Friday, July 27, 2012

Fri 27th July 2012 - Morning Report

Good morning! I've selected 5 companies to report on here, so can hopefully manage that before 8am.

Remember also, that here I focus mainly on small caps, and I exclude the resources sector, financials, insurance companies, foreign companies with a UK secondary listing, and anything else I don't like the look of. This is proving to be a really useful exercise, as I'm finding all sorts of companies that I've never heard of before, some quite good & building up a pretty good database of info, which I might make publicly accessible at some point.

There's a really handy "Search" function on the top RHS of the page here, which if you type in a company name, then wait briefly, it will list all the instances of it having been mentioned here. So do make use of that, if you wish.

Should be a good open, with US markets very strong overnight, and hence a FTSE 100 open up 33 points is on the cards. Apparently Draghi said something positive about the Euro, which is nice. But I'd rather hear something positive from the Germans, who are paying the bill. It's very simple Germany - you need to either fold, or go all-in. This middle ground is killing all of us.

Let's start with brownfield housebuilder Inland Homes plc (INL). A lot of my mates are in this one, and I've met the management twice, who seem very switched-on, if somewhat overpaid- big salaries for a £31m mkt cap tiddler (e.g. £326k for an FD is pretty bonkers!!).

Inland's trading statement (ahead of prelims to 30 June 2012) is mixed - they have achieved a resolution to grant planning consent on what seem to be improved terms on both 127 plots in Essex, and 276 plots in Farnborough.

On the downside, there has been a delay to the sale of land that was expected to contribute £2m profit to the results for y/e 30 June 2012, but expect to conclude this sale "in the near future". Common sense says that shareholders should not panic at a sale simply being delayed, so I doubt this news will do the share price much harm over a timing difference. Management confirm that net asset value "remains robust".

My feeling is that residential property is so wildly over-priced relative to incomes in the UK, especially in the South, that I'm not touching anything in the sector, even apparent bargains.

Another share that many of us either own or follow is £17m mkt cap cruise ship operator All Leisure Group plc (ALLG), which seems to have been plagued with problems in recent years, but has always looked cheap if you look beyond the short term issues, if that's what they are?

Interims to 30 April 2012 cover the quiet half of the year, but even so look really grim - turnover has dropped 29%, and last year's interim loss of £4.3m has ballooned to £11.2m loss. The interim divi has been cancelled, along with all dividends "for the foreseeable future". That's bad. Although they have previously indicated that this period would be weak, as they only operated one ship during the period.

Mgt say that improved trading relies on adverse economic, fuel, and exchange rate environment abating. The balance sheet looks stretched, relying on trade creditors to finance the business. I don't like the look of this overall, and it seems a full year loss is now inevitable, so I will be taking this one off my watch list.

Nationwide Accident Repair Services plc (NARS) issues a positive trading statement for the 6 months to 30 June 2012. Trading is in-line, and cash position remains strong. These shares look cheap, on a current year PER of 6, and with a whopping 9% dividend yield forecast. It's a mature business that fairly consistently chucks out roughly £6m p.a. in profit and 5p a year in divis. 

(EDIT: See the comments section below, Mark B has kindly pointed out to me that NARS has a £26m pension deficit, which bizarrely is not shown on the Balance Sheet - which I had checked, but seen an £11.4m pension asset - therefore thought there was no problem. Having dug further, they are making £2.6m p.a. overpayments into the pension fund, so this is clearly a material concern, and I think it's appalling that the accounts do not properly disclose such a large pension deficit on the Balance Sheet. I shall be contacting the company to clarify what on earth is going on - and why do the auditors allow such a misleading accounting treatment? But in the meantime, this certainly puts a much worse perspective on things, hence despite the big dividend yield, I don't see this as a bargain after all, given that a significant chunk of future earnings will be needed to prop up the pension fund).

Soft drinks maker AG Barr (BAG) reports a rather lacklustre trading statement. Understandably, the poor weather has had an impact, but despite this they achieved +4.5% sales revenue. However, costs rose such that interim profits are expected to be slightly below prior year. Margins will improve in H2, but not enough to recoup shortfall in H1. One assumes they will also be seeing improved sales now the weather is hot. The shares do not look cheap on a fwd PER that must now be nudging 20.

I can however confirm that their IRN-BRU drink is amazing at curing hangovers, which is probably why it's so popular in Scotland.

Another small cap favourite is toy maker Character Group (CCT). Their trading update this morning seems to use every excuse possible (Jubilee, Euro 2012, abnormal weather, Eurozone crisis, the Olympics, increase in clearance sales, reduced margins, retailers delaying stock intake, blah blah blah!).

But the bottom line is they've underperformed, and now expect to miss their full year forecasts, but they don't say by how much - a glaring omission, so now the market will probably fear the worst and mark down the shares a fair bit. Having said that the fwd PER was only just over 5, so looks like the share price is already factoring in some disappointment. They do also say that they expect a good start to the new financial year from 1 Sep 2012. Might be worth bottom-fishing this one today if they fall by more than 20%? It just depends whether this is a mild profits warning, or whether it's the usual start of a series of problems.

(I do NOT hold shares in any of the companies mentioned, and emphasise that this free Blog is purely for general interest, and does not constitute financial advice. Please DYOR as always).

Thursday, July 26, 2012

Thu 26 July 2012 - Supplementary Report

Well my fears on Lamprell proved correct - the shares are down a thumping 43% at 71p, by far the biggest faller of the day so far. This is one falling knife I'm not tempted to catch again - whenever bank covenants are likely to be breached, it's time to get the hell out of there. Lamprell no longer looks like a good company that has slipped up, but now just looks like a bad company, or at least with useless management who don't seem to be able to control the business. Although last time this happened a few years ago, I bought the shares around 60p and did very well indeed on them. They just seem too accident prone now though.

I remain amazed at the value on offer with Home Retail Group (HOME) shares, the owner of Argos and Homebase. The shares are now right back down to 70p, their 5-year low. I know chartists will tell me that if this crucial support is broken, they will drop another make-up-a-figure %, but to my mind if the price is too cheap for the fundamentals, then if it drops further it becomes more of a bargain.

To recap the figures on HOME, their most recent trading statement dated 19 June 2012 triggered a big spike in the price (since dissipated), because it showed that the precipitous sales declines at Argos have now stopped. Homebase saw an 8% drop in turnover, but explained by the exceptionally poor weather, and by my calcs they recouped about half of the lost gross profit with higher margins.

Total multi-channel (i.e. internet, mobile & phone) sales are now a staggering 51% of Argos sales - so they are winning, not losing the battle for the internet! Indeed, HOME is the UK's 2nd largest internet retailer.

Most importantly, they confirmed full year guidance, the outlook being as follows;

"At this early stage of the financial year we are comfortable with current market expectations for full year benchmark profit.  We will continue to plan cautiously, managing robustly both the cost base and the cash position of the Group while prioritising our investment in the ongoing development of our multi-channel capabilities."

In my view, if a company is comfortable with full year guidance in Q1, that usually means they've got a bit in the back pocket - i.e. it points to probably out-performance.

Full year broker consensus is for 6p EPS this year, or £72m profit before tax.
Bear in mind that the large depreciation charge means that EBITDA is nearer £200m, and the mkt cap of £574m starts to look quite good value.

However, the mkt cap begins to look like a bargain when you examine the Balance Sheet. In particular, HOME had an average net cash balance throughout last year (ended 2 March 2012) of £320m - or 56% of the mkt cap!

Better still, HOME operates its own in-house store card, and the debtor book for this, net of bad debt provisions, is an astonishing £461m, or 80% of the mkt cap! There is nil associated debt, so this is a real, liquid asset.

Hence HOME's own net cash, plus its debtor book, are equal to 136% of the mkt cap, and I emphasise, there is no corresponding debt - these are real, liquid assets, owned outright.

Surely it won't be long before a trade or Private Equity predator spots the opportunity to buy HOME using its own Balance Sheet surplus assets?!
Most brokers are negative on HOME, but they would be - it's a lagging indicator. Although Numis did turn positive last week.

So in my opinion HOME is simply valued wrong by the market, and fair value is by my estimates, roughly 120-150p - which would probably be the price of a successful bid. Imagine also say a US retailer buying this >£5bn t/o group, and ramming through some margin initiatives on the buying side. Every 1% extra gross margin is over £50m additional profit. Plus there would be loads of costs that could be stripped out.

Furthermore, fears about leases are exaggerated. HOME has few loss-making shops, and they are negotiating an average rent reduction of 16% on leases that come up for renewal. So over time the rent roll will gradually reduce. It's ridiculous to view leases as a liability if the shop is profitable. Future rent is just a future operating cost, in the same way as wages, rates, utilities, etc. So if you make the future rent into a huge creditor, then you should make future turnover into a huge debtor! It's bonkers.

As a former retail FD, I can tell you emphatically that the only leases which are a problem are those for loss-making shops. And shops which have been closed, and assigned to another retailer who then goes bust. In any case, over time inflation resolves a lot of problems with over-rented shops.

Anyway, enough about HOME. The bottom line is that, in my view, these shares are the wrong price, and should be significantly higher, but at the moment market sentiment disagrees with me. Remember that HOME also has one of the largest short interests in the market. So an even half-decent Q2 trading statement on 13 Sept 2012 could once again send the shorts running for cover. I do hope so!

Yes the Eurozone is a dark cloud over everything, but life goes on. The most important thing is that most Argos items are smallish ticket, and that consumer incomes are now back in balance, with inflation having fallen to roughly the same as average income growth (c. 2%). So the squeeze on disposable real incomes has come to an end. That should be good for Argos, as they sell things which are largely discretionary, hence probably why the last few years have been so weak (but still profitable).

OK, enough about HOME. Let's move on to some more results.

Industrial engineer (something about thermal processing services, whatever that means - why can't company descriptions use plain English any more?!) Bodycote (BOY) has put out pretty solid Interims today.

Headline profit before tax is up 12% to £45.7m for the 6 months to 30 June 2012. Basic headline EPS is up 13% to 18.3p. That seems to tie in with 36p consensus forecasts for this year (assuming no H1 vs H2 seasonality), so at 325p these shares look good value to me - that's a PER of only 9, and a forecast divi yield of 3.7%. Loads of debt? Actually no, only £16.7m net debt (halved from a year ago). I like the look of Bodycote - looks a bargain, worthy of further research in my view.

The market seemed to like Man Group (EMG) results yesterday, and the shares have risen nicely to just under 80p. I bought some yesterday, and am sitting tight, as it's not often you find a 20% dividend yield! Although the divi yield should be seen as a repayment of surplus capital to shareholders, as well as paying out all earnings.

Pretty grim results for y/e 30 April 2012 from Colefax (CFX), the luxury furnishing & fabrics group. EPS has halved from 33p to 15.8p, although net cash has risen to £8.5m - fairly material vs a £33m mkt cap. Results are however slightly ahead of brokers forecast, so poor performance must have been pre-warned. Doesn't look cheap though, on a PER of 15. Outlook statement is cautious, but points to small improvement in the US. The rich have got plenty of money, and are spending on luxuries, so if Colefax are struggling then to me that says its down to their products not being up to scratch. Hence I won't be buying any shares here.

Lots of other results today, but mainly large caps, which I don't usually cover here unless it's a quiet day for small caps.

Thu 26 July 2012 - Morning Report

Good morning, another lovely sunny day in the offing. GDP figure of -0.7% for Q2 looks awful, but personally I'm highly sceptical about that number. As commentators on CNBC said, it's totally inconsistent with other data showing falling unemployment, considerable job creation, and reasonable confidence. Also, I'm reading & reporting on pretty good company results every day here, so there's little evidence of a recession in my view. Also, look around you. Does it seem like a recession? It certainly doesn't here on the south coast. People are out & about, spending money like normal. We're not booming, but we're certainly not in recession.

Having said that, I'm very glad I dumped my shares in Lamprell (LAM), as they've come out with yet another profits warning, which sounds quite serious this time - they're actually likely to report losses of US$45m in H1, and US$12-17m for the full year. What was left of management credibility is now completely shot to bits here, and they look to be in potential trouble with the Banks too - needing to secure covenant waivers. This is being moved from my watch list, to my bargepole list. Expect a big sell-off here today, maybe 30-50% at a guess.

Half year results from Rolls-Royce (RR.) look solid - underlying EPS is up 11% to 26.54p. Interim divi up 10% to 7.6p. They confirm full year guidance (consensus is 58p EPS), so at 829p the shares look priced reasonably at a PER of 14.3.

Interim results from recruitment/staffing Impellam Group (IPEL) seem uninspiring. Turnover is a massive £591m (up 8%) for the six months, but adjusted operating profit is down slightly at £15.8m, and that's a wafer thin profit margin. Doesn't take a lot of clients to go bust to wipe out profit altogether, so it's only one big bad debt away from a profits warning at any time. Although it is cheap on a PER basis, although looking to be short of brokers consensus for this year. £12.9m net debt, from net cash of £1.8m 6 months ago is a concern too. Maiden divi of 7p is handy though. Reorganisation costs expected in H2.

£15m mkt cap IT company, SciSys (SSY) says that H1 finished with a flourish, so they are confident with full year guidance (which is 7p EPS). So that makes the shares look potentially cheap at 51.5p (PER of just 7.4). They had a neutral net cash/debt position at last y/e of 31 Dec 2011. So this really does look good value - worth checking out in my view. 2.5% divi yield too.

Soft drinks company (Vimto, and others) Nichols (NICL) announces pretty good interims. Turnover up 10% to £55.4m, Operating profit up 14% to £8.3m giving EPS of 16.88p. Divi up 12.4% to 5.62p, all good stuff. They confirm full year expectations. All very nice, but that puts it on a PER of nearly 18, which leaves little upside, even allowing for their net cash position.

Education supplies company Promethean World (PRW) serves up dreadful interims to 30 June 2012, with turnover down 23% to £83.2m, and EBITDA crashing down from £12.6m to a loss of £0.3m. Humungous exceptional items result in a loss before tax of £148m! They are cutting costs, which seems prudent in the circumstances. Balance sheet looks OK, so they don't seem in any immediate threat of insolvency, but I certainly wouldn't go near these shares. Mkt cap of £49m looks very generous - although it has been nicely profitable in the past, so a possible recovery play?

Marketing company Communisis (CMS) interims look reasonably good.  Operating profit up 22% to £4.4m, adjusted EPS up 13% to 1.94p. Outlook statement gives the all important in line with expectations message, which implies an H2 bias to earnings, if they are to hit 5.7p consensus forecast.
That puts the shares on a nice cheap PER of just 5. However, don't get too excited because they have £27.5m of net debt, so taking that into account, the PER is probably about right, maybe with a bit of upside? I try to avoid highly indebted companies though - why take the risk when you don't have to?

(EDIT: noticed later that Communisis also has a big pension deficit problem - £38m at 31/3/2011 on actuarial basis, so that moves it into bargepole territory for me).

Running out of time, so that's it for now. I'll probably do a few more in a supplementary report. IG have the FTSE 100 Futures up 10 points, so looks like a nice civilised open. Have a good day y'all!

Wednesday, July 25, 2012

Wed 25 July 2012 - Morning Report

Good morning. Most important results this morning to me, are Interims from Mecom (MEC). I flagged it here as a value opportunity recently, and the shares have risen about 30% since, coincidentally. Mecom is a European print publishing business, mainly newspapers, focussed these days on Holland, Denmark, and Poland, having recently disposed of their Norweigan business for a remarkable E195m.

This disposal has enabled Mecom to repay two thirds of its net debt, which has now fallen to E109.7m, making it a far more attractive proposition. It is also now churning out large dividends, and the Interim divi announced today for y/e 31 Dec 2012 is E6c, so I make that 4.7p payable on 31 August. Not bad considering the shares are 65p, so that's a 7.2% yield just for the Interim dividend alone!

Advertising revenue is down badly, at -14%, but subscription revenue was flat after adjusting for closed titles. Other revenue rose 2%, so overall revenue was down 8%. Not great, but not disastrous, as similar to Trinity Mirror, costs are variable, so are being reduced heavily as revenues fall.

So yes, print is a declining sector, but in the meantime it's still nicely profitable & in this case churning out bumper dividends & likely to continue doing so.

The rest of 2012 will benefit from much lower interest charges, and further cost reduction. In the Outlook section today, they reiterate guidance for the full year of between E85-95m. That's a pretty chunky number, considering the mkt cap is only £79m, and net debt has been reduced by two thirds to E110m.

So the attraction of Mecom shares is that as the business gradually declines, it will throw off enormous dividends. Also the whole group is now in play, with the CEO having already announced his departure, and all strategic options being considered.

Difficult to say how the market will react to today's figures, but there don't seem to be any nasty surprises in there as far as I can see. And the debt reduction, combined with big interim divi are surely positive? Although the balance sheet overall looks pretty weak, with substantial negative net assets, once you strip out intangibles.

At £2.2bn, Informa (INF) is out of my mkt cap range. Everything Everywhere is also too big, and has an utterly stupid name.

Renishaw (RSW) results looks pretty impressive. £924m mkt cap, so again too big for me, but the shares look interesting for several reasons. Most striking is their very high operating margin, of 25%, indicating seriously good pricing power. EPS is up 8% to 95.6p, so the shares look reasonably priced at 1270p, a PER of 13.3 is not bad for a growing, high margin company. Especially as it has net cash, although only £21m. Total divi for the year is 38.5p, a yield of 3%, better than a deposit account. Looks an interesting company to me.

I'm scratching my head a bit over results from exhibitions group Tarsus (TRS). The narrative states that their Interims represent a strong performance, and that their financial position is strong. Yet neither claim looks even remotely true to me! They only produced £1.8m profit on £19.2m turnover in the 6 months to 30 June 2012, and have a horrible balance sheet with negative net tangible assets. Bear in mind the mkt cap is £147m.
I presume they must have an H2-weighted trading year, but I've seen enough to put me off bothering to find out!

Synectics (SNX) is the new name for CCTV company Quadnetics. Their interim results to 31 May 2012 look pretty sound. Underlying profit has risen from £1.8m to £2.8m for the half year, and diluted underlying EPS is up from 8.4p to 12.7p. It has net cash of £2.7m. Interim divi maintained at 2.5p. Order book up. Outlook says they have increasing confidence for in-line full year results, but there is also a sting in the tail in that H2 is expected to be below H1. Ah. Broker consensus is for 17.7p EPS, so at 285p a share that gives a PER of 16.1, which is not cheap in my book. I'd want a considerably stronger Outlook to justify the £50m mkt cap, so wouldn't be surprised to see this fall from current levels.

Markets open now, so that's it for now.

Tuesday, July 24, 2012

MelloCast video - Plastics Capital (PLA)

Second attempt, let's try to embed the MelloCast videos of David Stredder & myself interviewing the Chairman of Plastics Capital (PLA).

Here is Part 1;

And here is Part 2;

Tue 24 July 2012 - Supplementary Report

Hello again. Quite a lot of trading statements today, so I'll do a quick recap of those in a moment.

However before that, let me tell you about the first "MelloCast" video interview which I co-hosted with renowned small caps investor, David Stredder.
David came up with the idea to run a series of video interviews with interesting small cap CEOs. He asked me to get involved, so David and I recently did our first video interview, with the Executive Chairman of Plastics Capital plc (PLA), a £20m mkt cap plastics group.

The idea is that MelloCasts are in-depth investment interviews by investors, for investors. Even the cameraman & video editing chap is a successful private investor! We did pretty much the whole thing in one take, with no script, and no rehearsals, and mgt were not informed in advance of the questions. So it's reality TV - a fly on the wall discussion between real investors and a company Chairman. We're not trying to be Paxman - so the style is friendly, and we're more interested in teasing information out of the interviewee, rather than grilling them! But above all, it gives investors an idea of the people behind the company. Also, crucially we only interview companies that we like, and where we think the shares are attractive. So we definitely won't be interviewing any dodgy blue sky or resource sector companies!

I hope you like our first video, which can be found here;

Source Bioscience (SBS) announces double digit turnover growth, and confirms that overall performance is in line with expectations. That implies a PER of 17 for this year, falling to 11 next year, not wildly exciting.

Kofax (KFX) is up 4% this morning on an in-line trading update. Looks quite good value, with a fwd PER of about 10, and $81m of net cash.

If you like micro caps, then it might be worth having a look at Hangar8 plc (HGR8). This £6m mkt cap minnow charters privately owned jets to third parties (nice business model). Showing good growth, and today indicates that turnover for y/e 30 June 2012 will be about £20m, and profit in line with market expectations.

The only forecast seems to be from Daniel Stewart, for EPS of 15.3p, so that gives a bargain PER of 5.8. Downsides are that there's no divi, and the CEO seems to own 63% of the company, way too high for comfort.

Looks an interesting company though, and they indicate "great confidence" in the future.

Vertu Motors (VTU) says they are trading in line with market expectations. That puts the shares on a PER of about 9, which is probably about right. I don't like car dealerships, as the operating margins are so thin, about 1% in this case, leaving no room for downside surprises.

Have a look at Globo (GBO). I've never really understood what they do, it's something to do with computers & mobile. But the shares are on a very cheap forward PER, perhaps because of fears about Greece (since Globo is a Greek company). But international growth now means that the group is not so reliant on Greece, with 68% of revenues international.

The company's track record of growth is very impressive, and they today indicate that revenues are up 29% in H1 of 2012, ahead of expectations, and with profits "substantially higher" than for the same period last year.

That puts them on a fwd PER of 6.4 times this year's earnings, and just 4.2 times next year. Apparently very cheap for a company delivering strong growth, so worth a look. Shares are up 10% today. I've just bought a few.

Scapa Group (SCPA), who make bonding systems, announces a solid AGM statement - Q1 in line with expectations, Board confident about the outlook.
Fwd PER is 11.3, but divi yield is minimal.
I seem to recall they had some issue with asbestos claims years ago, so not sure of the current status there. Seems a fairly low PER for a company which has just announced a confident outlook.

Ubisense (UBI) shares are down 8% after a less than inspiring trading update, saying that results for y/e 31 Dec 2012 are now likely to be at the lower end of market expectations. That looks close to breakeven as far as I can see, so £43m mkt cap looks distinctly toppy. If I held, I'd be selling today.

The market also dislikes an update from Titan Europe (TSW), with their shares down 14% at the moment. They point to problems related to an earthquake in Northern Italy, and "very depressed trading conditions" in China.  Furthermore, weakening of the Euro means that trading profit will be "materially below current market expectations".

It seems to be quite highly indebted, with £124m net debt at last year-end, so this looks a pretty risky situation to me, best avoided.

That's it for now.

Mecom (MEC) results in the morning, already confirmed as in-line, and the company is in play. Up nicely from when I published an article about it here a few days ago.

HOME also looking outstanding value, as now barely higher than before the recent in line trading update. Mkt cap now below the value of the group's own average net cash balance + it's in house storecard debtor book. It has no debt, so you get Argos and Homebase in for free. I suspect a trade or PE buyer will spot the value & bid for it at some point. Also a huge short interest, so hopeful of a big short squeeze too.

I am also perplexed as to why the market soared, but then fell back again from the astonishingly bullish update recently from Tethys Petroleum (TPL). It's either a speculative ramp, or amazingly cheap, so naturally I've had a small punt, hoping for the latter.

Tue 24 July 2012 - Morning Report

Good morning! Already nice and sunny here in Hove, so I may have to take some Annual Reports down to the beach & do my research there today :-)

Not really a small cap, but PZ Cussons (PZC) are weak, with EPS down 9%. This is driven by problems in Nigeria. I hadn't realised how much of their business is in Africa. The PER is almost 22, so despite a reasonable outlook for 2012/13, it looks fully priced to me.

Perpetually, and bizarrely over-valued carpet retailer, Carpetright (CPR) has put out a Q1 trading update. Looks OK - Q1 in line, and full year expectations unchanged. Encouragingly, UK LFL sales are mildly positive, up 1.7% - more evidence that the worst might be over for the UK consumer?  Rest of Europe sales are bad, at LFL (Like For Like - i.e. excluding store openings & closures) of minus 6.3%.

A bargain these shares are not, on a current year forecast PER of 35.8! Quite why the market always values CPR including a huge does of optimism about improved trading, when it does not do the same for any other retailer, remains a complete mystery. I would rather buy other retailers on a PER nearer 10, which is roughly the sector norm.

Forbidden Technologies (FBT) has always looked very optimistically valued to me, on jam tomorrow hopes. This is reinforced with pathetic results, showing turnover up 91% to just £348k, and an unchanged loss of £157k. These are for a year too, not interims! The mkt cap is £27m, so glad I'm not a shareholder here, as that valuation factors in years of stellar growth.

Results from chemicals company Croda (CRDA) look OK, with interim EPS up 8.1%, but the PER of 16.9 makes it look fully priced to me, especially when you allow for net debt and a pension deficit.

Richard Stearn has taken over as FD at Quintain Estates (QED).

I've often been tempted to bottom fish Man Group (EMG) shares, which have been in  a long-term decline in recent years, now only 69p, or mkt cap of £1,258m.
Funds under management continue to decline, now down to $52.7bn (down a whopping 26% from a year ago). Adjusted, diluted EPS has halved to US4.8c for the 6 months to 30 June 2012. It is loss-making on a statutory basis.

However, the divis look very interesting, as they paid out 9.5c as an interim divi (6.12p), and say they expect to pay out a final divi of 12.5c, so I make that a yield of nudging 20% for the year! If they can get back to previous glory days of well-performing funds, then there could be nice upside on these shares, in the meantime stonking divis are being paid from excess capital. I might have to have a little punt here.

Ideagen (IDEA) is a small software company admitted to AIM on 2 July 2012. £12m mkt cap, so just above my usual minimum of £10m.
Prelims for y/e 30 April 2012 look OK, with turnover up 78% to just £4m, and adjusted EBITDA up 127% to £1.18m. Net cash of £1.3m, although as is often the case with software companies, most of that is prepayments from customers (shown as a deferred income creditor).

But if you like tiny, but growing companies, then this might be worth a look?

Quite a few trading updates too, so I'll follow up with a second report on those in about an hour. FTSE 100 futures are up 24, so we should at least get a reasonable start - although how long before Spain & the Euro saga once again puncture confidence? Lunchtime if we're lucky! Have a smashing day all.

Monday, July 23, 2012

Mon 23 July 2012 - Morning Report

Good morning! Already feeling warm & sunny, at 07:14, so looks like this heatwave could be real - markets likely to be quiet then, as people head for the beach!

Shares in XP Power (XPP) might be worth a look. Whilst Interims to 30 June 2012 look poor (diluted EPS down from 52.9p to 40.4p), the dividend has been raised from 19p to 21p, and more importantly the Outlook statement is very bullish - saying that orders are up, such that H2 should see "substantially higher" revenues and earnings than H1. That indicates a prospective PER of about 9, and yield of about 4%, which looks interesting.

Dialight (DIA) Interims look very good, with EPS up from 12.7p to 17.2p. But at a share price of 997p, full year forecast of 37.25p EPS puts these on a racy PER of 26.8! No room for any slip-ups with that valuation.

£6m mkt cap tiddler Sopheon (SPE) has put out a positive-sounding trading update, saying that H1 revenue is expected to "comfortably exceed" last year, but costs are also up. Nevertheless, EBITDA is "expected to show significant improvement compared to the first half of 2011". Sounds good, although the company's history is of making little to no profit, so one would lean towards scepticism here. But might be worth a look.

Hygiene products company, Tristel (TSTL) sounds positive, saying adjusted profits for y/e 30 June 2012 will be in excess of £700k, together with a year-end cash balance of £600k. Mkt cap is £12.2m, so that doesn't look particularly exciting. But it might be if further growth is expected.

Dominos Pizza (DOM) yet again serves up decent figures, showing that good companies do well even in recessions. How on earth have they achieved UK LFL sales increase of 5.7%. They even managed a 2.9% LFL increase in Ireland, that's really impressive.

Diluted EPS is up 12% to 10.2p, and interim divi up 20% to 6.6p, although against a share price of 519p that doesn't look cheap to me! Broker consensus of 21.3p EPS for this year puts them on a PER of 24. Too rich for me, even though this is a terrific business.

Microgen (MCGN) Interims to 30 June 2012 show flat EPS at 4.2p. Net cash of £27.1m is striking (compared with £109m), although as with all software companies it is vital to check that this is not just down to customer prepayments (shown as "deferred income" creditor on the balance sheet). The outlook statement makes nervous noises about H2 being dependent on a number of sales opportunities closing - preparing the ground for a possible profits warning? Prospective PER of 15 looks toppy to me, given the uncertain outlook.

Senior (SNR) reports impressive Interims, with revenue up 20% to £377m, and adjusted PBT also up 20% to £45.5m. Prospective PER of 10.5 and yield of 2.5% look pretty good to me, although there is £74.8m of net debt.

Filtronic (FTC) results for y/e 31 May 2012 show a bounce back into operating profit of £0.8m (vs £5.3m loss in 2011). Although hardly exciting, given their £32m mkt cap.

Gooch & Housego (GHH) reports that delayed orders have now been received. Prospective PER of 14 doesn't excite me.

Online casino 32Red (TTR) puts out a positive trading update, confirming profits in line with expectations. Looks an interesting growth company, at a reasonable price. Worth a look perhaps?

That's it folks, have a good week & enjoy the sun!