Thomson Reuters and Misys have many customers in common. But Mike Lawrie, the chief executive of the FTSE 250 software group, might be forgiven for keeping closer tabs on his larger peer than usual.

For like Thomson Reuters — which this week announced plans to abandon its London listing in favour of North America — shares in Misys trade at vastly different valuations on either side of the Atlantic.

That much is evident from Allscripts-Misys, the US-listed healthcare software developer in which the British company has a 57 per cent stake. On the basis of yesterday’s share price, Misys’s holding is worth £860 million — or only £60 million less than its London stock market capitalisation.

Put another way, Jefferies International, the investment bank, notes that the non-healthcare interests of Misys — namely its banking and treasury and capital markets divisions — are being valued at anomalously low levels: a discount of 80 per cent to their closest rivals, on its calculations.

It was the strength of Allscripts that shone through in yesterday’s year-end trading update. After being only 1 per cent ahead during the first nine months, orders in healthcare for the full year were up 7 per cent — implying a surge during the fourth quarter. That performance provided the clearest evidence to date that President Obama’s stimulus package — specifically, $19 billion of incentives to induce American medical practices to keep their health records electronically — is starting to have an effect.

Misys’s banking division was less impressive, with orders down 1 per cent. However, the company appears to be holding market share, while recent cost cutting means profits should keep rising even if sales mark time. If there was a disappointment, it was in treasury and capital markets, where customers appear to be deferring purchases: order intake for the year was down 10 per cent, a sharp reverse from the 10 per cent growth over the first nine months. The question is to what extent such business has been rolled over into the next financial year, or gone away more permanently.

At 169¼p, down 2½p, or 16 times earnings, Misys is not obviously cheap — and the pace of American healthcare reforms could yet disappoint. But in the belief that Mr Lawrie will seek to extract value from Allscripts in the medium rather than long term, the shares should be bought on the dips.

DS Smith

If the stock market was unsettled by yesterday’s dividend cut from DS Smith, its first in quarter of a century, it failed to show. Shares in the paper and packaging group gained more than 10 per cent.

True, DS Smith has had a poor run in recent weeks, such that its shares are still beneath their level of a fortnight ago. There must also be relief that the dividend was merely halved, rather than scrapped altogether. Even at yesterday’s 4.4p a share payout, a level that should prove sustainable henceforth, the yield is an attractive 6.4 per cent.

But the wider encouragement is that the company is doing all that might be expected to mitigate the hit from lower packaging demand, a phenomenon that saw operating profits in its core UK business collapse 73 per cent in the space of six months. Cash conservation and cost reduction have become the short-term priority. The company booked £27 million of restructuring charges in yesterday’s full-year results, but further belt-tightening is under way: the dividend cut will save £17 million a year, while expenditure on plant is being reined in and working capital reduced.

DS Smith would not be drawn on whether it believes its markets to have bottomed out. Sales at Spicers, its office paper wholesaler that accounts for one third of group revenues, tend to track trends in white-collar employment, suggesting the worst is yet to come.

Recent capacity cuts in Europe — International Paper announced a factory closure in France this week — should help to restore equilibrium. In the interim, a slimmed-down DS Smith, which has dominant positions in recycled and lightweight packaging, is well positioned to benefit from recovery when it arrives.

Assuming that current-year profits — forecast at £44 million — will prove the low-water mark, the shares, at 68½p, or less than nine times earnings, are a buy on weakness.

Clinton Cards

Birthdays is the deal that Clinton Cards would rather forget. The cheap and cheerful greetings card chain, bought by Clinton five years ago for £46 million, has been nothing to celebrate. It forced its new owner heavily into debt and never turned a profit. Last month, near the end of the financial year that Birthdays was once due to break even, Clinton put its 332 stores into administration.

But recession has given Clinton a second chance at its suppliers’ and landlords’ expense. Yesterday, it bought back the 196 profitable stores for only £3.5 million.

The effect on the bottom line should be pronounced: not only is Clinton relieved of Birthdays’s losses and the depreciation charge on the worst performing stores but it has been able to negotiate better rents from landlords who would prefer a lower-paying tenant than no tenant at all. Stronger cash generation should also enable the company to pay down its near-£60 million of borrowings more quickly than before. Current-year profit forecasts were yesterday raised by 67 per cent to £7.5 million.

At 27½p, the shares have risen six-fold from December’s low. However, with trading still subdued, the rating no longer niggardly — some 11 times earnings — and no dividend on offer, they have run far enough for now. Pass.

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