(RWA) Robert Walters

now broken up through the 200 day moving av. :o))))

breakout over 200p .... nice ;o)

if this breaks through 200 shortly, then 225, and 250 seem to be on the cards

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Stock to Watch: Robert Walters
By Edmond Jackson | Fri, 13/01/2012 - 00:00

At 177p the FTSE Small Cap shares in international professional recruitment group Robert Walters (RWA) are worth watching this year, now the price is well down on the chart - amid cautionary noises from the recruitment industry.

Robert Walters tends to get traded both ways and a relatively thin market applies. Prospects will improve in due course and Walters' shares recover, it is just a matter of timing. Meanwhile the risk/reward profile looks interesting for long-term investors.

RWA has halved from levels near 350p in the first half of last year - back to where it was trading in the second half of 2009. Showing how recruiters can get hit by recession, normalised pre-tax profit plunged from £18.2 million to £1.6 million in 2009, yet recovered strongly to £13.2 million in 2010. This is why RWA's forward price-earnings multiple initially appears quite high, in the mid-teens, because the market is confident the business can in future years do better than the outlook for 2012.

A 6 January update cited "weaker client and candidate confidence... we therefore enter 2012 with caution", however the shares have edged up from 162p a few days before.

By way of comparison, Michael Page (MPI) said in an 11 January review for 2011 that its Asia Pacific segment grew by 23.3% like-for-like in the fourth quarter of 2011. Asia, however, saw an overall 28% growth rate "slow towards the end of the quarter, as international clients in particular became more cautious, deferring or reducing their recruitment needs." This is the issue investors worry may spread.

But doomsters are keeping a low profile as 2012 starts, with positive news from the US economy and as the eurozone muddles along; the predicted debacle is at least deferred. This helps explain why Page's FTSE 250 shares have jumped from about 350p to 375p after the update. More liquid than Walters' shares, they are likely to gain more attention first, although the key macroeconomic issues affecting recruiters are quite similar.

If you believe in eurozone disorder exporting uncertainty to the rest of the world, and companies postponing decisions, you would avoid cyclicals like recruiters for the time being. Yet it was just such a fear that depressed share prices in late summer 2011 and to an extent remains factored in. So any easing of fears can improve cyclical shares even if their commercial outlook is little changed.

Walters has also been doing well in France and Germany, despite the economic uncertainty across Europe. Net fee income during the final quarter of 2011 rose best of all in continental Europe, up 24% to £10.5 million, whereas the UK barely kept pace with inflation, up just 3% to £12.0 million. Overall, the group achieved 14% growth in net fee income, or 18% for 2011 as a whole - 15% in constant currency terms, anyway very good progress.

The company looks to be evolving well internationally, it's just that sentiment has been hit by another bout of uncertainty. In the first half of last year, a sixth office was opened in Australia, a fourth in China and the first in Vietnam. New offices were planned for Indonesia, Taiwan and Germany for the second half of 2011 and it will be interesting to track how all this is coming together.

With net fee income split 71% to permanent and 29% to contract professionals, the group should not be too exposed to the vagaries of short-term employment - which tends to be exposed most of all in a downturn. Last August's interims cited China and Thailand both more than doubling net fee income - easier done from a relatively low base, however Walters is positioning itself astutely for long-term growth.

The board has also ensured a dividend policy, albeit a flat payout of 4.75p a share over 2008-10 which is projected to rise to about 5.2p for 2011 and possibly 5.3p in 2012, altho