Thursday, July 5, 2012

Thu 5 July morning report

Good morning! Here's my quick, pithy review of this morning's RNSs which interest me.

As usual, a retailer first. Absolutely stonking Q4 trading statement from discount sheds operator Dunelm (DNLM) - LFL sales up an astonishing +10.4% in Q4, and +5.2% in the second half, and +3.1% for the year. So that's an accelerating trend throughout the year.

Interestingly, they say that the inclement weather boosted sales, and just goes to show that the only weather that matters is whether you have the right stock in the right place at the right time!

They raise profit expectations to £96m for the year ended 30 June 2012, although that's possibly priced in to a £1,035m mkt cap at 512p. Trading from 115 superstores, another 10 are planned for this year. A really very impressive business, so I must visit one to see what they're doing which is working so well! The PER seems to be about 14, based on the revised profit figure, so there could be some scope for the shares to rise on this excellent performance, but not a huge amount.
Net funds have risen to £60m.

Next, insolvency accountants Begbies Traynor (BEG) - note the appropriateness of the ticker for the sector!
Adjusted EPS fell slightly from 6.4p to 6.0p, but bear in mind the shares are only 30p, so the PER looks cheap at 5.

(I should declare an interest here, as my family hold a few shares in BEG).

Noteworthy is the 1.6p final divi, giving 2.2p total for the year, a very attractive yield of around 7%.

Net debt has fallen by just over £2m to £20.1m.
Worth noting that their bank debt is unsecured, very unusual, which gives me confidence that the Bank have confidence in them.

I once worked on insolvency jobs, 20 years ago, and the nature of the work is that large debtors build up, a backlog of fees, which are then paid in a lump when the creditors meetings are held. Hence a long-dated debtor book, financed by bank borrowings, is completely normal.

I don't think the stock market has ever quite grasped that, and has instead lumped in Begbies with problem over-geared accountants like Vantis & RSM Tenon - isn't it shocking & surprising that groups of accountants are so frequently incompetent in managing their own businesses!

But all looks fine at Begbies, and on the back of these figures I'm happy to continue holding. Might see if I can attend the analyst meeting this morning at 9:30 as I happen to be in London.

They have disposed of problem divisions, and now seem focused on the core insolvency business. A nice counter-cyclical share to hold.

Cinema operator, Cineworld (CINE) announces an in-line trading statement. These shares look priced about right to me, on a PER of 11.

Stadium (SDM) announces broadly in-line (i.e. slightly below!) trading.

Progressive Digital Media Group (PRO) also announces in line trading.

I am left again thinking, recession? What recession?!

Rather odd announcement from Media Corp (MDC) about re-acquiring some websites previously disposed of. Adds to my gut feeling that this company has a slight whiff of something not quite right about it. But can't put my finger on it.

Have a good day, looks like a modestly up start, with the FTSE 100 futures up about 10.

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