Monday, October 8, 2012

Mon 8 Oct - WTM, DAY, CWK

Good morning! Yes I'm back, after a sporadic week last week, due to being away from home and focused on other things. Not to mention the spectacular success we're having with 2 of my main picks, Trinity Mirror (TNI) and IndigoVision (IND), both of which I have high hopes for & can see considerable upside even after recent large share price rises. But as always, please DYOR! (do your own research).

Looks like a fairly quiet morning for results today, as the 30 June reporting season is now mostly behind us. Won't be long before we get busy again with 30 Sept period ends though.

I don't recall having looked at engineering consultancy, Waterman Group (WTM) before. Their mkt cap is £13.4m at 43.5p/share.
Preliminary results for y/e 30 June show turnover reduced from £74.1m to £68.8m, but profit before amortisation & exceptionals, and tax of £1.1m (slightly down on £1.2m last year). So a wafer thin profit margin there.

They talk about challenging market conditions, and the outlook statement seems to point to flat trading vs last year. Interesting to see that they have cleared their net debt by doing a sale & leaseback of property, so that should make the balance sheet much more secure (as lease financing can't be withdrawn (unless you fail to pay the rent, in which case you just get thrown out), whereas bank funding can). Although the interest cost savings are likely to be offset by the increased rental charges.

Overall, I can't see much to get excited about at Waterman. Although if you think the Govt will eventually realise that they need to ramp up infrastructure spending heavily in order to get us out of recession, then Waterman could be a beneficiary. Also, their balance sheet overall is nice & strong.
Although if you look back pre-credit crunch, it was making £5-8m p.a.. So a return to those kind of numbers would see a much higher share price, if it were to happen. At some point a cyclical recovery will happen, we just don't know when.

Business telecoms providers, Daisy Group (DAY) sparked my interest with a positive sounding trading update today. However, having looked at their most recent results, but balance sheet puts me off - huge amounts of intangibles, both goodwill and capitalised costs (they value "customer lists" at £187.7m net book value, for example!), plus a lot of debt. So that throws into question how real the profits are? Not for me. Why take the risk of investing in something with a weak balance sheet & aggressive accounting treatments.

Food producer Cranswick (CWK) puts out an in line with expectations trading statement to 30 Sept. So according to broker consensus that puts it on a PER of 10.2, with a divi yield of 3.8%. So might be worth a further look?

FTSE set to open 25 points down in a few seconds. Have a good day! I'm off to Gunwharf Quays (Portsmouth Harbour) for a long lunch with an old friend today, so should be fun! Well worth visiting Portsmouth Harbour for a day out actually, fantastic place with lots to see & do, e.g. HMS Victory. Esp easy as Portsmouth Harbour has its own railway line, easy to get to.

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