregulated market means it deserves to trade on its growth rating.

“DX’s entry in the market will likely only raise the profile of the deregulating Pounds 5bn UK postal market,” he said. Philip Stafford