Wednesday, October 3, 2012

Holding comment - 3 Oct 2012 - TNI, IND,

Dear readers, I can only apologise for the intermittent nature of my morning reports lately, this is due to a number of factors.

Firstly it's pretty demanding having to make snap decisions on numerous sets of accounts every morning, especially as I try really hard not to make any mistakes, so end up whirling around from website to website checking figures at 7-9am. Only got so much mental capacity, and maybe I reached it last week?

Secondly, the flurry of 30 June results is now coming to an end. So the pace is going to soften a bit in between. Mum commented on the telephone yesterday that she thought my Blog was, "a bit rubbish", or something similar on Monday, so sorry Mum! ;-)

Thirdly, I've been just bowled over by the fantastic success we're having here with my main stock picks. Trinity Mirror (TNI) has vindicated my analysis, and has more than doubled from 25p to 66p. Of course people are top-slicing on the way up, simply because one's portfolio becomes so ridiculously overweight in a stock like TNI when it more than doubles, you have to top-slice a few on the way up. That's just good practice. Personally I can't sell many, as it's still so cheap on a PER basis of 2.5! But I have top-sliced, as always. Standard policy.

Also, I love seeing my own analysis being copy pasted into the press now the shares in TNI are 66p, who didn't touch it when it was at 25p a few weeks ago. BLOODY SHEEP!
(Edit: actually, on reflection that is unfair. The reality is that journalists are stretched so thin these days, that they simply don't have time to do anything other than copy/paste content found elsewhere).

Also encouraging is the big rise in IndigoVision (IND), which again was well trailed here on the day of results.

I technically still hold 2.2% of IND, so am obviously talking my own book, as everyone does. Always assume I own shares in the companies I talk about - as everyone on bulletin boards does, so nothing new there.

Apologies for being too pre-occupied with things to do my morning reports. Normal service will resume next Monday!

Also, my friends in London took me to the 38th floor of the Heron Tower for drinks (there are several great bars up there), and WOW, WOW!!! Is all I can say. Stunning views of London. Looking DOWN on the Gherkin!
If you haven't already, go if you can. £5 for a Japanese beer, I can live with that, given it's been swished up 200 metres, and my pee is swishing down 200 metres, taking somebody's eye out at the bottom! lol

Tuesday, October 2, 2012

Tue 2 Oct - WGB, SNCL, AND, TNI, IND

Good morning. Things seem much more relaxed this week, with most of the 30 June prelims & interims out of the way now, for reasonable sized companies, and I should think so after 3 months - which is ample time. Companies reporting at this point and beyond for 30 June, are not on top of their businesses in my opinion, which itself is a warning sign not to invest.

Very nice rally yesterday, driven apparently by stronger than expected US data, but it petered out towards the end of play in the US last night, so futures are now pointing to the FTSE opening down 25 points.

How pleasing to see a UK manufacturer doing well - Walker Greenbank (WGB), the up-market furnishings company, reports quite good interims to 31 July. Adj profit before tax is up 11% to £2.7m for the 6 months, on turnover up 2.4% to £38.3m. Adjusted EPS is up 14.8% to 3.8p.

They confirm confidence of achieving full year estimates, which according to DigitalLook (who I now use instead of the painfully slow & expensive Morningstar service) means full year EPS of 10.5p (there is clearly an H2 bias to profitability). At 70.5p that makes the shares look good value on a PER of just 6.7 - cheap for a company that is delivering decent profit growth in the current climate. Perhaps they are a beneficiary of the after-glow of the Olympics, increasing interest in British products?

(EDIT: have broker consensus of 9.00p EPS for y/e 31 Jan 2013, which is lower than the consensus of 10.5p shown on DigitalLook. Although even on the lower figure, the PER is still low, at 7.8.
Furthermore, Edison have an EPS figure of 7.5p for this year, I'm told. So it's not entirely clear what the market consensus is).

On the downside, WGB does have a pension deficit, but it's only around £6m, which is not the end of the world for a £42m mkt cap company. Also I see they have reduced net debt to just £2.7m, so a tick there too. Overall, I like WGB, and it's difficult to see why the shares are trading on a PER below 10, which implies a more reasonable price would be around 105p, a decent 50% upside on the current price. I suspect these will go up today, so I might try to grab a few at the open if the price doesn't move too much.

Peat farmer William Sinclair (SNCL) has warned on profits, due to adverse weather, not for the first time. The final divi is being cut, but it's difficult to assess how the market will react, as it's clearly down to factors outside their control (widespread flooding in the North of the UK).

These shares don't look particularly good value (a PER of 13.5) and that is based on next year's earnings, allowing for a recovery in trading. This year looks to be around breakeven. So it's a question of whether the longer term prospects justify a valuation that's looking a little warm right now? Not for me.

Andor Technology (AND) has put out a positive trading update, and announced a maiden divi. Although a nicely profitable company with a mkt cap of £118m should be paying divis already! Fwd PER is 17 times this year's EPS, and 15 times next year's, according to broker consensus on DigitalLook. Bit pricey for me.

I'm having a storming week so far, with Trinity Mirror (TNI) looking strong, and possibly another leg up in the pipeline? It looks that way anyway, despite the fact that the shares have already doubled since August, they remain astonishingly cheap for such a cash generative business - the PER is less than 2, and by my calcs net debt will be fully repaid from cashflow by 2014. Their pension deficit is under control, and is in any case covered by an equivalent value in freehold property.

The star performer for me is IndigoVision (IND), a share I've held continuously for almost 10 years. Last week's results statement showed a transformation in the company's prospects, reflected in their returning substantially all their cash pile to shareholders via a Special Divi in Nov 2012. With 75p in total divis due in Nov 2012, that makes the net price of the shares about 375p now, and doing the maths from the indications in their statement last week (market growth of 20% being targeted) that means EPS should double to around 50p this year. Hence a PER of around 20 could be justified (or more) for this growth, so I see upside to 1000p on IND shares in the next 6-12 months. But obviously DYOR as usual.

Have a good day, bye for now.

Regards, Paul.

Monday, October 1, 2012

Mon 1 Oct - BEG, RNWH, EPO

Good morning. Apologies for Friday's lack of morning report, I was tired & nothing grabbed me as particularly interesting from the RNSs, so had a day off.
Back to normal today.

One of my portfolio stocks, insolvency practitioner Bebgies Traynor (BEG) has put out an AGM Trading Statement, covering the first 5 months of their financial year. They note that insolvencies are down 8% on the prior year period, note cost cutting (with £1m restructuring costs), that debt is unchanged, and that expectations for the year remain unchanged.

Of course, as with the artificially propped up housing market, we are also in a strange parallel universe with insolvencies at the moment, where banks are reluctant to push insolvent companies into formal insolvency, since that would force them to recognise a bad debt. Also the Govt is doing everything possible through HMRC to prop up insolvent companies, by giving more far lenient payment terms on tax arrears than has ever been the case before.

So at some point (we don't know when), BEG will see a large increase in work, as the inevitable insolvencies occur - either through the macro picture getting worse, or from the macro picture getting better. So BEG is a nice each-way bet on the insolvency market, which in the meantime pays out a 6.3% dividend yield, and is too cheap on a PER of 5.8 times forecast earnings. It does however have a considerable amount of debt, however that is to finance the extended debtor book which is normal for an insolvency practitioner. Amazingly, the debt is also unsecured, which gives a good indication that the banks are very relaxed about it. And after all, insolvency practitioners effectively work for the banks. So I shall continue to hold here.

Renew Holdings (RNWH) announces that trading was satisfactory in H2, and expects full year results to be in line. The PER is 7.7 on broker consensus (note: generally when I quote a PER it will be based on the current year forecast earnings, not historic earnings). Fc divi yield is reasonable, at 3.3%. Might be worth a look, although generally I tend to avoid low margin businesses like this, as it only takes one bad contract to wipe out all the profit.

Perpetual jam tomorrow outfit, Earthport (EPO) has yet again put out a bullish-sounding trading statement. Although with this company it's usually wise to re-arrange the last 3 letters of bullish, adding an extra t. As their own (former) FD once said to me, "I'm just amazed that people keep putting fresh money into it, to fund the losses". Quite. I'll eat my hat if this thing ever turns a profit.

Oh dear, that's about it I'm afraid, nothing more of interest so far this morning. FTSE futures are looking flat at the time of writing (7:52). Have a good day!