De La Rue Share Dive Could Present an Opportunity

For investors willing to ride out the near-term uncertainty, De La Rue recent slump could present an attractive entry point

Brett Horn 25 January, 2011 | 9:28AM
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De La Rue (DLAR) announced it has rejected an increased bid of 935 pence per share from Oberthur, as it believes this offer still undervalues the company. As a result, Oberthur has dropped its bid to acquire De La Rue. This latest bid was a bit higher than our fair value estimate for the firm, but given that De La Rue's stock had traded at higher levels before the company's production issues last year, we can understand management's reticence to sell at this price.

We are maintaining our fair value estimate, which is based on our assessment of the firm as a stand-alone company. With the shares falling significantly after this latest announcement, we believe they are undervalued at the current level and could represent an attractive entry point for investors willing to ride out the near-term uncertainty. But given the potential for substantial customer losses, we would like to see a larger margin of safety before recommending De La Rue's shares.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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

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