Avesco wins the Gold medal!!

Well, so much for my New Year resolution to post more often on my blog. Note to self, don't make resolutions that are almost impossible to keep. In truth I should have known that I don't really have sufficient time at the moment to post regularly due to other commitments. I might also point out that ad revenues from my blog, whilst welcome, are very small and hardly a great incentive to spend too much time posting when I can more usefully use the additional time on research.

Anyway, I shall endeavour to post at least once a week.

Avesco released their full year 2012 results this week, and as I predicted at the start of the year, results came in above market expectations with adjusted basic EPS at 21.7p. A gold medal performance indeed from staff and management who have clearly exploited the London Olympics to the full. In fact results would have been even more impressive if it wasn't for losses at CT Asia Pacific (around £1m) and costs associated with restructuring at Presteigne Charter.

Excellent results all round however, with revenues up 14%, operating profit 196%, trading profit 217% and EBITDA up 34%.

Markets are forward looking though, so what of 2013? Well the first quarter has been slow, but Avesco have indicated that Chinese operations are now more encouraging and that both the UK and US are showing clear signs of an upturn in business. It's highly unlikely that this year's bumper results will be repeated in 2013 due to the odd year effect, but it's probable that the underlying business will show further growth (although the first quarter will almost certainly show a loss).

Should I be looking to sell all or part of my holding in Avesco?

You must be joking.

This company is keeping its promises, and it's intentions are to continue to generate cash, reduce net debt, ensure the balance sheet remains strong and grow dividends. In the past two years Avesco have increased the dividend by 300% and 33% respectively with more increases on the way. Tangible NAV increased from £1.46 in 2011 to £1.52 this year. Margins have also been on the increase. As I have stated many times before Avesco is still cheap on any number of measures.

The share price is currently around £1.70, and is well supported by all of the above, throw in a possible £1.40 per share payout from Disney, a 29.9% shareholder in Taya Communications, a Chairman who fairly recently forked out a further £125,000 to buy shares in the group to bring his holding above 20% (most recently at prices around 160p - so not much below the current price), and their mysterious and tight-lipped reluctance to bring in a new CEO (although they would probably argue that management is sufficiently strong not to warrant hiring one in haste - umm...? over 6 months ago and counting).

This is also a company that is senstive to poor global economic conditions and yet Avesco has achieved outstanding growth in some of the most hostile conditions in the past 100 years. How will they fare when world economic growth eventually gathers speed? Very well I expect.

I can't see any reasons to part with a single share.

GCER have a 267p price target which I believe still underestimates the potential value to be unlocked here.

Anyway, as ever, interesting times ahead, and no advice intended or given.

Fantastic 3D, but where do I invest?

I'm a great fan of 3D movies, and have recently taken my family to see 'The Hobbit' and 'The Life of Pi' at our local cinema. I can thoroughly recommend both films.

Over the past year or two I have seen a number of newspaper articles that suggest that the 3D revolution is over hyped. I disagree. Personally, I won't go to the cinema to watch a film that isn't in 3D. I absolutely love the experience, and I'm sure I can't be the only one.

Critics have noted that some 3D movies have not attracted the expected audiences and that consumers are opting for the 2D versions. Sales of 3D TVs have been sluggish. Two simple reasons I'd suggest: cost and content. 3D movies are far more expensive than there 2D version counterparts, and 3D TVs are still expensive with content sparse. The past few years have been exceptional economic times with low consumer confidence, but world growth will eventually gather momentum and, in my opinion, so will the 3D revolution. But where to invest?

A company that has been on my radar for some considerable time is DDD group which describes itself as follows:-

"DDD transforms the visual experience by bringing 3D to the consumer. Its TriDef(TM) 3D solutions convert 2D to 3D automatically, and enable delivery to 3D TVs, PCs and mobile devices. Leading brands including Intel, Samsung, LG Electronics and Sony license these solutions. Over 20 million TriDef 3D products have been shipped by DDD's licensees worldwide. DDD's Yabazam! label delivers 3D everywhere with its online content portal and Smart TV apps."

DDD is a growing company with a terrific client list (see above) and market leading technology, it's just turned a maiden profit and has a solid balance sheet and gross margins currently running at 96%. Revenues were up 74% in the 6 months to June at $4m with EPS at 0.06c. So why haven't I bought any?

With a current market cap. of £30m it's a bit too expensive for my tastes at the moment. However, should a suitable opportunity arise then I'll be a keen buyer.

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Something on my mind

Sometimes it's easy to become preoccupied with certain events at a company, and forget about some important details that are currently unresolved.

Readers will know that I'm a great fan of Avesco, and believe the company to be undervalued on any number of measures with or without a payout from Disney.

Recently of course like most shareholders I've been eagerly anticipating the 2012 results (due in a week or two) and any news associated with the Disney case. However, something else is on my mind.

At the June interims, Ian Martin the CEO of the company stood down from the board after ten years. Nothing too surprising there perhaps, but that was 6 months ago and they haven't yet found a replacement unless they are waiting to announce the new incumbent with their final results?

I re-read the interim statement again today where Richard Murray (Chairman) states the following:-

"Ian Martin, the Chief Executive, has decided to step down from the Board and leave the Company to pursue other interests and opportunities. I have known Ian for a long time and since I asked him to come to Avesco ten years ago, we have worked closely together to build Avesco into a truly international business. With that work complete, we both knew the time was right for the Company to make a change. The parting has been amicable. I would like to thank Ian for his real contribution and leadership over the years. I know he wishes everyone at Avesco well and expects the Company to continue to go from strength to strength. The Board has asked me to dedicate more time to the business pending a decision regarding a replacement."

I am now intrigued by this line :- "...pending a decision regarding a replacement". Lots of different interpretations in those few words methinks.

I recently held shares in a company called Zetar which I have mentioned on this blog. It was recently subject to a takeover. Not long before the takeover approach Zetar announced this unexpected bit of news:-

"Our Chairman, David Williams, has announced his intention to step down from the Board at the forthcoming AGM. David played a pivotal role in the flotation of Zetar as an AIM listed company and has helped it to grow from a single GBP50m confectionery company to a confectionery and snack group with sales last year of GBP128m. The Board and, in particular, the Executives who have worked with him from Zetar's inception, would like to express their gratitude for all his guidance, support and the intuition he has demonstrated over these seven years and wish him every success for the future."

Umm........

I'm probably putting 2 and 2 together here to make 5, but make no mistake Avesco is cheap and is currently priced at less than twice this year's expected EBITDA. It's also worth remembering that Taya Communications are a 29.9% controlling shareholder and may eventually want to cash in their chips, so to speak, by selling the company on at some stage, although I have no insight into their long term intentions. Avesco attribute little intangible value to their company even though they have numerous prestigious clients. The current market cap. is little above the tangible value of their assets. As I said, cheap on any number of measures.

Clearly, the Disney case will need resolving one way or another, given the size of the possible payout, but once that's out the way....?

Anyway, just my idle thoughts which could be considerably wide of the mark.

As ever no advice is given or intended.

Good luck with your investing and if you need any good books to help, the link below takes you to my recommended reads:-

http://astore.amazon.co.uk/httpmichae1mb-21