Friday, July 20, 2012

Fri 20 July 2012 - Morning Report

Good morning! Another busy morning for announcements, many of which are from companies I've never heard of. Which is why doing these morning reports is useful, in flagging up companies that I might otherwise never have noticed. But there's clearly only time to have a very superficial look at the key figures, and the outlook.

In passing, you might also notice that I have allowed Google to place 2 adverts on each page, which I think is only mildly intrusive. The purpose, to be blunt, is to raise a small amount of ad revenue, but this only occurs if the occasional reader is good enough to notice them, and follow through (I'm not allowed to spell it out, but hopefully you get the drift). So that is one small way to perhaps occasionally show your appreciation for my early starts!

ECO Animal Health Group (EAH) commits the sin of using the word "eco", "clean", or "environmental" in their name, which instantly puts me off investing in anything so named. However, at first glance their results look pretty good, with a 32% rise in profits afer tax. 42% rise in diluted EPS to 4.2p.
25% increase in divi to 3.75p, and has £9.5m net cash.

At 257p the mkt cap is an eye watering £142m, so perhaps not quite a bargain after all! I'd be interested at a quarter of that price, but otherwise forget it.
The huge premium price seems to hinge on them achieving USA/Canada marketing authorisations in the future. I'm not prepared to pay up-front, sorry.

Bizarre micro cap of the day award goes to Sports Stars Media (SPSM), which describes itself as a "sports personality animation business", developing a cartoon called "Mourinho and the Special Ones". I am not making this up.
I really do wish AIM would stop allowing rubbish like this to List.

Stockbroker WH Ireland (WHI) Interims look pretty poor - profits down by two thirds to £0.5m for the half year to 31 May. Still, at least they're still profitable. With no dividend it's difficult to see why anyone would want to buy the shares, although they do state an intention to resume divis when prudent.

£8m mkt cap marketing minnow Hasgrove (HGV) might be worth a look, as results show a decent improvement. The half year trading update shows turnover up 16% to £9.0m, and profit up 7-fold from £0.1m to £0.7m. Small numbers, but very nice growth, and they indicate "confidence in being able to achieve our full year expectations", so looks potentially interesting. Net debt down to £1m. (PDC) puts out an AGM statement, indicating softer trading, but gives no numbers, which strikes me as a bad idea - much better to be precise and tell it like it is. Vagueness just fuels uncertainty, and makes investors fear the worst.

Their 9% divi yield has not been fully covered by earnings for the last 3 years, so I doubt that can be maintained at such a high level. Probably best to avoid these I think.

If I had to invest in any property company, it would probably be London & Stamford (LSP). They've got a great track record of having raised money, sat on it through the downturn, and then investing in great assets at the right price. Pays a 6.2% divi yield too. Their IMS this morning details current progress. So a nice geared play on quality commercial property in my opinion.

FTSE 100 futures set to open slightly down 6 points in a moment.

Recommended cash offer for Goals Soccer Centres at 144p. Nice company, I held these some time ago.

That's it, run out of time. Have a good day!

Thursday, July 19, 2012

Thurs morning supplementary report

Here are some more announcements, too many to fit into one post by 8am, my usual target.

Kingfisher (KGF) reports an improving trend in UK sales, which seems a common theme with several retailers reporting recently. May & June saw UK LFL sales up 1.1%, compared with down 5.6% for the 23 weeks to 7 July, showing just how bad Feb-April was.
Although France has gone the other way, with LFL sales slipping to -2.3% for the last 10 weeks. Doesn't give profits guidance. Stand out performance is Russia, up 19% LFL! China down 3.7% LFL, which is interesting, and confirms suggestions that the Chinese bubble may be finally bursting?

Howden Joinery Group (HWDN) puts out inteirm results which it says are in line with expectations. Priced on a PER just below 10, and with net cash, this looks good value to me - since they have performed well in a recession, and hence one would imagine will be well placed for the recovery in construction when it occurs? Might therefore be worth a look.

Mitchells & Butlers (MAB) announces an in-line IMS. Too much debt for my liking.

Positive trading update from recruitment company Networkers (NWKI), although it doesn't actually mention profits, just sales increases & debt reduction. Looks good value though, on a fwd PER of around 7-8, and with some heavyweight shareholders, including Nigel Wray. Might be worth a look?

The market seems to like Mothercare's (MTC) latest update today, which follows their recent trend of lamentable performance in the UK, offset by strong international trading. Shares have done quite well recently, so I'm not interested in chasing this one.

That's it for now. I must say that most corporate results seem pretty good right now, so it's difficult to reconcile that with the never ending stream of gloom from the media. It seems to me that, barring a meltdown in the Eurozone, equities are looking great value compared with other asset classes. So I remain firmly bullish looking through short term macro issues. Economies will eventually recover, they always do. So I'm mainly focused on trying to find shares in companies which are cheap on current earnings, but which have scope to grow earnings significantly once the economy is growing again.

Thu 19 July 2012 - Morning report

Good morning.
Lots of results today, including predictably impressive results from Sports Direct (SPD), with underlying EPS up 11.4% to 18.7p. More evidence that great companies do well, even in a recession. They're crushing competition like JJB Sports. Shares look up with events at 294p though. No final dividend, which is surprising.

Sports Direct is a fabulous example of how a company will go from strength to strength if you properly reward & incentivise your employees! Instead of just paying minimum wage robots, SPD pays out a generous bonus scheme to staff, and just look at the results! We could do with more of that intelligent thinking in corporate Britain. Showering the rich with huge bonuses, and paying the troops an inadequate salary to live on, is not a recipe for a successful or happy company or country.

It looks as if time is finally running out for JJB Sports (JJB) with an AGM report which details terrible trading (cash margins down 16.6% for 24 weeks ending 15 Jult 2012), and the begging bowl looks to be out again.
Surely shareholders can't be so stupid as to pour even more money down the drain here? It needs to just be put out of its misery, which I suspect will now happen fairly swiftly - unless JJB manage to pull off their speciality of sourcing gullible and wealthy Americans to refinance it again?

Automotive engineer Ricardo (RCDO) puts out a bullish update, saying that profit should be at the upper end of analyst expectations. Shares are on a PER of about 13, which looks about right. Yield is around 3.5%. Net cash. Might be worth a look, but doesn't seem huge upside on those figures.

API Group (API) shares have performed very well in the last couple of years, and today they've issued a positive trading update - traded strongly in Q1, and on track to meet full year expectations. A very detailed note came out from Equity Development recently, and the company is in play, so might be worth a look. Forecast PER is only 6, so it looks cheap at first glance.

Walker Greenbank (WGB), the luxury furnishings group, might be worth a look, as recovery seems to be underway there. Although quite why they announce an RNS for a "substantial order" of $156k from a hotel in Texas, in the context of a group with turnover of £74m, seems odd to me. Surely that is just in the normal course of business, and does not warrant an RNS? Looks a bit desperate. Although it does go on to say that sales in the US are up 15% year to date. Shares are on a fwd PER of 7.5, so could be worth a look.

Running out of time here, there are so many announcements to read!

Halfords (HFD) have put out an IMS. Looks pretty bad, with Q1 group LFL sales down 5.2%, although they do show how the drop is concentrated in April & May, and has levelled off in June. Their autocentres (car repairs) seem to be doing well though. Unchanged interim divi of 8p. Guidance is for full year PBT of £62-70m, below current consensus of £76m. I don't like this business - seriously over-priced product, so the PER of 6 looks justified. Could go lower today? I don't like chasing high historic divi yields for businesses that are struggling, as sooner or later the divi is pulled. I'll be watching from the sidelines with this one.

Lots more updates, I might follow up with another post once I've had a cup of tea!

Wednesday, July 18, 2012

Weds 18 July - morning report

Please note I published a report last night on Mecom, on the menu bar to the left. Looks a very cheap value situation to me, reporting next week.

Dreadful night's sleep, so might have to publish this & retire for another hour or two. Lots of RNSs. In no particular order, this is what catches my eye.

I didn't know that there was a Listed water dispensing system company, but there is, and it's called Waterlogic (WTL). Group revenues are expected to be in line with expectations, but it's not very clear whether profits are or not. With the shares on a historic PER of 51, my interest has therefore ceased as quickly as it began.

Consultancy firm Turner & Townsend has produced a solid-looking set of results, with revenue up 20% to £244m, and EBITDA up very nicely from £18.8m to £23.6m. They're not coming up on Morningstar, so I can't find the mkt cap, which is a pity as the results look good. Worthy of a further look in my opinion.

Datatec (DTC) says that growth is slowing due to Eurozone fallout, but forecasts remain unchanged. That seems to put it on a forecast PER of just under 10, so looks reasonably priced. Although I don't like the look of huge turnover, and thin margins.

Mobile Streams (MOS) reports improved sales & EBITDA, but then spoils it by saying that more than 90% of the company's cash is in Argentina, and hence subject to currency controls. Moving swiftly on ...

Software firm Brady reports strong growth, and confirms full year expectations.

Positive trading update from Netcall (NET).

A solid trading update from Judges Scientific (JDG), David Cicurel's acquisition vehicle for small companies in the scientific instruments area.

In-line Q1 Trad Statement from Speedy Hire.

FTSE 100 futures are currently up 17, so a fairly relaxed start is in the offing.

Mecom Group (MEC)

Mecom Group (MEC) cropped up on one of my value filters over the weekend, so I've been researching it & present my findings here for your general interest.

As always please remember that this is a personal interest shares blog, and nothing written here is intended as a recommendation or advice, so please always do your own research. I hold a small number of shares in Mecom Group.

Mecom describes itself as a "major European consumer publishing group", with several hundred paid for and free newspaper titles in Denmark, Holland, and Poland.

I like the print sector right now, because stock market valuations are unbelievably low, yet these businesses are still highly profitable, although in long-term decline as circulations gradually fall, and ad revenues migrate to the internet. Hence with careful selection, there is a chance to pick up highly cash generative businesses at rock bottom valuations.

Also consider that with ageing populations, many of whom eschew the internet,  a reader aged 70 could well be a customer for another 20 years. So the run-off of these print assets could be highly profitable for another couple of decades. They also typically have a variable cost base, hence reductions in circulation and ad revenue can simply be matched by reductions in costs, as Trinity Mirror has successfully shown, remaining remarkably profitable & cash generative.

The problem with Trinity Mirror is that it's going to spend the next 2-3 years paying off its remaining debt, and the overhang of their pension deficit limits their ability to pay dividends. So whilst I still hold TNI, and think it's an extraordinarily cheap value situation (especially when you consider that their freehold property is worth the same as the pension deficit, yet is ignored altogether by the stock market), I came across Mecom as a similar situation which may have more immediate upside. Hence I have split my investment in TNI into Mecom too, to hopefully get 2 cracks at the same opportunity.

Mecom shares have collapsed in the past year by around three quarters, and are now sitting at a recent low of 51p, giving a mkt cap of just £57m.

But this is a big business. 2011 figures showed turnover of E1.06bn, and adjusted EBITDA of E113.6m, so a healthy 10.8% EBITDA margin (see what I mean about print media being highly profitable still - which is probably why Warren Buffett is a buyer in the sector).

Moreover, Mecom paid out a whopping E15.4c in divis in 2011, and this is what makes the company interesting - they cleared the way for dividend payments some in Sept 2011 by reclassifying the share premium account as a distributable reserve. So there are now no barriers to substantial continued dividends.

Net debt was down by E52.2m to E259m on 31 Dec 2011, so still a big chunk of debt there.

However, this is where it gets doubly interesting. Mecom recently (28 June) completed the disposal of its Norweigan business for an astonishing E190m, the proceeds of which should eliminate most of their net debt!

This will be reflected for the first time in their next set of Interims, due out next week on 25 July 2012.

Therefore, despite the poor trading announced on 6 June 2012, we should now have a largely de-geared, highly cash generative group, committed to considerable cost-cutting and further dividend payments.

On brokers consensus the forecast divi yield is 9.3%, so it's a real cash cow. The forecast PER is just 3.4 (figures from Morningstar brokers consensus).

Check out their investor presentations here;

I think the Stock Market has thrown out the baby with the bathwater here, and that this share is looking irrationally cheap both on a PER and divi yield basis, but as always please do your own research. I've been buying these shares recently between 51-56p.

Tuesday, July 17, 2012

Tue 17 July 2012 - morning report

Good morning, lots of announcements today, so here are the ones that have caught my eye.

Contract win from Lamprell (LAM) for $120.9m to build an oil platform for Seajacks. Trouble is there is no detail on profitability, so it's not possible to assess how good this news is. Lamprell seems to warn on profits every few years, see a collapse in its share price, but then recover. So I'm tempted by these shares which seem to have found a base around 100p, or £260m. Fwd PER of 9 and a 7.5% fc divi look pretty attractive. Bal Sheet is solid too.

£7m mkt cap minnow GETECH (GTC) announces a "major licence of global gravity & magnetic data", which sounds intriguing until you discover it is only a contract for $1.28m. Another company which is far too small to be Listed, I do wish they would have a big clear-out and get rid of all this junk cluttering up the bottom end of the market.

CSR (CSR) shareholders look set for a windfall as they announce a business  sale to Samsung, and return of up to $285m to shareholders. Looks good.

Strong results for IG Index (IGG), with diluted EPS up 15% to 37.5p. That makes the shares seem good value to me at 462p, a PER of 12.3.
22.5p total year's divis gives an attractive yield of 4.9%. Strong balance sheet too, and they seem hot on risk management. Looks good to me.

Tanfield has done a small Placing to raise £2m at 42p, to prop up Smiths Electric Vehicles prior to its IPO. Sounds a bit scary to me.

Buoyant sounding trading statement from Monitise (MONI), until you get to the bit where they say they're on track to reach EBITDA break-even by Dec 2013! £234m mkt cap is way too rich for me, for anything loss-making.

Solid interims from £181m mkt cap Low & Bonar (LWB), and confirms on track for full year. Valuation did look about right - fwd PER just under 10 - until I noticed they have £99m in net debt, plus a pension deficit of £24m, so on that basis it probably looks rather expensive.

TETRA radio handset maker, Sepura (SEPU) announces a solid Q1 performance. I like this business a lot - mkt leader in 30 countries, high margins, and huge R&D spend.

In-line trading statement from Computacenter (CCC), shares look good value on a fwd PER of 8, and fwd divi yield of 5.7%. Worth a look.

FTSE 100 futures look set to open up 15, so a reasonably stress-free start. Have a good day y'all!

Monday, July 16, 2012

Mon 16 Jul - morning report

Good morning!
Normal service has resumed this week, as I'm gradually overcoming the chest infection which scuppered last week. So here is my usual quick review of this morning's RNSs of interest to me.

Jam tomorrow tiddler Plant Impact (PIM) serves up another poor set of results, with £2m turnover, and a £2m loss. Oh dear, bargepole time. Of course the company still has an "exciting future". Hmmm.

I've never invested in a stockbroker, and am not likely to start, despite today's results from Arden Partners (ARDN). The £11m mkt cap minnow does at least announce a continued strong balance sheet, and a resumption of small divis. Profits are down though, and it's difficult to see why stockbrokers still exist, given the ease of internet trading.

Recruitment company SThree (STHR) interims look lacklustre, with profits down 17%, although they have an H2 weighted year, so that might exaggerate the interim decline. A PER of 16 looks toppy for a poor performance. They pay out almost all earnings in divis, which is handy. I'd be happier paying a PER of 10, so will avoid this one!

Perennial loss-maker, Clean Air Power Ltd (CAP) has a glimmer of hope for long-suffering shareholders today, with a positive trading statement stating "revenues significantly ahead". Might be worth a look if you like blue sky things. I note shrewdies Hargreave Hale are a 7.4% shareholder, and they're not daft.

A broadly in line trading statement from software company Sage Group (SGE).

Had a quick glance at poor results from SnackTime (SNAK) - doesn't look good. Small vending businesses never work, so will not be pursuing this one.

That's it, rather a scrappy morning with rather flakey companies reporting. FTSE 100 Futures are set for a +14 start, so that doesn't sound too stressful. Have a good week everyone.