I notice that the Sunday Telegraph have published their share tips for 2014 in today's paper which include the following companies:-
Barratt Developments
Monitise
AstraZeneca
Drax
Chemring
Home Retail Group
RSA group
Firstgroup
Imagination Technologies
Barclays
I must confess that I generally ignore tips in newspapers, and anywhere else for that matter, but in fairness their picks for 2013 did well with an average gain of 54.53%.
http://www.telegraph.co.uk/finance/markets/10540409/The-Telegraphs-share-tips-for-2014.html
The rational for each tipsters choices are generally well written, but as with all newspaper articles they rarely refer to the all important underlying figures that are always my first point of call before I delve further into their businesses and prospects.
What I have decided to do then is have a brief look at the figures for these companies.
I'll start with Chemring, a company I mentioned at about this time last year:-
http://michae1mouse.blogspot.co.uk/2013/01/new-year-resolution.html
The share price looks like it hasn't moved much during that time, although savvy traders might have made double digit profits as the share price originally moved above 300p before a rather abrupt retrace.
So what are the figures for Chemring? Do they back up the reporters optimism for 2014? Well firstly this is a company that has paid regular dividends to shareholders in the past. In fact they have paid out as much as 50p per share in 2010 which is almost a quarter of the current share price (special dividend?). Last year's dividend was less generous at 9.5p or 4.4%, not bad, but of course it may fall further this year. Nevertheless, I do like companies that have tried to adopt a progressive dividend policy. If the good times roll again then you can expect dividend hikes.
The NAV (from Advfn figures) is around 224p which is above the current share price. However, if you strip out the intangibles then TNAV is just 10.5p. In a fire-sale intangibles are absolutely worthless, and hence if Chemring were to get into real trouble then don't expect to get any of your money back.
They also have high levels of debt, although I notice that net debt fell by £45m in the quarter to 31 October, at £249m it is around the same levels as last year.
Heavily indebted companies with little asset backing are not really my cup of tea, although in certain circumstances and with the right conditions and some good fortune these companies can turn out to be an excellent punt. A recent example would be Thomas Cook Group which at one point looked in real trouble. A risky strategy, but it can pay off handsomely at times.
Overall, it appears to be a highly cash generative company, although I did notice there was a small cash outflow reported in the interims.
It's the sort of company that would possibly interest me if the share price were to fall much further since the risk/reward would be far more attractive to me, but at present I'll not be investing. I could quite easily see the share price moving upwards though with some strategic disposals and improved trading. As the report suggests there is also the possibility of a suitor, although I wouldn't like to guess the price that any offer would be pitched at.
As ever, no advice is intended or given.
P.S. I don't have holdings in any of these companies.
Sunday, 29 December 2013
Friday, 27 December 2013
Proposed share buy-back and implications for future dividend payments at Avesco
In a short follow-up to my comments about Avesco's recently announced distribution of the Disney proceeds to shareholders, and in particular the share buyback, I just wanted to add my further thoughts about future shareholder returns.
Firstly, at 217.5p per share (pre-Disney payout) shareholders will receive a 52% dividend within 4 months (114p) which currently implies that post Disney and final dividend pay-outs, the shares are worth 103.5p (217.5p-114p) or a £19m market cap.
As mentioned previously this leaves the shares at a very substantial discount to NTAV. The even year effect in 2014 is more than likely to put the company back on track after a disappointing 2013.
Moreover, the company have increased the dividend by 25% this year (from 4p to 5p), and have stated their intent in pursuing a progressive dividend policy. This is interesting since the reduction in the share capital (assuming the share buy-back goes ahead) from 25.9m to 18.3m implies that a maintained dividend would actually equate to around 7p next year (25.9m*5p=£1.3m, 18.3m*7p=£1.3m). In fact a 7p dividend next year would be marginally less expensive. If Avesco are truly going to implement a progressive dividend policy then is it possible that next year's dividend could be 8p plus? It will be interesting to see.
The way I see it, the company have effectively returned pretty much all of the cash from Disney to their shareholders. The buy-back increases each shareholder's stake by approximately 41%. Despite having being an investor in Avesco for more than four years, and although I have benefitted from substantial share price gains and large pay-outs, I still see the company as well below fair value.
Investor's should also take a peek at their website to view the circular re: return of £1.10 and share buyback:-
http://avesco.com/node/355
and this is also worth a watch:-
http://www.ct-group.com/news/nuformer-and-ct-team-Philips
As ever, no advice intended or given.
Firstly, at 217.5p per share (pre-Disney payout) shareholders will receive a 52% dividend within 4 months (114p) which currently implies that post Disney and final dividend pay-outs, the shares are worth 103.5p (217.5p-114p) or a £19m market cap.
As mentioned previously this leaves the shares at a very substantial discount to NTAV. The even year effect in 2014 is more than likely to put the company back on track after a disappointing 2013.
Moreover, the company have increased the dividend by 25% this year (from 4p to 5p), and have stated their intent in pursuing a progressive dividend policy. This is interesting since the reduction in the share capital (assuming the share buy-back goes ahead) from 25.9m to 18.3m implies that a maintained dividend would actually equate to around 7p next year (25.9m*5p=£1.3m, 18.3m*7p=£1.3m). In fact a 7p dividend next year would be marginally less expensive. If Avesco are truly going to implement a progressive dividend policy then is it possible that next year's dividend could be 8p plus? It will be interesting to see.
The way I see it, the company have effectively returned pretty much all of the cash from Disney to their shareholders. The buy-back increases each shareholder's stake by approximately 41%. Despite having being an investor in Avesco for more than four years, and although I have benefitted from substantial share price gains and large pay-outs, I still see the company as well below fair value.
Investor's should also take a peek at their website to view the circular re: return of £1.10 and share buyback:-
http://avesco.com/node/355
and this is also worth a watch:-
http://www.ct-group.com/news/nuformer-and-ct-team-Philips
As ever, no advice intended or given.
Monday, 23 December 2013
Avesco returns cash and buys back 30% of it's shares from Taya
I must admit to feeling just a little bit queasy when I saw that Avesco had released two news statements at just after 5pm this evening. Normally this doesn't signify good news!
However, on this occasion and to my relief, it was quite the opposite.
Firstly, let's deal with the prelims which didn't make very good reading. Avesco had previously indicated that 2013 had been a challenging year for the company and this is apparent from the final results, and of course comparisons with last year are unfair since revenues and earnings had a very substantial boost from the London Olympics.
Nevertheless, they did make a small trading profit of £0.5m, but more significantly the final dividend of 4p is a 33.3% premium to last year's (3p) and a 25% increase on the full dividend (5p compared to 4p in 2012). Moreover, the company are committed to a progressive dividend policy.
I'm not going to spend too much time analysing the 2013 results because there are several figures that could be quoted for EPS, the headline figure of course is 136.2p because of the huge income received from the Disney litigation.
The main drag on underlying earnings this year appears to have been CT Germany and Presteigne Charter. The company had to incur restructuring costs in both of these divisions.
Looking forward however, Richard Murray states:-
"The first quarter of the current financial year has started in line with the Board's expectations. As we look further into 2014, the Group anticipates a return to profitability with the benefits of a reduced cost base and an expected increase in demand over 2013 for its services, with a number of major "even year" sporting events being held, including the Winter Olympics in Russia, the Commonwealth Games in Scotland and the FIFA World Cup in Brazil."
There will still be some costly restructuring at their loss making European operations, but the business should be stronger and more predictable going forward as a result.
Overall, the fact that they have no requirement for the Disney cash going forward, and are intent on a progressive dividend policy, is an excellent and reassuring sign for the future.
The £1.10 return of cash to shareholders will now take place at the end of January and shareholders can opt for the pay-out either as income or capital. With the share price currently standing at £2.26, post Disney pay-out and share buyback (mentioned below), Avesco is valued at just £21.4m.
This brings me on to the unexpected buyback from Taya of nearly 30% of the company's issued share capital. The shares will either be held in Treasury or cancelled. The number of shares in issue will fall from around 26m to around 18.4m and as consequence should enhance earnings significantly.
I must admit this wasn't a move I had anticipated, but it is extremely welcome.
Their reasoning is as follows:-
"The completion of the Share Buy-Back is expected to be earnings-enhancing, post on-going funding costs. After the completion of the Share Buy-Back, the value of the net assets per Ordinary Share will increase proportionately."
"The total voting rights of Independent Shareholders (excluding the interests of the Directors) will increase to 66 per cent. from 47 per cent. and, in this context, the Independent Directors believe that the removal of a significant shareholder will remove a possible disincentive to other institutional investors considering an investment in the Company."
"In recent years the Company has been reporting its financial results on a quarterly basis to enable Taya to comply with Taya's own reporting obligations on the Tel Aviv Stock Exchange. After completion of the Share Buy-Back, the Company will be able to revert to producing its financial results on a biannual basis which will remove a management and administrative burden."
"It is estimated that the Company will save approximately GBP0.2 million per year in quarterly audit review fees, director's fees and related expenses."
"The reduction in the issued share capital will result in a 29.2 per cent. reduction in the amount of cash being paid out in dividends by the Company and will, therefore, provide further support to the Company's intention to maintain its progressive dividend policy."
If my calculations are correct then post Disney pay-out and share buyback the shares stand at a 40% discount to Avesco's net asset value (and they are quality assets). In my view this still means the company is significantly undervalued.
Avesco has been a stellar performer for me, and I am extremely grateful for all the efforts of those involved with the company.
Merry Christmas to all readers of my blog, and congratulations to all shareholders in Avesco.
As ever no advice intended or given.
However, on this occasion and to my relief, it was quite the opposite.
Firstly, let's deal with the prelims which didn't make very good reading. Avesco had previously indicated that 2013 had been a challenging year for the company and this is apparent from the final results, and of course comparisons with last year are unfair since revenues and earnings had a very substantial boost from the London Olympics.
Nevertheless, they did make a small trading profit of £0.5m, but more significantly the final dividend of 4p is a 33.3% premium to last year's (3p) and a 25% increase on the full dividend (5p compared to 4p in 2012). Moreover, the company are committed to a progressive dividend policy.
I'm not going to spend too much time analysing the 2013 results because there are several figures that could be quoted for EPS, the headline figure of course is 136.2p because of the huge income received from the Disney litigation.
The main drag on underlying earnings this year appears to have been CT Germany and Presteigne Charter. The company had to incur restructuring costs in both of these divisions.
Looking forward however, Richard Murray states:-
"The first quarter of the current financial year has started in line with the Board's expectations. As we look further into 2014, the Group anticipates a return to profitability with the benefits of a reduced cost base and an expected increase in demand over 2013 for its services, with a number of major "even year" sporting events being held, including the Winter Olympics in Russia, the Commonwealth Games in Scotland and the FIFA World Cup in Brazil."
There will still be some costly restructuring at their loss making European operations, but the business should be stronger and more predictable going forward as a result.
Overall, the fact that they have no requirement for the Disney cash going forward, and are intent on a progressive dividend policy, is an excellent and reassuring sign for the future.
The £1.10 return of cash to shareholders will now take place at the end of January and shareholders can opt for the pay-out either as income or capital. With the share price currently standing at £2.26, post Disney pay-out and share buyback (mentioned below), Avesco is valued at just £21.4m.
This brings me on to the unexpected buyback from Taya of nearly 30% of the company's issued share capital. The shares will either be held in Treasury or cancelled. The number of shares in issue will fall from around 26m to around 18.4m and as consequence should enhance earnings significantly.
I must admit this wasn't a move I had anticipated, but it is extremely welcome.
Their reasoning is as follows:-
"The completion of the Share Buy-Back is expected to be earnings-enhancing, post on-going funding costs. After the completion of the Share Buy-Back, the value of the net assets per Ordinary Share will increase proportionately."
"The total voting rights of Independent Shareholders (excluding the interests of the Directors) will increase to 66 per cent. from 47 per cent. and, in this context, the Independent Directors believe that the removal of a significant shareholder will remove a possible disincentive to other institutional investors considering an investment in the Company."
"In recent years the Company has been reporting its financial results on a quarterly basis to enable Taya to comply with Taya's own reporting obligations on the Tel Aviv Stock Exchange. After completion of the Share Buy-Back, the Company will be able to revert to producing its financial results on a biannual basis which will remove a management and administrative burden."
"It is estimated that the Company will save approximately GBP0.2 million per year in quarterly audit review fees, director's fees and related expenses."
"The reduction in the issued share capital will result in a 29.2 per cent. reduction in the amount of cash being paid out in dividends by the Company and will, therefore, provide further support to the Company's intention to maintain its progressive dividend policy."
If my calculations are correct then post Disney pay-out and share buyback the shares stand at a 40% discount to Avesco's net asset value (and they are quality assets). In my view this still means the company is significantly undervalued.
Avesco has been a stellar performer for me, and I am extremely grateful for all the efforts of those involved with the company.
Merry Christmas to all readers of my blog, and congratulations to all shareholders in Avesco.
As ever no advice intended or given.
Subscribe to:
Posts (Atom)