Wednesday, August 8, 2012

Wed 8 Aug - QED, SBT, AVON, ISG, TRI

Good morning. First off we have an IMS from Quintain Estates (QED), a company I've looked into in some depth - see my report of their last analyst meeting, which I attended, on the "Main Write-Ups" tab above).

It all sounds great, but I can't see anything new in there, more of a recap of what we already know. Things do seem to be going well at QED, but I struggle to calculate whether the shares are cheap or not? They have all these different construction projects and other activities, but frankly what's the point, given that shareholders don't get anything from them?! I am always scratching my head and asking whose benefit QED exists for, and the answer reluctantly is that it seems only to benefit management and Directors at the moment, providing nice secure, well paid jobs. Some shareholder value may arise at some point, but it's probably correct that the shares trade at a substantial discount to an NAV which comprises essentially two large building sites! Maybe that's a bit harsh?

That said, the financing deal with a Far Eastern investor has transformed their prospects (i.e. no chance of another Rights Issue now). It wouldn't surprise me to see these shares double in the next couple of years, if the economy recovers, so I should probably buy some. Genuinely can't make up my mind on this one.

Think I might revisit Sportingbet (SBT) at 34p/share. Their Q4 IMS today is OK - trading in line overall, with Europe weak (quelle surprise!) and Australia strong. That puts them on a PER of 9.8 and a juicy dividend yield of 5.3%, per broker consensus from Morningstar.

The last balance sheet has £57.5m of loans on it, so important to take into account. That's fairly material for a £227m mkt cap company, so perhaps not quite that cheap - that's about 25% of the mkt cap in debt, so that would take the adjusted PER up to nearer 12, which is perhaps not quite so exciting. Divi yield still looks good though.

Avon Rubber (AVON) the dairy rubber & gas masks business, puts out a decent IMS, saying H2 will be stronger than H1 (but don't comment on how that relates to market views, which is not terribly helpful). The shares have done well over the last 3 years, so not sure how much is still left in the tank? I'm looking mainly for shares with decent divis at the moment, so this doesn't work on that basis, yield only around 1%. But PER looks reasonable, around 10, but I haven't checked the balance sheet, so that view depends on debt being low.

Interior Services Group (ISG) puts out news of a £16m contract win to refurbish offices at City Tower in London. All good, but for a group with £1.2bn turnover should they really be issuing an RNS for such a small contract? Surely RNS is for investor information, not PR purposes? Although many companies blur the lines between the two.

This company looks potentially interesting though - wafer thin margins (sub 1%) on fitting-out work, but I don't see any loss-making years over the last 8 years, which implies they know how to handle fit-out contracts without slipping up. Fwd PER is only 5, and it has a history of paying out huge dividends, although that is forecast to drop to 9p this year, which would still be a 7.2% yield. Directors look seriously overpaid though, top two earning an average of around £600k apiece. That's a lot for a glorified builder!

Trifast (TRI), an industrial fastenings group, puts out a slightly oddly worded IMS (sounds like the writer had had too much coffee & got a bit over-excited!), but I can forgive that since they report trading "consistently ahead of budget, with Automotive in the UK & mainland Europe being the main driver...". Quite interesting.

Finally, if you didn't see it, I strongly recommend watching TV Doctor Michael Mosley's latest offering a couple of days ago, Horizon - "Eat, fast, live longer".
Mosley demonstrated how there is powerful scientific evidence that Western diets make us ill, and that we eat far too much. Hence he tries out various fasting strategies, which have been proven to dramatically reduce weight, but also virtually eliminate the risk of heart disease, strokes, and dramatically reduce cancer risk.

I've started following his best strategy, which is called alternate day fasting - where you eat normally one day, then the next day restrict your food intake to 600 calories maximum, comprised only of fruit & vegetables.

Yesterday was my first "fasting" day, and it was slightly unpleasant, but I had an apple late morning, a basic salad (veg only) for lunch, and a big tray of roasted veg (only one spoonful of olive oil used!) for dinner. I felt a bit light-headed and grouchy for some of the day, but overall it was bearable. And of course you only have to mildly suffer for one day, which is never too bad as you can eat what you like the next day.

Eating very little yesterday has already made me feel good today - dramatically reduced pot belly overnight, so this could be the answer! As I'm 44 now, need to improve my lifestyle, no spring chicken any more, so think I will persist with this alternate day fasting idea. But very highly recommended anyway, worth watching.

Hope you all have a great day, and thank you for the positive feedback about my Blog re-design - 85% of you like it, so that's pleasing. I'll continue to make improvements on an ongoing basis, and do of course feel free to recommend this Blog to others - the more visitors we get, and the occasional interest taken in the sponsors messages (which I've tried to make reasonably discreet, and I've also blocked the highest yielding, but tacky ones, like hot babes dating sites, etc!) mean that I get a trickle of ad revenue which might rise to enough to pay my mobile phone bill! So it's only small amounts, but even so it's fun to see the ad revenue rising, and it helps me measure the success of what I'm doing here.

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