Wednesday, November 28, 2012

Wed 28 Nov - VP., DAY, TRK, CRE, AVG

Yesterday was certainly an interesting day at the Inland Homes (INL) AGM. I posted some initial thoughts yesterday afternoon on the bulletin board, and will write up a more detailed report here later today, or tomorrow.

Interim results from specialist equipment hire company, VP (VP.) look pretty solid. This seems to me a decent company, which is riding out depressed market conditions very well. EPS is up 18.8p to 21.7p for the 6 months to 30 Sep. There is a strong H1 bias to seasonality, as you would expect for this sector, but they seem on track to deliver broker forecasts of around 32p for the full year.

So at 334p (£138m mkt cap) these look reasonable value, on a PER of about 10.5. There is a fair bit of debt, around £50m, but for an equipment hire group that is to be expected, and it's funding £114m of equipment (Balance Sheet net book value of fixed assets).

There's also a useful dividend of around 3.6% forecast, so quite a nice one, especially as I reckon there could be good upside on an economic recovery. It's too easy to get into the mindset of being in a permanent downturn, but at some point things will fire back up again, and that will drive big earnings increases at cyclical companies.

At £240m its mkt cap is a bit large for me, but Daisy (DAY) has rather bizarre accounts. They capitalise enormous amounts of costs as intangible assets (described as "customer lists", valued at £180.9m!), in order to show a large EBITDA figure on the P&L, but after amortisation is always loss-making. I don't like the look of that at all.
I'm only mentioning it here so that I can search for the name again here using the search box above, and quickly remember why the shares should be avoided!

I've had a quick skim of Torotrak (TRK) results - a relic from the late 90's technology shares boom. Their infinitely variable transmission has never really taken off, but the company is still going, and managed to deliver a £1.6m profit for the half year to 30 Sep. Although in the past profit here has been one-offs due to licence receipts, and not recurring.

I don't know the company well enough to make detailed comment, but note they are planning on ramping up costs by £2.5m p.a., which they say will be funded from license revenues. Plus they have £10m cash in the bank, so maybe there is hope yet. They also say that perceived new technology risk has put off vehicle makers from adopting their technology.

It will be interested to see if this ever does work commercially, but surely they've been trying for so long now, that the Patents are likely to have run out by the time they do manage to sell anything in volume? The £50m mkt cap makes it much too racy for me.

Marketing company Creston (CRE) has issued interims which are ridiculously complicated for such a small company - so many different measures of profits, before & after amortisation, before & after restructuring costs & changes in deferred consideration, I really can't be bothered to go through it all right now.

You would think for a marketing company, that they would market themselves a bit better in terms of producing results that can be readily understood!
I'm confused as to why the PBIT figure has gone down, but DEPS (diluted EPS) has gone up. I like this company, as the shares seem cheap, but will have to park this to one side for when I have more time to understand the figures properly. They do say that the full year will be around the same as last year, so that simplifies things a bit.

Based on broker forecasts, both the fwd PER of 5.6 and divi yield of 4.8% look very attractive though, so I will return to Creston at some point. I don't currently hold any shares in it, but did have a few up until recently.

Nice announcement from Avingtrans (AVG) about winning an £80m ten year contract with Rolls-Royce. I met the management at a FinnCap meeting earlier this year, and was impressed. The shares have had a good run already in the last 3 years, so I'm struggling to see compelling value here, as the fwd PER of about 11 looks about right for a company of this size (c.£27m mkt cap).

Right that's it for today.

Regards, Paul.

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