Monday, October 1, 2012

Mon 1 Oct - BEG, RNWH, EPO

Good morning. Apologies for Friday's lack of morning report, I was tired & nothing grabbed me as particularly interesting from the RNSs, so had a day off.
Back to normal today.

One of my portfolio stocks, insolvency practitioner Bebgies Traynor (BEG) has put out an AGM Trading Statement, covering the first 5 months of their financial year. They note that insolvencies are down 8% on the prior year period, note cost cutting (with £1m restructuring costs), that debt is unchanged, and that expectations for the year remain unchanged.

Of course, as with the artificially propped up housing market, we are also in a strange parallel universe with insolvencies at the moment, where banks are reluctant to push insolvent companies into formal insolvency, since that would force them to recognise a bad debt. Also the Govt is doing everything possible through HMRC to prop up insolvent companies, by giving more far lenient payment terms on tax arrears than has ever been the case before.

So at some point (we don't know when), BEG will see a large increase in work, as the inevitable insolvencies occur - either through the macro picture getting worse, or from the macro picture getting better. So BEG is a nice each-way bet on the insolvency market, which in the meantime pays out a 6.3% dividend yield, and is too cheap on a PER of 5.8 times forecast earnings. It does however have a considerable amount of debt, however that is to finance the extended debtor book which is normal for an insolvency practitioner. Amazingly, the debt is also unsecured, which gives a good indication that the banks are very relaxed about it. And after all, insolvency practitioners effectively work for the banks. So I shall continue to hold here.

Renew Holdings (RNWH) announces that trading was satisfactory in H2, and expects full year results to be in line. The PER is 7.7 on broker consensus (note: generally when I quote a PER it will be based on the current year forecast earnings, not historic earnings). Fc divi yield is reasonable, at 3.3%. Might be worth a look, although generally I tend to avoid low margin businesses like this, as it only takes one bad contract to wipe out all the profit.

Perpetual jam tomorrow outfit, Earthport (EPO) has yet again put out a bullish-sounding trading statement. Although with this company it's usually wise to re-arrange the last 3 letters of bullish, adding an extra t. As their own (former) FD once said to me, "I'm just amazed that people keep putting fresh money into it, to fund the losses". Quite. I'll eat my hat if this thing ever turns a profit.

Oh dear, that's about it I'm afraid, nothing more of interest so far this morning. FTSE futures are looking flat at the time of writing (7:52). Have a good day!

4 comments:

  1. Have you ever cast your eye over RHL Paul? I was in and out once and made a small profit on the back of the Vivargo situation. Tried my best to have a look at the accounts , pension seems small but the goodwill etc is huge. They seem to have chucked everything into the last update which seems to wipe out 12-13 and some, but 13-14 may be better or as stated ?
    The thing I'm not sure about is wether or not the money they are allegedly owed by Vivergo is included in their accounts or not.
    As far as I can see they are only worth the cash in the bank , but they seem to have some med term contracts.

    Not asking for investment advice , just a pointer on the accounts to make up my own mind.

    DbD

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    1. Hi DbD,
      Sorry but no, I've never looked at Redhall.
      From what you say, it sounds rather messy!!
      Regards, Paul.

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  2. Now that you mentioned Earthport, I thought I might take a glance. A glance at its fundamentals and was surprised at the fact that the operating loss risen from £4.4 million in 2007 to £7.5 million! This is certainly not a profit making company in spite of cheerful articles about them like "Earthport could grow at “triple digit percentages” after break-even, says executive director" back in August 2012.

    ... Right, as if anyone can actually believe that!

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    1. Earthport is a long-running & sick joke, in my view. More mugs come & go - both as management and investors. I've heard the same BS for over a decade from this company. Just look at its retained losses - staggering how much people have put into this crock. I put £30k into a Placing years ago, much to my shame. Absolute rubbish.

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