Tuesday, October 23, 2012

Tue 23 Oct (part 2) - MUL, ARM, SND, TNI (again!)

Hello again! After all the excitement of the TNI hacking allegations (see my earlier comments here in previous post), let's have a look at today's other company results.

Posh handbags maker, Mulberry (MUL) is down a thumping 25% this morning to  998p, following a disappointing trading update, containing a profit warning. The ridiculously high rating for this share meant that it was always an accident waiting to happen.

EPS was 44p last year, and they say today that this year will see lower profits than last year (but not quantified). So if the drop is only small to say 40p EPS, then that means the shares are still very highly rated on a PER of 25, even after today's falls. Any more bad news, and it would be easy to see these shares fall much lower again. Not for me, I'd rather buy bombed out things where the bad news is already in the price, not premium-priced shares which are a hostage to fortune - especially in these times of macroeconomic uncertainty.

Another share on a premium rating is chip designer ARM Holdings (ARM). At £8.1bn, it's market cap is in the stratosphere, but I mention it merely to point out the rating. Q3 EPS came in at 3.7p, so annualise that (ignoring any seasonality) and you get 14.8p EPS. So at 627p the shares are on a staggering PER of 42. Turnover & profit growth are both only around 20% year on year, so this looks a really toppy valuation.

Software group, Sanderson (SND) has fallen for the latest fashion of heading up a trading update with a tag line which is supposed to tell the reader how to interpret it, which in this case is, "Strong trading momentum maintained".

I detest these tag lines, because it is our job as investors to interpret the trading update. Just give us the facts & figures, and no spin thank you!
Pleasingly, the shares have fallen on this announcement, by 3% to 46p (£21m mkt cap).

The statement itself isn't bad though, with the key line being that "trading results for y/e 30 Sept 2012 are slightly ahead of market forecasts, and the Group's cash balance as at 30 Sept 2012 has further improved to £4m".

The shares look priced about right, on 13 times this year's forecast earnings.

I see that TNI have just put out a response to the phone hacking allegations, which is short & sweet, saying;

Response to Reported Allegations
 We note the allegations made against us by Mark Lewis in today's papers.
 We have not yet received any claims nor have we been provided with any substantiation for those claims.
 As we have previously stated, all our journalists work within the criminal law and the Press Complaints Commission Code of Conduct. 

The share price is recovering from recent lows, confirming my view that these phone hacking allegations are nothing new, and that it's already in the price.
Regards, Paul.


  1. Hi Paul,

    Wondering what your take is on Air Partner (AIP). Someone wrote about this in the money section of the FT about 10 days ago (since when it's rocketed nicely). Salient points are that it has a large cash pile which is equivalent to a large chunk of the mkt cap, low debt and is profitable with a divi yielding 7%. See the article here:


    Thanks for the blog!


  2. I agree about ARM but one expects them to be boosted by iPhone 5 sales and the fact Windows 8 will run on ARM. I do however think they will fall back into their normal 500-600 trading range once the new device hype has worn off.

    I'll remember this though and look to get in on the ARM act in anticipation (3 months or so before) the next time there are major product launches.