Friday Morning Review

Good morning! It should be a good day too, as there was a strong rally in the last couple of hours of US trading last night, plus another big rise in the futures overnight, so the FTSE100 is forecast to open UP 110 points at 5598! This seems to be on some optimism about the EZ crisis possibly now coming to the end game - talk of a breakthrough overnight.


Certainly my feeling is that there is so much deep value out there in small caps, that it's better to be long of the cheapest stocks, whilst keeping some powder dry in case there is a EZ melt-down to pick up even cheaper bargains.
Although having said that, I'm fully invested, as the value is so good in small caps, I'm prepared to look through & past the EZ crisis - which one way or another has to get sorted out.


Loads of results this morning. Here are the ones that caught my eye;


Betfair (BET) £761m mkt cap at 735p/share, reports decent results for y/e 30 April 2012. Underlying EPS is up 21% to 41.1p. Shares are priced at 735p, so that's a PER of 17.9.
Divi is up 19% to 10.2% for the full year, for a yield of an unexciting 1.4%.
Good current year trading too, revenue up 18% so far.
Balance sheet looks OK at a quick glance. Depreciation & amortisation charges quite high, and internally generated capex needs scrutiny.
Shares look priced about right to me, perhaps 20% upside, so nothing too exciting.


Housebuilder results are always interesting, for a view on the overall health of the economy & consumer confidence. Berkeley Group (BKG) reports this morning. At 1365p it is capitalised at £1,792m.


The figures look remarkably good. Revenues are up 40% and pre-exceptional operating profit is up 44% at £196m. NAV/share is 839p, so the share price seems to factor in quite a lot of future profit.


They refer to healthy demand in London & the S.E. from British and overseas buyers. All very well, but in my view it's an artificial market, with ultra-low interest rates propping up prices which are now out of reach for ordinary people. We are becoming a less & less equal country, which can only lead to serious problems in the future. If someone as right-wing as me is worried about this, then there really are big problems.


Berkeley Group seems over-priced to me, given the serious risk of a housing market correction once interest rates normalise. Where is the upside, when it's trading on a high PER, and a considerable premium to net assets?


Very brief, in-line trading statement from Clarkson (CKN).
It's on a forecast PER of about 11, probably priced about right.


Lots of other results, but all in companies I've never heard of!


Have a good day & a pleasant weekend, and thanks for visiting, I hope these morning reports are useful. I'll be doing some individual stock analysis too soon, but have just been busy doing other things this week.


I'll Tweet when important updates are published, but please do subscribe to or bookmark my Blog! The more page hits it gets, the more encouraged I am to write more, as it shows that people find it useful.


I shall probably be buying more HOME this morning at the open - it's fallen all the way back to 80p, despite the recent pivotal trading statement which showed that sales have stabilised at Argos, and confirming profits for the year. The business is in for free, since the mkt cap is only equal to their storecard debtor book + net cash. There is no debt. The pension fund deficit is equal to freehold property. So a real copper-bottomed opportunity, and it's the UK's 2nd largest internet retailer. I will be going to the AGM next week, so will publish a report here afterwards.


Regards, Paul.

Thurs Morning Review

Good morning! So far so good - I've managed 4 days on the trot with a 7am start & market review published around 8am, not bad going as I'm the opposite of a morning person! I hope you find them useful, and judging by the number of page hits, it looks like you do! You can subscribe to this Blog by hovering your mouse over the black box on the extreme right of this page, and some buttons appear.


Also, sorry about the advertising, but it's a useful little side income (pays my mobile phone bill!) and the ads are actually quite interesting & relevant in my view, and there are only 2 ads in total. I've been blocking the dating website ads as they appear, so those should now thankfully be a thing of the past, as I don't want any ads on here that cheapen things. Feel free to leave feedback in the comments sections, or the feedback box that appears at the bottom right of the page.


This is what caught my eye this morning:


Being a former retailing FD, Debenhams (DEB) IMS (Interim Mgt Statement) comes first. It's really strong, considering the gloomy economic backdrop - LFL sales (exc. VAT) were running +0.3% in H1 (to 3 Mar 2012), but that has accelerated to +3.1% in the subsequent 16 weeks to 23 Jun 2012, giving an average of +1.2% YTD. That really is pretty impressive, and demonstrates that even in a recession, good companies can do well.


Very strong online sales growth this YTD, of +40.2. Wow! Mobile also growing strongly, and they offer free WiFi in all stores - v. good idea. Gross margins slightly (30 bps) down, but that's pretty insignificant, and down to the sales mix (isn't it always?!). A £20m share buyback is underway, that should help support the price (taking their lead from Next).


Overall they restate that they "remain comfortable" with forecasts for this year (I'm a bit surprised these figures do not trigger an outperformance outlook, but maybe they are keeping their powder dry just in case?).


The shares are 83p, giving a mkt cap of £1,071m.
Market consensus is for earnings of 9.1p this year and 10.1p next year, so a PER of 9.1, falling to 8.2 next year. Superficially tempting, until you remember that DEB has a lot of debt which was £312m at 3 Mar 2012, so the PER is nearer 12 when you adjust for the debt - which looks priced about right to me, for a mature business with limited growth prospects, even allowing for the fact it is trading well. So I'm not tempted to buy these shares.


Punch Taverns (PUB) IMS says they are on target to meet full year expectations. However it seems to me that the equity is virtually worthless because they have so much debt (although falling fast through disposals). This is very much a special situation, where the equity is either worthless or not. Might well be an interesting, high risk share to research - could multi-bag in an economic recovery, as highly geared companies that survive tend to be the biggest risers in the first wave of economic recovery. Or it could go bust, who knows? On balance, I might steer clear!


Results from Photo-Me (PHTM), the photo booth company are fairly uninteresting. Sales fell 5%, but profits rose 12%, and EPS rose 6% to 3.95p. At 40.5p that puts them on a PER of just over 10. Mkt cap of £147m, and net cash of £52m looks healthy, so might be worth a further look. Good divi yield of 2.5p, giving 6.2%.


Looks good value, although likely to be perceived as "old economy" company, so not likely to attract a high rating. Can't get excited about this one.


Construction company Morgan Sindall (MGNS) report a "satisfactory first half". It seems to consistently throw out about 75p EPS each year, and pays 42p in divis. So  at 615p it looks fair value. I don't like this type of company with huge turnover £2.2bn p.a., and wafer thin profit of around £40m p.a., as they are only one problem contract away from a profits warning & potentially insolvency. Although they seem a well-run outfit, as there do not seem to have been any significant problems of that nature in the last 10 years, judging from rock steady profits each year.


Greene King (GNK) report solid results, with EPS up 10% to 53p. Look good value to me at a share price of 533p, PER of 10 given growth & a stonking operating margin of 21%! Who said pubs can't make money?! LFL sales up a very impressive 7% in last 8 weeks, so I'm tempted to buy some of these (the shares, not the products!). Not too keen on the Balance Sheet though, as lots of debt, but also lots of freeholds. Hmmm, needs more research methinks, but long-term I see this as a brand which will crush the competition.


Beale plc (BAE), the independent department store business, which is a throwback from the 1960s, is still soldiering on, amazingly. Results are out this morning, a small H1 loss. At £5m mkt cap I really should have a closer look at these - there might be a property redevelopment angle on it, as they have some good town centre sites. Bank facilities renewed for 3 years, so that's reassuring - the Bank must be comfortable they'll get their money back.


In line trading update from Costain (COST).


All in all after reading these results this morning, one is left thinking, recession, what recession?! Just shows that good companies are still doing well, and that once recovery is underway as the Eurozone crisis eventually recedes, we could well see some excellent upside on equities which are the only strikingly cheap asset class - compare available earnings yields of 10-20% (equivalent to PER of 5-10) and divi yields of 4-10% with any other asset class! So I remain a long-term bull on smaller caps especially, where the deepest value exists. Although I have no idea what will happen in the short term.


Have a good day all!


Regards, Paul.

Weds Morning Review

Good morning! FTSE futures looking a bit more healthy this morning - pointing to an open UP about 23 points, at 5468, which is a pleasant change.


Lots of company results, so as usual I've selected a handful which caught my eye whilst munching on my muesli.


Plastics Capital (PLA) has put out preliminary results for y/e 31 Mar 2012 here;
http://www.investegate.co.uk/Article.aspx?id=201206270700072030G

They are fairly close to broker consensus (which is for 10.45p EPS), having announced 10.1p EPS today, slightly down from last year's 10.2p. This puts the shares on a cheap-looking PER of just under 8 (at 79.5p/share, £22m mkt cap), however once the £10.1m of net debt is factored in, the debt-inclusive PER is about 11.4, which looks about right to me.


A maiden final divi has been declared, making 1.0p in total for the year, and unexciting yield of 1.3%. So I was hoping to get excited about this interesting niche plastics business, but for the time being it's only going on the watch list. Although I will revisit it once economic recovery begins in earnest, as it could quickly look cheap once growth in EPS is factored in. Outlook statement sounds OK but not exciting.


£2m mkt cap SocialGo (SGO) has announced some small issuance of shares, including one to its broker in lieu of fees. Hmmm, so looks like they're strapped for cash again, so expect another fund-raising for this cash burner. However, if they do manage to get traction for their social networking software, then it could be a serial multi-bagger. A high risk punt at best, but I'd be a buyer if & when they show some decent sales growth.


Remember Scotty Group (SCO)? The former dot.com boom era darling is still going, and has actually delivered a small profit today (£349k for y/e 31 Dec 2011) - errr hello guys, it's end of June, why has it taken so long to produce the accounts? Such a long delay rules it out as an investable stock for me. Outlook statement warns on H1 profits, but says outlook for H2 better. I've always thought this company was over-hyped, and am not tempted even at £7m mkt cap.


Sarantel Group (SLG) has always looked interesting technology (high quality mobile device antennae) but serial disappointer on sales & profits. The mkt cap is only £3.4m now at 0.41p/share, and 2 contract wins announced today look quite good, but lack financial info.The figures are dire, but somehow they managed to get a £2m loan from HSBC a little while ago. That aroused my interest. Have not invested, and it's very high risk, but potentially interesting.


Glanced briefly at results for PHSC (PHSC), a £2m mkt cap, 2p final divi makes a yield of just under 10%. Could be interesting, but why on earth have a Listing for something this small? It's evaluating acquisitions apparently.


OK, run out of time. I like to publish these updates before 8am, so that's it for now. Have a good day all!
Paul.

Tuesday Morning Review

Good morning! Euch, terrible night's sleep, only managed about 3 hours, my mind was whirring, thinking about all sorts of things. So annoying when you can't shut down for the night.

Futures are indicating a benign start, with the FTSE 100 up 12 to 5463 after yesterday's miserable performance. This Eurozone crisis just seems to grind on forever, although it surely cannot be long now until a climax? The sooner the better - I foresee potentially massive upside on small caps once the fog has cleared, and growth resumed.

Only time to review 5 or 6 RNSs each morning, these ones caught my eye;

Toumaz Microsystems (TMZ) has put out a positive-sounding RNS about "multiple major design wins" for its "system on chip" semiconductors - which it needs to in order to justify a £74m mkt cap, despite only £4m turnover last year, and more than that in continuous losses every year. A friend I respect tells me that it's a very exciting company - which it needs to be, with figures like that! Not for me at such a racy price.

A lot of my friends will be excited this morning, as Lo-Q (LOQ) puts out its interim results. It's an impressive little company that provides virtual queuing systems for theme parks. Most of these are presumably closed over the winter, judging from their results, which show losses and tiny turnover (although up on previous year). Surely they could choose a year-end date which splits the year into two roughly equal halves, rather than have almost all their turnover in one half, and negligible amounts in another?

The outlook statement is therefore of all importance, and it sounds OK - with a reassurance of in-line expectations.

Share price at 304p looks up with events (if not maybe a bit toppy?) given that it's 22 times forecast earnings, and no dividend seems to have ever been paid, and none is likely in the medium term, per this morning's RNS.

Two companies whose shares continuously defy gravity, and any kind of logic, also report this morning - Ocado and Carpetright. Sooner or later shorters will clean up on both these massively overpriced shares.

Ocado's figures are laughable. It barely scraped a profit before tax of £0.2m for the half year (stated as 24 weeks, am I going mad?! Why not 26 weeks?) on turnover of £332m. Net debt grew several fold to £71m. The mkt cap is a nonsensical £600m at 108p a share. This one is just an accident waiting to happen, so stand well clear! Forecast PER for next year is 165. Enough said.

To continue the insanity theme, I'm having a good laugh at Carpetright (CPR) figures for the 52 weeks to 28 April 2012. Absolutely dreadful figures, with underlying profit falling from £16.9m to £4.0m, or 4.5p a share.

So have a guess what the share price is? 50p would look about right to me. No, they are 653p, or a mkt cap of £452m! Total insanity.

Admittedly, net debt has been reduced greatly from £66m to £19m, on the back of store sale & leasebacks. Outlook sounds unexciting. When will the bubble eventually burst? Who knows, but again my view is to stand well clear, or be short (which I'm not at the moment).

They say things always come in threes, and sure enough we have a third joke company announcement, this time from perpetual jam tomorrow Earthport (EPO). A partnership in Singapore has been announced. Big deal, or rather it probably won't be, like all the other deals they've announced over the years. Earthport just manages £2m turnover every year, with usually about £5m losses. Wave after wave of mug investors put more cash into it, and so the fun carries on.

Allocate Software (ALL) has put out a positive-sounding, in line trading update. At 72p the share price is on a forecast PER of just over 10, so looks good value - worth a further look. Talks of continued growth in today's RNS. I notice that shrewdies Hargreave Hale hold about 10%, a good sign.

That's all I have time for before the market open. Hope you have a good day!

Monday morning review

Good morning. The FTSE 100 Futures are indicating a slightly negative open, down 8 points to 5499.

Having a quick scan of the RNSs, not a lot catches my eye (I don't cover resource stocks incidentally, as it's a specialist sector where I don't have any expertise).

Delcam (DLC) has put out a positive trading update, with revenues up 14% on prior year, and results likely to be ahead of forecasts. That's a fairly unusual situation right now, so noteworthy. The shares look up with events though, as price is 17x multiple of existing forecasts, and a divi yield of only 1%, so I can't get excited about that.

Construction company, Kier Group (KIE) has put out an in-line trading update, mentioning public sector PFI projects. Not one for me, given the wafer thin profit margins. Although shares look reasonable value on a forecast PER of 9, and a 5% dividend yield.

Very impressive-looking results from Cohort(CHRT) - Adjusted EPS up 62% to 15.5p, so that puts the shares on a PER of less than 6. But given that it's a defence supplier primarily in the UK, and impending Govt cuts, perhaps that's why it's cheap? Not a company I've looked at before, but with a strong Balance Sheet too, this one looks worthy of further research.

A rather waffly update from Panmure Gordon (PMR), thin on detail, but seems to show their heavily loss-making 4-year period may now be behind them. Always surprising how small these "big name" City firms are. Only £14m mkt cap.

Glanced quickly at Paragon Entertainment (PEL), a £13m mkt cap company engaged in building attractions. Unusually, its turnover is zero. Why on earth is something this early-stage Listed at all? £2.9m operating loss for calendar year 2011. Hmmmm.

Vitesse Media (VIS) - a £1m mkt cap (yes, really! Again, why is it sensible to have a Listing?) reports a £500k loss and a very weak looking Balance Sheet. Bargepole.

That's all for the moment, just thought I'd try to bash out a quick pre-opening report each day this week, so do check back every day!

Regards, Paul.