Mon 26 Nov - QED, INL, IDH, ALLG

Results from Quintain Estates (QED) always interest me, as I've traded the shares in the past (profitably) several times, and have drilled into the numbers in some depth, been to a few meetings with management, etc.

In the end I came to the conclusion that it wasn't at all clear that they're creating much (or indeed any) shareholder value. There's no dividend, and the share price has been at a substantial discount to NAV for some time. The shares are currently 54p (£279m mkt cap), and NAV (EPRA) per share has fallen again to 109p (from 116p 6 months ago, and 126p a further 6 months before that).

So with a clear downtrend in NAV, and no dividend, it's hardly surprising that the shares are at a 50% discount to NAV. Once again most of the gross profit is swallowed up in administrative costs (i.e. plush Mayfair offices & staff/Directors), so you have to question just whose benefit this company is run for? Right now, the answer seems to be its Directors & staff. Whilst shareholders provide the capital, yet get no return. Not really a happy situation, so I won't be tempted back into these shares.

Sure there is development upside on their flagship projects at Wembley and Greenwich, but I'm not convinced that is enough to make much difference to NAV in a reasonable timescale. And how do shareholders actually benefit from a higher NAV anyway, if there's no dividend? Unless someone bids for it, the money is just dead.

It reminds me a bit of Inland Homes (INL), whose AGM is tomorrow (which I will be attending & reporting back on), where Directors who have been successful in a property bull market, are floundering in a less favourable market, yet still expect to be paid handsomely for delivering negative shareholder value! Seems to me the whole sector needs a wake-up call from the providers of capital, to reduce costs substantially in order to achieve a more equitable distribution of rewards.

Immunodiagnostic Systems (IDH) interests me, as it came up on a PAS filter used on my other website, www.SmallCapValue.co.uk

although it didn't quite make it into the model portfolio there, as I wanted to do more research & see more up-to-date accounts, and then decide what to do.

IDH makes laboratory testing equipment, and consumables. It was a stock market darling, with good growth, high margins, and a high share price, but the shares have crashed from a peak in Jul 2011 of 1196p, to bottom at around 243p this summer. They've since recovered somewhat to around 298p (£82.5m mkt cap).

The problem is, several competitors entered their market, and have won market share, such that IDH's turnover is now falling - the nightmare scenario for any growth investor, as you get a double whammy of reduced earnings forecasts, and they are valued on a much lower multiple too.

Interims to 30 Sep show turnover down 13%, and profits sharply lower (before exceptionals) down from £8.4m to £4.8m. Ouch. In fairness though, this has been well flagged beforehand, so is not a surprise. Indeed, they confirm full year guidance, which seems to be for around 32p EPS, putting the shares on a PER of just under 10, pretty good value. They also hold £10m in net cash, so the valuation looks undemanding.

The problem I have, is what happens next? Is this now a declining business which is being squeezed by competitors, or have they stabilised things & are fighting back? I don't feel able to make an accurate judgment on that, so will pass on these shares. There might be a bit of upside on the current price though, who knows?

All Leisure (ALLG) is a company that I've owned (briefly) in the past, and looks attractive from time to time, but always seems to lurch from one disaster to another (often not of their own cause). It's a niche cruise ship operator, whose Chairman, Roger Allard, owns 60%. It used to pay out a whacking dividend, but after several tough years that's gone now.

Their pre-close statement this morning indicates they expect to make a modest profit for y/e 31 Oct 2012. If they achieve broker forecast for next year, then the shares will look very cheap indeed. But it's high risk - the balance sheet looks fairly precarious to me, and it has a "distress" Altman Z-score which I note from Stockopedia's stock report page on this share. I'm tempted, but will probably just keep it on the watch list for now.

OK that's it for now. I shall be at the Inland Homes AGM tomorrow, so might not get a chance to do a morning report. But I intend posting reports here for Wed, Thu & Fri. Have a great week y'all!

Regards, Paul.