Buy, hold or sell: Henderson Smaller Companies


Hermon first bought into business-to-business media group Tarsus in 2013, when he became convinced that the exhibition specialist had good long-term prospects.

The firm, founded in 1988, owns a number of established and popular events brands, including Dubai Airshow, Labelexpo and Heavent Paris. It operates throughout the US, France and emerging markets.

According to Hermon, emerging markets is a key area for Tarsus, as wealthy consumers in these markets still prefer the face-to-face interaction an exhibition provides. Emerging markets is the strongest growth area for the company.

Hermon claims Tarsus has the advantage of already being considered the leading exhibitions provider in several key regions, including the Middle East.

The Tarsus holding accounts for around 1 per cent of Henderson Smaller Companies' total portfolio - placing it among the top 40 of around 120 holdings - after Hermon added to his position in June. He originally bought in for around 215p a share. He admits that shares have traded 'sideways' since.

At 1 September, Tarsus shares stood at 204p, but this price may not be an accurate reflection of their value considering the sharp sell-offs seen throughout global markets during the final week of August.

The company is rated a buy by key brokers including Numis and Investec, who have target prices of 275p and 290p respectively for the shares.


NMC Health, valued at around £1.4 billion, is the largest private healthcare provider in the United Arab Emirates (UAE). The company operates hospitals, day surgery centres and pharmacies throughout the UAE. It also runs a successful distribution arm dealing in pharmaceuticals, as well as food, and veterinary and educational products.

Hermon bought into NMC during the firm's London initial public offering in 2012, at around 224p a share. With shares trading at more than 750p as at 1 September, he is already sitting on a tidy 235 per cent profit.

He says the firm is currently experiencing a period of rapid expansion. It recently opened its largest speciality hospital in Abu Dhabi City, equipped to receive 250 patients - which takes NMC's total capacity in the UAE to 855 beds across 25 medical fields.

Hermon says there remains plenty of room for expansion, as UAE government spending on healthcare is increasing year on year. According to the World Health Organisation, the UAE is expected to increase spending on healthcare by 6.9 per cent a year, from an estimated $14 billion (£9.1 billion) in 2013 to $19.6 billion in 2018.

Hermon says NMC is attractively valued: its shares trade at just 14.5 times forward price to earnings. Earnings per share growth in 2014 was around 19 per cent.

The NMC holding is currently the trust's ninth largest. However, there is little room to add to the position, which is why Hermon is holding rather than buying.

NMC Health table



Shares in UK pub chain Greene King once accounted for 1.5 per cent of Hermon's portfolio, but the holding has now disappeared from it entirely. Hermon sold his final stake in June this year. He says he had owned Greene King for a number of years and been pleased with the way the company performed for the portfolio overall.

Over the five years to 1 September, Greene King shares appreciated by close to 87 per cent, rising from 431p to 804p. However, over the past year, its share price has been listless: the price fell in value by 2.4 per cent over the 12 months to 1 September (although, again, this period takes in the highly damaging final week of August).

The company's revenues have also begun to disappoint, with pre-tax operating profits falling by 1.7 per cent - to £256.2 million in the financial year 2015 - compared with 2014. Perhaps more concerning to Hermon, however, are recent political developments.

In terms of Greene King's place in the Henderson Smaller Companies trust portfolio, chancellor George Osborne's decision to raise the national minimum wage, as announced in his March Budget, proved to be the final straw for Hermon.

He predicts that the rise in the minimum wage to £6.70 an hour, due in October this year, will be particularly expensive for companies such as Greene King - most of which pay no more than the minimum wage.

He is bearish on the UK pub chain sector as a whole for the same reason.

NMC Health table