Tue 24 July 2012 - Morning Report

Good morning! Already nice and sunny here in Hove, so I may have to take some Annual Reports down to the beach & do my research there today :-)


Not really a small cap, but PZ Cussons (PZC) are weak, with EPS down 9%. This is driven by problems in Nigeria. I hadn't realised how much of their business is in Africa. The PER is almost 22, so despite a reasonable outlook for 2012/13, it looks fully priced to me.


Perpetually, and bizarrely over-valued carpet retailer, Carpetright (CPR) has put out a Q1 trading update. Looks OK - Q1 in line, and full year expectations unchanged. Encouragingly, UK LFL sales are mildly positive, up 1.7% - more evidence that the worst might be over for the UK consumer?  Rest of Europe sales are bad, at LFL (Like For Like - i.e. excluding store openings & closures) of minus 6.3%.


A bargain these shares are not, on a current year forecast PER of 35.8! Quite why the market always values CPR including a huge does of optimism about improved trading, when it does not do the same for any other retailer, remains a complete mystery. I would rather buy other retailers on a PER nearer 10, which is roughly the sector norm.


Forbidden Technologies (FBT) has always looked very optimistically valued to me, on jam tomorrow hopes. This is reinforced with pathetic results, showing turnover up 91% to just £348k, and an unchanged loss of £157k. These are for a year too, not interims! The mkt cap is £27m, so glad I'm not a shareholder here, as that valuation factors in years of stellar growth.


Results from chemicals company Croda (CRDA) look OK, with interim EPS up 8.1%, but the PER of 16.9 makes it look fully priced to me, especially when you allow for net debt and a pension deficit.


Richard Stearn has taken over as FD at Quintain Estates (QED).


I've often been tempted to bottom fish Man Group (EMG) shares, which have been in  a long-term decline in recent years, now only 69p, or mkt cap of £1,258m.
Funds under management continue to decline, now down to $52.7bn (down a whopping 26% from a year ago). Adjusted, diluted EPS has halved to US4.8c for the 6 months to 30 June 2012. It is loss-making on a statutory basis.


However, the divis look very interesting, as they paid out 9.5c as an interim divi (6.12p), and say they expect to pay out a final divi of 12.5c, so I make that a yield of nudging 20% for the year! If they can get back to previous glory days of well-performing funds, then there could be nice upside on these shares, in the meantime stonking divis are being paid from excess capital. I might have to have a little punt here.


Ideagen (IDEA) is a small software company admitted to AIM on 2 July 2012. £12m mkt cap, so just above my usual minimum of £10m.
Prelims for y/e 30 April 2012 look OK, with turnover up 78% to just £4m, and adjusted EBITDA up 127% to £1.18m. Net cash of £1.3m, although as is often the case with software companies, most of that is prepayments from customers (shown as a deferred income creditor).


But if you like tiny, but growing companies, then this might be worth a look?


Quite a few trading updates too, so I'll follow up with a second report on those in about an hour. FTSE 100 futures are up 24, so we should at least get a reasonable start - although how long before Spain & the Euro saga once again puncture confidence? Lunchtime if we're lucky! Have a smashing day all.