Monday, July 30, 2012

Mon 30 July 2012 - Morning Report

Good morning! Before I start, just want to flag up an article I wrote yesterday, about the scandalous accounting treatment used at Nationwide Accident Repair Services plc (NARS), which manages to completely hide a £26m unfunded pension scheme deficit off balance sheet, and instead display a fictitious pension scheme asset. This materially mistates the accounts, does not present a true & fair view, so I have lodged a complaint with the Financial Reporting Council, asking them to investigate. Let's see if anything happens. Whatever happened to the true & fair over-ride? This is a glaring case where that over-ride was itself over-ridden!

Right, this morning's RNSs, here is the usual quick scan, and please remember always DYOR (do your own research) in case I've missed anything important, which is always a risk with these quick reviews between 7-8am.

Pure Wafer (PUR), a £5.7m mkt cap, silicon wafer reclaim service (whatever that is) puts out a buoyant trading update - results expected to exceed current market expectations, with increased EBITDA and reduced losses. So the last 2 words of that sentence put a bit of a dampener on things! There seems to be quite a bit of debt. Too small for me, so moving on.

Computer company Globo (GBO) announces what it says is an "exciting and significant contract" for its GO!Enterprise Server, with a mobile network operator. I like Globo, as its shares are depressed due to it being based in Greece, for obvious reasons. However, it is achieving most sales & growth outside of Greece, so the fwd PER of 7, falling to 4.7 next year, seem harsh.

It's mainly a morning for results from mid & large caps, and resource stocks, none of which I cover here, so a quiet morning for me.

I'd also like to point out a company I didn't spot last week, called Goodwin (GDWN). This £96m mkt cap engineeering group put out solid results, with profits up 51% to £12.3m. Although before you get too excited, this seems to have been a bounce back from a poor previous year.

It's looks a really solid, traditional company, with plenty of Goodwins on the shareholder list. Good long term track record. Strong order book, is up 22%, although they also have some heavy capex planned, and it's a generally capital-intensive business, so may need to extend its borrowings next year (which are fine at the moment). PER is under 11, so if that growth comes through without a hitch, then it might be a bargain, but DYOR as usual.

Micro cap GETECH (GTC) might be worth a look, although the £7m mkt cap is too low for me. Trading statement today indicates that profits for y/e 31 July 2012 will exceed market expectations (which are for a £0.7m profit). The provide data & other services for oil explorers. Interestingly, this is the first company I can recall seeing where all the Directors seem to draw salaries under £100k each. They indicate "strong client interest in our products & capabilities", improved fwd visibility of earnings, and stronger cash balances. Sounds quite good if you think the growth will continue, or accelerate?

The unstoppable march of Tracsis (TRCS) continues, with an announcement of a new trial in Scandinavia for its rail management systems. This will probably take the £31m mkt cap higher, but the valuation is already too rich for me.

Personnel software company Bond International (BDI) has put out a rather rampy-looking contract win RNS. It relates to a 5-year, $4m contract in Japan. So that's about £0.5m p.a. then. How does that warrant a separat RNS, for a company with annual turnover of £37m? Not particularly impressed. My view is that companies should only RNS material contract wins, anything less just makes them look desperate.

I don't usually cover financial companies, but this morning's IMS from Brewin Dolphin (BRW) looks OK - an impressive 20% increase in recurring revenue has more than offset a fall in non-recurring revenue. However, the RNS doesn't seem to give any information at all on profits, so this IMS is fairly useless in that it doesn't provide the most important bit of information needed by investors!

The fwd PER seems reasonable though, at about 11, so might be worth a look?

That's all folks. FTSE 100 due to open in 2 minutes, with the Futures up 15, so a civilised open in the offing. Let's see what horrors the Eurozone can serve up this week? ...

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