Monday, January 14, 2013


Here we go again, Monday morning, and another busy week in the offing, with many 31 Dec trading statements likely. I'm pleased to say my DryAthlon is going well, haven't touched a drop of booze since 29 Dec. Better still, the donations for Cancer Research (almost all from readers here!) have already hit 155% of target - awesome! Thank you to everyone who has donated, it's much appreciated.

Sarantel Group (LON:SLG) has finally run out of investor appetite for repeated fund-raisings, and has put itself up for sale, having just reported on another year (ended 30 Sep 2012) where it burned around £2m in cash losses.

Pity, as I always thought their product (high performance, small antennae for high end mobile devices) has great promise, but as is often the case with new technology it takes longer & costs far more to commercialise things than originally planned.

From today's RNS it looks like a sale process is well advanced, and is likely to pay out roughly the current mkt cap - so if it succeeds, then it will be a lucky escape for shareholders I think. If I held the shares (which I don't), I'd head for the exit now, as there seems little if any upside, and considerable downside risk.

A very interesting trading update has been issued by Porta Communications (PTCM), with trading "ahead of management expectations", with, "an exceptional end to the year". It seems to be a small advertising & PR group, which invests in start-ups, rather than buying existing businesses. Interesting strategy, and probably sensible given that it's a sector which is all about people & contacts.

Whilst they say that annualised revenues are now running at £16m, and all companies in the group expected to be profitable in 2013, the level of profit is not quantified, either in this trading statement, or in broker notes (since there don't seem to be any broker notes).

I can't just make a leap in the dark with no forecasts, so unless & until they commission some research and issue it to the market, then the shares can't possibly go into my portfolio. Pity, as I like the look of it.

Bioquell (BQE) is one that got away - it came up on a stock screen I did with PAS (Performance Analysis Scores), the stock screening tool that I now use on my other website, in Jan 2012 at around 110p, but I didn't follow it up. The shares are now 160p.

Their trading statement today details some issues around the year-end, with orders delayed due to various factors. Also their military division has had a poor year, with inherently "lumpy" orders. However, their core business seems to be doing well & has good prospects. It does look like a veiled profits warning for 2012, so with a PER of about 20, the share price looks vulnerable to me, so I won't be buying any.

I see that Vianet (VNET) is on the move upwards again. Apparently it was tipped in a highly-regarded tipsheet (SCSW) over the weekend, which reinforces my confidence in the shares as an excellent value and growth situation. Always good to have another set of eyes & slide rules run over a share in my portfolio, which is one of the reasons I like throwing my portfolio ideas over to public scrutiny - several minds are always better than one, and any pitfalls are more likely to be spotted.

Accounts from housebuilders are always worth a look, as a general pointer to the economy as a whole. Taylor Wimpey (TW.) report a calendar 2012 that has gone very well, with profits up over 40%, at the upper end of expectations.

It certainly looks as if all the measures taken by Govt to artificially prop up house prices that are historically still way too high in relation to incomes, has worked for the time being. So perhaps there is hope that housebuilding might increase in 2013, that we might begin to actually build anywhere near the number of houses we need given our hugely increased population since the doors were thrown wide open in 1997, without even the vaguest thought given to where all these new people were actually going to live! Common sense departed Westminster a long time ago I'm afraid & shows no sign of ever returning!

Recruiter, Hydrogen (HYDG) announces a positive end to 2012, bouncing back from their soft Q3. Could be a buying opportunity, now that trading is back on track, but the share price still well below where it was 3 months ago.

By my calcs the PER is 9.8 times market consensus for 2012 EPS, which they have confirmed today will be achieved. That drops to 7.9 times 2013 forecast EPS. A very nice divi too, yielding 5.2%. Looks tempting.

Menswear retailer & hirer, Moss Bros (MOSB) says that they had a good Xmas, and expects to exceed market expectations for 2012/13. The shares have looked pretty pricey for a while now, so this perhaps explains why. It has a strong balance sheet too.

Another recruiter reports today in line trading, Networkers International (NWKI). They look potentially interesting, with possible upside from 4G roll-out on their telecoms recruitment division.

Pure Wafer (PUR) has never looked viable, with (admittedly reducing) losses in all the last 5 years. They seem to be around breakeven now, which doesn't excite me.

OK that's it for today, same time tomorrow!

Regards, Paul.

1 comment:

  1. Hi Paul

    Regarding PUR, I take your point however have a look at the cashflow which it generates and the PF balance sheet post the recent equity raising.

    The bottom line of the P&L doesnt look great due to the massive depreciation charge resulting from their plant investments in recent years. However if you look at the cashflow then the FCF yield is pretty spectacular (or alternatively substitute the depreciation charge in teh P&L for the maintenance capex and then look at the EPS and PE).

    The obvious question people would ask is whether they'd need to reinvest more in the plant however they're meant to have substantial capacity now so expansionary capex shouldnt be needed. It should therefore throw off cash.

    The balance sheet has also been cleared up, admittedly with a few shareholders grumbling about the placing but for new/recent investors such as me thats less of an issue.

    The P&L / capex discrepancy is huge and something which is easily missed when someone only has 20 seconds to view a company's results