Buy Quercus Publishing at 77.5p

By the PLUS Market specialists at UnQuoted-Analyst.co.uk

Today on UK-Analyst.com we bring you an exclusive report from the PLUS Markets experts at UnQuoted-Analyst.co.uk.

Quercus Publishing is a rapidly growing independent book publisher, shares in which have been amongst the best performing on PLUS Markets in the past year. Founded in May 2004 by a team who previously worked in senior management for the Orion Publishing Group, since then the company has established itself as one the most respected and fastest growing independent publishers in the country.

The firm operates through two divisions, Contract Publishing and Trade Publishing. Contract Publishing business produces and supplies bulk quantities of a book or range of books to customers who commit to the print run in advance and sell the book to the consumer under their own label or as their own stock. Through this model Quercus looks after the editorial, design and production and the customer assumes the role of publisher, providing all sales, marketing and distribution functions. The company prints to order, delivers direct from the printer, carries no stock, accepts no returns and incurs no retail marketing costs making this a relatively low risk way of doing business.

On the other hand the Trade Publishing business uses a more traditional model. In this division, as publisher, Quercus prints at its own risk and sells, on a non-exclusive basis, to book retailers and wholesalers. As opposed to the Contract Division it incurs the cost of sales, distribution and marketing and books are usually sold on a sale or return basis. To compensate for the additional costs incurred, margins are generally higher than in Contract Publishing but as you would expect the risks are also higher as the books are not guaranteed to be sold.

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PLUS RETAIL ROADSHOW 2010
Retail investors, brokers and fund managers invited to speak to senior management from selected PLUS companies over a glass of wine and lunch to discover some of the investment opportunities they can offer and learn about PLUS. The next lunch briefings take place between 12.00-14.30 in:
Leeds: 16 September - Residence 6
Bristol: 30 September - Mecure Holland House
London: 14 October - The May Fair Hotel
For more details and to register, click here . For enquiries please contact Melissa Gilmour on 08451 276676.

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In a recent trading statement Quercus reported that revenues almost trebled, from £5.5 million to £15 million, in the six months to 30th June 2010. Operating profits were £3.4 million, against a loss of £0.1 million as margins improved despite a decline in the wider book retail industry.

The results continued to be driven by sales of Steig Laarson's Millennium trilogy, the series of books to which the company has the global English rights to. The three titles - The Girl WIth the Dragon Tattoo, the Girl Who Played with Fire and the Girl Who Kicked the Hornet's Nest - have been the best selling in the UK in the past six months, with Laarson being the first author to sell over 1 million e-books on the Kindle device through the Amazon website. Quercus was the 11th largest UK publisher in the period, with a 1.5% market share, and was also the fastest growing trade publisher in the UK in 2009, with sales rising by 133%.

Shares in Quercus have continued to soar on the back of the phenomenal success of the Millennium trilogy. At the current mid-price of 79p, a level not seen since late 2008, the company is capitalised at £13.87 million. We note that the firm made two and a half times the operating profits in the first halof the current year than it did in the whole of 2009. On that basis, trading on a historical multiple of 22 times, the shares clearly look good value given the growth being posted.

We are concerned that a significant proportion of the company's success is down to the success of the Millennium trilogy. Rival publisher Bloomsbury ran into problems when the Harry Potter series of books reached its end - Steig Laarson died in 2004, so there is no scope for further titles. Once the hype over the series dries up Quercus has the challenge of continuing to grow its new titles to maintain the current levels of growth. . That said, the shares still look cheap. Buy .

Key Data
EPIC: QUPP
MARKET: PLUS
Spread: 78p - 80p

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