Tuesday Morning Review

Good morning! No report yesterday, as there were no results which interested me, and I picked up a mild cold over the weekend so was resting.

Just a handful of results today, as usual I'll start with retail, N Brown Group (BWNG) put out a trading statement ahead of its AGM later today. Whilst womenswear has been hit by poor weather, other categories have performed better, such that overall LFL sales were up 1.9% for the 17 weeks to 30 June 2012. More evidence that retail is bottoming out, hence bombed out shares in the sector are worth a look - my favourite on a value basis being HOME (since its balance sheet contains net cash + storecard debtor book which are greater than the entire mkt cap, so the business itself is effectively in for free!).

N Brown looks reasonably priced, on 8.8 times forecast earnings, and a very good yield of 5.6%. There is some debt though, so that needs checking. The rating looks about the same as Debenhams. Since N Brown does just over half of its sales over the internet, it's certainly wrong to think of it as old economy.

Housebuilder Persimmon (PSN) reports positively on current trading. Legal completions in H1 are up 6% against prior year, turnover up 13%. Average selling price is up 7%, and operating margin has risen from 9% to over 11.5%. Pretty impressive stuff, but it all relies on an artificially expensive housing market which is supported by ultra-low interest rates, and where affordability has gone out of the window for many people. Hence owner-occupation has sadly become a luxury available only to older people, a small number of high earners, and people whose parents are rich enough to give them a substantial deposit. How long before prices eventually correct back to affordable multiples of salary? I don't know, but it makes me want to steer well clear of the entire housebuilding sector - much too high risk.

What did catch my eye in Persimmon's statement this morning is that they plan on returning £1.9bn of capital to shareholders over the next 9 years, starting in June 2013. That is equal to their entire mkt cap!

Real Good Food Company (RGD) - a favourite amongst PIs, has released its RGD results. A big increase in diluted adjusted EPS from 2.6p to 6.5p, so that puts it on a PER of about 8. However note that net debt has risen to £25.9m, so in the context of a £34m mkt cap that makes it look rather pricey in my opinion. Wafer thin profit margins on large turnover don't appeal to me either - increases the risk of something going wrong.

The outlook statement makes a bold statement that they are "embarking on an exciting period designed to transform the scale of the Group over the next 3 years". I can't get excited about this one I'm afraid.

£10m mkt cap minnow AdEPT Telecom (ADT) announces solid results. Looks good value on an EBITDA basis (3 times) and maiden divi. Worth a look perhaps.

That's it for now, have a good day!


P.S. Quite a busy week, as I'm off to Milton Keynes tomorrow for the Home Retail Group (HOME) AGM. So once I've collected my thoughts, and got an internet connection, will post a report about it here - so do check back regularly for new stuff! I'm planning on gradually building up the amount of stuff I post here, but have been busy on a couple of other interesting projects, details to follow!