Wednesday, October 10, 2012

Wed 10 Oct - MAYG, THT, NPT, AVN

Good afternoon! Been busy again this morning, so sorry this report is a bit late. But hopefully you find my article below on May Gurney (MAYG) (published here late last night) interesting. Good to see MAYG continuing to rise, up another 6% today, and it still looks cheap to me, but as always please DYOR (do your own research).

There is a good discussion of May Gurney here on Motley Fool, please do share your thoughts on that discussion thread.

Troubled retailer Thorntons (THT) has issued a Q1 trading update, where they say that the first 14 weeks was in line with expectations. Own store LFL sales were down 1.7%, whilst commercial sales rose by 9.8%, and the Xmas order book is strong.
They are trading around breakeven, and with considerable debt, this is a very high risk situation, so not for me. But I am watching with interest.

As with all struggling retailers, the crux of the problem is onerous leases, where a long tail of loss-making shops on excessive rents could pull down the whole business. The solution is often a pre-pack administration or CVA, to dump all the loss-making shops in one go. Trouble is, that usually wipes out shareholders, and management usually walk away with the profitable part of the business pretty much free - a very unsatisfactory process. I hope Thorntons do survive, and manage to avoid such a process, but the shares look way too risky for me.

Interactive gaming company Netplay TV (NPT) have issued an in-line with market expectations update. Broker consensus is for 1p EPS this year, so that puts them on a PER of 12. Seems reasonable, although the company has a long history of under-performance & losses, which makes me view it with caution.

Ethically I'm not entirely comfortable with online casinos - who knows what proportion of players are kids who've nicked their parent's credit cards, etc?
Or people who are racking up debt with a gambling addiction? Plus they have to constantly advertise to bring in new players as old ones bust out. So not for me.

Satellite operator, Avanti Communications (AVN) has issued prelims for year-ended 30 June, which on the face of it look pretty grim for a £326m mkt cap (that's after today's 16% fall to 292p). I note that a Director has splashed £15k trying to support the share price today.

It always seems to be about jam tomorrow with Avanti. I've looked at this company lots of times before, and have never had the faintest idea how to value it.
But one thing's for sure, I don't want to pay up-front for things that may or may not happen in the future. I'd rather invest in cheap, unfashionable, bucket-loads of cashflow, like at Trinity Mirror (TNI).

That's it for today!
Regards, Paul.

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