De La Rue Literally Prints Money

MORNINGSTAR ANALYSIS: De La Rue is a leading player in an industry where an established reputation is the key to success

Brett Horn 18 January, 2011 | 2:00PM

De La Rue (DLAR) is a long-established leader in its industry. While that's a good thing for any company, it is especially good for De La Rue. The company's business centres on the design, printing, and handling of currency and other security documents. The products De La Rue deals with are obviously highly sensitive, making an established record crucial, as the risk governments would face in dealing with unproven vendors is too great. This insulates the company from competition, and we think a wide moat surrounds the business. Recent production issues will negatively impact the business in the short run, and could lead to the loss of a major customer, but we think the company's moat will remain intact. On the positive side, the company's problems have led to an unsolicited bid from competitor Oberthur, this could put a floor on the stock until the company moves past the production issues.

Fair Value Estimate: 844p ¦ Uncertainty Rating: High ¦ Economic Moat: Wide ¦ Stewardship Rating: B

Thesis (Last updated January 11, 2011)
De La Rue is a leading player in an industry where an established reputation is the key to success. The company's business centres on the design, printing, and handling of currency and other security documents. Many small and some large countries outsource all or some portion of these processes. The products De La Rue deals with are highly sensitive, and having an established record is crucial, as the risk governments would face in dealing with unproven vendors is too great. As a result, the industry is characterised by a few large global firms and other smaller firms that concentrate on specific countries. We think top players like De La Rue benefit from a wide economic moat.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
De La Rue PLC156.00 GBX-0.51

About Author

Brett Horn  Brett Horn is an associate director in the equity research department.

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