For my next study, I have decided to compare the performance of the following companies against the FTSE all-share index over a period of around 3 years. The companies in question are:-
Bischi Mining (BISI) -110p
21st Cent. Tech (C21) - 7.5p
Fairpoint (FRP) - 130p
H&T Group (HAT) - 145p
Hydro Intl. (HYD) - 113.5p
MS Intl. (MSI) - 174p
Quarto Group (QRT) - 163.5p
Tandem Group (TND) - 75p
Walker Crips (WCW) - 44.75p
Again I don't hold any of these shares in my personal portfolio, and I haven't conducted any research on the individual companies. However, the selection is not a totally random one. Each of the companies listed has a current market cap. less than £100m and pays (or has paid) a dividend of over 3% (relative to it's current share price) covered more than twice by earnings. Their current p/e ratios are all less than 10 (based on last year's earnings). I have listed each company's current mid-price alongside it's ticker. The FTSE all-share currently stands at 3605.
Value investors will understand why I have chosen the nine companies above, and I intend to research each in turn and post my thoughts on this blog.
I'll start with Bischi Mining which already looks interesting to me. Bischi describes itself as a UK mining company with direct coal mining operations in South Africa. The current share price weakness appears to be related to "a short term impact on production following an incident at one of Black Wattle's main production pits, where we have mined into old underground workings which were never recorded on any historical mine plan". This will impact earnings for 2013, but they don't expect production or profitability to be impacted in 2014.
Looking at the financials, the historical p/e is below 9, the dividend yield is above 3.5% and the shares are trading at a significant discount to TNAV (169p). It also appears that they have a UK property portfolio linked to the retail sector which is performing well. Cash on the balance sheet looks healthy, and they don't appear to be heavily indebted. In fact what's not to like about this company with a medium to long term view?
Generally, I don't invest in mining companies but I am going to research this one further, and it will definitely go onto my monitor.
As ever, no advice intended or given.
Sunday, 5 January 2014
Friday, 3 January 2014
More share tips for 2014
Investors Chronicle have published their share tips for 2014 this week, and if you wish to read their rationale then you're going to have to purchase the magazine or become a member I'm afraid:-
http://www.investorschronicle.co.uk/2014/01/03/shares/news-and-analysis/tips-of-the-year-6VAcXZE4OAY1MiLBMoWm5L/article.html
Nevertheless, here are the names of the companies they are tipping with their bull and bear points (IC opinion). I might add my own views at a later date, if time permits.
For reference their 2013 tips made an average gain of 31.4% (FTSE all-share 13.3%). Their top performer being Vodafone with a 53% gain, followed by Henry Boot 51.1% and Invensys 50.4%. The IC also includes a brief report on each of these companies.
Anyway here are their 2014 tips:-
Growth tip of the year - Utilitywise (UTW)
Bull points:-
Beneficiary of rising energy prices
Scaling up rapidly
Secured contracts give good visibility
Strong balance sheet with net cash
Bear points:-
Will need to successfully manage rapid expansion
Limited track record as listed company
Value tip of the year - Wincanton
Bull points:-
Highly geared to economic recovery
Restructuring programme ongoing
Low rating on several metrics
Chairman buying the shares
Bear points:-
No improvement in core business yet
Still lots of debt
Income tip of the year - HSBC
Bull points:-
Impressive dividend prospects (forecast 5.6%)
Improving credit quality
Emerging markets exposure
Partial UK arm float could release value
Bear points:-
Business misconduct issues have hit sentiment
Ongoing margin erosion
Old reliable tip of the year - Chesnara
Bull points:-
Large dividend (forecast 5.7%)
Strong balance sheet
Swedish operation now profitable
Trading below embedded value
Bear points:-
Vunerable to market volatility
Policy attrition still prevalent in Sweden
Overseas tip of the year - Novo Nordisk AS
Bull points:-
Dominant insulin market share
Productive pipeline
Favourable demographic trends
Cheap by historic standards
Bear points:-
Plenty of emerging competition
Tresiba set back
Recovery tip of the year - Hays
Bull points:-
Sizeable potential for UK profits to recover
Recruitment markets improving in many regions
Two consecutive quarters of better than expected net fee growth
Valuation discount versus other large recruiters
Bear points:-
Australian business hit by resource market weakness
Highly geared to economic recovery
Take over tip of the year - Anglo American
Bull points:-
Improved prospects at Minas Rio
Rationalisation benefits
Glencore listing facilities potential bid
Margins recovering
Bear points:-
Labour problems in South Africa
Existing capital commitments
Contrarian tip of the year - Zambeef
Bull points:-
Vertically integrated business model
Share price far below net asset value
Decent macroeconomic outlook for Zambia
Deal with Rainbow Chickens
Bear points:-
Damage to reputation may linger
Currency risk for UK investors
Whilst I would never recommend buying shares from tips in newspapers or magazines or anywhere else for that matter, sometimes they can provide a useful starting point for your own research or indeed to confirm or question your decision to hold, buy or sell if you're already an investor.
As ever, no advice is intended or given.
http://www.investorschronicle.co.uk/2014/01/03/shares/news-and-analysis/tips-of-the-year-6VAcXZE4OAY1MiLBMoWm5L/article.html
Nevertheless, here are the names of the companies they are tipping with their bull and bear points (IC opinion). I might add my own views at a later date, if time permits.
For reference their 2013 tips made an average gain of 31.4% (FTSE all-share 13.3%). Their top performer being Vodafone with a 53% gain, followed by Henry Boot 51.1% and Invensys 50.4%. The IC also includes a brief report on each of these companies.
Anyway here are their 2014 tips:-
Growth tip of the year - Utilitywise (UTW)
Bull points:-
Beneficiary of rising energy prices
Scaling up rapidly
Secured contracts give good visibility
Strong balance sheet with net cash
Bear points:-
Will need to successfully manage rapid expansion
Limited track record as listed company
Value tip of the year - Wincanton
Bull points:-
Highly geared to economic recovery
Restructuring programme ongoing
Low rating on several metrics
Chairman buying the shares
Bear points:-
No improvement in core business yet
Still lots of debt
Income tip of the year - HSBC
Bull points:-
Impressive dividend prospects (forecast 5.6%)
Improving credit quality
Emerging markets exposure
Partial UK arm float could release value
Bear points:-
Business misconduct issues have hit sentiment
Ongoing margin erosion
Old reliable tip of the year - Chesnara
Bull points:-
Large dividend (forecast 5.7%)
Strong balance sheet
Swedish operation now profitable
Trading below embedded value
Bear points:-
Vunerable to market volatility
Policy attrition still prevalent in Sweden
Overseas tip of the year - Novo Nordisk AS
Bull points:-
Dominant insulin market share
Productive pipeline
Favourable demographic trends
Cheap by historic standards
Bear points:-
Plenty of emerging competition
Tresiba set back
Recovery tip of the year - Hays
Bull points:-
Sizeable potential for UK profits to recover
Recruitment markets improving in many regions
Two consecutive quarters of better than expected net fee growth
Valuation discount versus other large recruiters
Bear points:-
Australian business hit by resource market weakness
Highly geared to economic recovery
Take over tip of the year - Anglo American
Bull points:-
Improved prospects at Minas Rio
Rationalisation benefits
Glencore listing facilities potential bid
Margins recovering
Bear points:-
Labour problems in South Africa
Existing capital commitments
Contrarian tip of the year - Zambeef
Bull points:-
Vertically integrated business model
Share price far below net asset value
Decent macroeconomic outlook for Zambia
Deal with Rainbow Chickens
Bear points:-
Damage to reputation may linger
Currency risk for UK investors
Whilst I would never recommend buying shares from tips in newspapers or magazines or anywhere else for that matter, sometimes they can provide a useful starting point for your own research or indeed to confirm or question your decision to hold, buy or sell if you're already an investor.
As ever, no advice is intended or given.
Corero Network Security
Now here's a interesting company that some investor's might like to research further - Corero Network Security Plc.
Firstly here's a brief description of what the company do from their half-yearly report:-
"Corero Network Security is an international network security company and the leading provider of Distributed Denial of Service (DDoS) and cyber-attack defence solutions. As the First Line of Defense, Corero's products and services stop DDoS attacks, protect IT infrastructure and eliminate downtime. Customers include enterprises, service providers and government organizations worldwide. Corero's appliance-based solutions are dynamic and automatically respond to evolving cyber attacks, known and unknown, allowing existing IT infrastructure -- such as firewalls -- to perform their intended purposes. Corero's products are transparent, highly scalable and feature the lowest latency and highest reliability in the industry."
At first glance it doesn't look particularly appealing since it's loss making, and revenues were down slightly at the half year stage compared with last year, whilst losses had risen. Cash on the balance sheet was $5.3m, but it is burning cash. Earlier in the year they also had to issue additional equity to raise cash for organic growth. Needless to say it's never paid a dividend, and whilst it's net asset value was recorded as around 33p (current share price 18p) it's tangible value is in negative territory. Added to this it's a US company listed on Aim. Whilst I'm a fan of finding hidden gems listed on Aim, I'm only ever interested in British companies. Before you conclude that I'm some sort of xenophobe, I can assure you that I'm certainly not and I'll leave readers to conduct their own research on some of the horror stories that have emanated from overseas companies listed on Aim. My particular lucky escape was RCG Holdings. Truly a case where fact was much stranger than fiction:-
http://michae1mouse.blogspot.co.uk/2011/02/rcg-holdings-brief-encounter.html
So why on earth am I writing about this company given what I've just written above? Well, the half-year results are for 30 June 2013. On the 1 August they completed the sale of Corero Business Systems Limited for a net consideration to the Company of $16.5 million with a profit on sale of approximately $15.0 million. Gross cash on a pro-forma basis at 30 June 2013 is $21.2 million and net cash $15.2 million (approx. £9.2m). This is highly significant since this is not far short of the whole market cap. (£10.5m - figure not checked) of the remaining company. The sale of the CBS business has resulted in the Company becoming exclusively focused in the network security market and has provided the Company with the cash resources to fund the organic development of the network security business. I further notice that they have since used some of this cash to pay off all of their loan notes which held a punitive 8% coupon.
Clearly the group will report a large profit at the end of the financial year from the sale, and will benefit from the cash injection going forward. The outlook statement is encouraging:-
"The Board believes that the network security market remains highly attractive. Specifically, the DDoS prevention market is forecast by Infonetics to grow by over 25% CAGR in the period 2012 to 2017 and IDC forecast the market will be worth $870 million in 2017.
For the year ending 31 December 2013 the CNS division expects to report revenue similar to that for the year ended 31 December 2012.
The Board remains confident in the Group's prospects."
It may be a company worth sticking on the monitor?
As ever, no advice intended or given.
Firstly here's a brief description of what the company do from their half-yearly report:-
"Corero Network Security is an international network security company and the leading provider of Distributed Denial of Service (DDoS) and cyber-attack defence solutions. As the First Line of Defense, Corero's products and services stop DDoS attacks, protect IT infrastructure and eliminate downtime. Customers include enterprises, service providers and government organizations worldwide. Corero's appliance-based solutions are dynamic and automatically respond to evolving cyber attacks, known and unknown, allowing existing IT infrastructure -- such as firewalls -- to perform their intended purposes. Corero's products are transparent, highly scalable and feature the lowest latency and highest reliability in the industry."
At first glance it doesn't look particularly appealing since it's loss making, and revenues were down slightly at the half year stage compared with last year, whilst losses had risen. Cash on the balance sheet was $5.3m, but it is burning cash. Earlier in the year they also had to issue additional equity to raise cash for organic growth. Needless to say it's never paid a dividend, and whilst it's net asset value was recorded as around 33p (current share price 18p) it's tangible value is in negative territory. Added to this it's a US company listed on Aim. Whilst I'm a fan of finding hidden gems listed on Aim, I'm only ever interested in British companies. Before you conclude that I'm some sort of xenophobe, I can assure you that I'm certainly not and I'll leave readers to conduct their own research on some of the horror stories that have emanated from overseas companies listed on Aim. My particular lucky escape was RCG Holdings. Truly a case where fact was much stranger than fiction:-
http://michae1mouse.blogspot.co.uk/2011/02/rcg-holdings-brief-encounter.html
So why on earth am I writing about this company given what I've just written above? Well, the half-year results are for 30 June 2013. On the 1 August they completed the sale of Corero Business Systems Limited for a net consideration to the Company of $16.5 million with a profit on sale of approximately $15.0 million. Gross cash on a pro-forma basis at 30 June 2013 is $21.2 million and net cash $15.2 million (approx. £9.2m). This is highly significant since this is not far short of the whole market cap. (£10.5m - figure not checked) of the remaining company. The sale of the CBS business has resulted in the Company becoming exclusively focused in the network security market and has provided the Company with the cash resources to fund the organic development of the network security business. I further notice that they have since used some of this cash to pay off all of their loan notes which held a punitive 8% coupon.
Clearly the group will report a large profit at the end of the financial year from the sale, and will benefit from the cash injection going forward. The outlook statement is encouraging:-
"The Board believes that the network security market remains highly attractive. Specifically, the DDoS prevention market is forecast by Infonetics to grow by over 25% CAGR in the period 2012 to 2017 and IDC forecast the market will be worth $870 million in 2017.
For the year ending 31 December 2013 the CNS division expects to report revenue similar to that for the year ended 31 December 2012.
The Board remains confident in the Group's prospects."
It may be a company worth sticking on the monitor?
As ever, no advice intended or given.
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