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Investec Analyst Report (18/06/02)
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INVESTEC HENDERSON CROSTHWAITE SECURITIES 18 June, 2002

ITE - Trading Update
BUY

After a difficult 2 years, it appears we are near a turning point for ITE. The new CEO, Stephen Warshaw, has been clearing the decks since his arrival 8 months ago and is re-focusing the group on its core strengths in Russia and CIS. After PBT of �6.8m in FY2002E, we expect a recovery to �14.0m in FY2003E. Even considering a normal emerging market discount, the valuation is low.

• Even bearing in mind an emerging market discount, ITE shares look cheap on 2003 P/E of 7.6x (8.0x calendarised) and EV/EBITDA of 4.6x (4.7x calendarised).
  
• It looks as if the problems will be behind us after this year. New management (Stephen Warshaw) has nearly completed a rationalisation program and is re- orienting ITE towards its core strong franchises in Russia and CIS.
• Interims (1HFY02) showed good top line growth (4.5%), but further goodwill impairments, � (3.2) m of one-off restructuring costs and repeating higher staff costs.
• We expect PBT to recover to �14.0m in FY2003E, driven by absence of one-off costs, presence of bi-ennial events, increased space selling opportunities in Russia and re-staging of Turkish events (cancelled in FY2002).
• While exposure to Russia carries higher risk, it may be beneficial at present as the economy is relatively strong and ITE's Russian trade shows are trading strongly.

Performance

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