The Insider: City deals uncovered

Xchanging backs aggressive growth

Xchanging had a great summer. Trading at 147p at the beginning of July, the share price rocketed when the business outsourcing firm paid £64 million for the European operations of insurance software company Agencyport Software.

It will have a big impact on 2015 earnings at the company which makes its money from insurance - it supplies Lloyds of London - financial services, technology and procurement. Investec Securities expects an adjusted pre-tax profit of £64.2 million next year and adjusted earnings per share (EPS) of 13.1p. This year, it's tipped to be little changed at £52.9 million and 10.2p.

Clearly, chairman Geoff Unwin is confident of doing the numbers. He's just spent £92,500 on 50,000 shares at 185p, taking his stake to almost 321,000. On Investec's estimates, Xchanging trades on just 14 times expected earnings for 2015. That's decent value for a company set to grow EPS by an average of 26% for at least the next two years.

Strip out forecast 2015 year-end net cash of £81 million, or 33 per share, and the earnings multiple drops to just 11.6. Industry veteran Unwin has spotted a bargain.

HSBC chiefs pocket a fortune

Big share sales like these are a reminder why the public holds bankers in such low regard. A trio of HSBC top brass trousered £1.9 million this week, likely the result of share awards dished out earlier this year.

Finance director Iain Mackay sold 48,000 shares at 651p (£312,480), chief operating officer Sean O'Sullivan sold 46,115 shares at 658p (£303,437), and Samir Assaf, head of the Global Banking and Markets division, offloaded 188,081 at 660p (over £1.24 million).

A company spokesperson said such awards are subject to a retention period, typically six months. Clearly, time is up and with restrictions now lifted, bosses have hit the sell button.

But would they have done better to hold on? There's likely technical support at around 645p, but next stop below that is 620p. And that’s what broker Investec Securities thinks the shares are worth.

However, while it's true that banks are under a bit of pressure right now and the threat of big fines looms large, if the economic recovery continues they should do very well.

HSBC trades on 1.2 times 2015 estimates for tangible net assets (TNAV), and return on equity is expected to remain below the company's own target of 12% out to 2016. Ongoing regulatory uncertainty, a further drawn-out period of near-zero interest rates and a potential "hard landing" in China, could make things worse argues Investec.

However, that TNAV multiple is hardly aggressive, and the blame for a 12% drop in half-year profit is laid squarely at the door of regulators. HSBC has also outperformed the other banks - RBS, Lloyds and Barclays - by some margin over the past five years, and only RBS has done better in 2014.

A common equity tier 1 ratio improved tipped to break above 12% this year and prospective dividend yield of close to 5% also justify optimism.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.