Thursday, October 18, 2012

Thu 18 Oct - MEC, XAR, LWB, MTC, HOME, 888

Good afternoon! Thank you so much for the generous donations to my Half Marathon charity thingy ----> we're already up to 15% of target! It's enormously appreciated. It's also motivating me to do more training, and will drag my carcass out for a jog along Hove seafront later today!

Another fairly quiet day for results. European publishing group Mecom (MEC) has issued an IMS. I flagged up this share at around 51p some time ago as a main write-up on this site, but sold them after a big rise & feeling that it was difficult to quantify the upside.

Today's IMS confirm previous guidance given on 6 June that full year EBITDA will be in the E85-95m range. It is very helpful indeed when companies spell out the actual guidance figures like this, rather than referring obliquely to management or market expectations (since we might not know what those are!).
A bit like TNI, Mecom are seeing declining turnover from their newspapers, but are compensating through cost cutting. Net debt has risen sharply, from E109.7m at 30 June to E150.8m at 30 Sept 2012, although they say that year-end net debt will be lower than market expectations.

Overall, I remain of the view that Mecom is tricky to value, hence am not planning on revisiting the shares at 84p today (up 5p on the day, so the market likes this IMS). In my opinion TNI is a safer, cheaper & easier to value bet in this market. Although Mecom is paying big divis, and is in play due to being forced by shareholders to break itself up. (I hold shares in TNI).

I've always liked print-head maker Xaar (XAR). Their Q3 trading statement today is reassuring, saying "the outlook for 2012 profitability continues to be in line with the Board's expectations".
Market consensus is for 15p EPS this year, and 19p EPS next year, so at 260p a share (£193m mkt cap) it's on PERs of 17.3 and 13.7, which is not exactly bargain basement territory, but not outrageous at all for a company with a great track record of strong EPS growth over the last few years.

They also have net cash of £18.8m, or 25p/share. So the Enterprise Value is 235p/share. I can see the attraction, but don't know enough about their market to determine whether or not the growth is likely to continue.

Low & Bonar (LWB) has put out a mild profits warning, due to problems at its yarns division. Shares are only down 4% to 55p, which is a very gentle reaction from the market. Even mild profits warnings usually seem to trigger an instant 20-30% mark-down, but not in this case.

The forecast PER seems to be about 9, and divi yield 4.2%, which looks like a fairly modest valuation, although I haven't looked at what their net debt position is.
(incidentally, whenever I refer to PER and divi yields, I'm always referring to the current year, forecast consensus, not the historic values).

The market has reacted very positively to the Mothercare (MTC) H1 trading statement today, with the shares up 16% to 269p. That looks a tad overdone to me, as their UK business is still a serious problem - they've only managed to stabilise LFL sales. Although their overseas business is doing well. On balance, I've missed the boat on this one, so won't be buying in after such a big rise.

But it does reinforce the view that the worst is probably now over for UK retailers. The ones that have survived, and are managing down their rental costs, should be OK from now on, perhaps. Share prices reflect that though, so it's not something I'm going to chase up. Indeed, I've sold my HOME shares recently, as they've had a great run (up 50% from recent lows), and I'd rather wait to see the Interim figures next week, and possibly buy back in, rather than risk holding them. Nobody ever went bust banking a profit, so there we go.

I see that 888 Holdings (888) have slipped back 6% to 102p today, after yesterday's positive trading statement. Might revisit this one, as I like the company, and the valuation seems reasonable.

OK, that's it for today, see you tomorrow! Am having an early night tonight, so hopefully will be publishing tomorrow's article a bit earlier.

Regards, Paul.

No comments:

Post a Comment