Market's are currently looking a little jittery. There has been plenty of talk in recent months about share prices getting ahead of themselves, and that a Market correction was looking a distinct possibility. Whilst ratings on certain stocks may be a little toppy and suffer a setback, my personal view is that in the long term this Bull market still has considerable legs. Having said that, it does largely depend on the portfolio of stocks that you currently hold. Economic recovery is happening, but it's still in it's early stages (hence the low interest rates), and when it really does build momentum then I expect earnings reporting from many companies to surprise to the upside. Ultimately it's earnings that dictate the share price direction. So far my portfolio has managed to shrug off the current nervousness in markets, and most have issued robust trading statements. If any prices suffer because of general market sentiment then I will see that as an excellent opportunity to increase my holdings.
On this subject, at last week's Avesco GM the share-buy-back, and B/C Share scheme was approved by shareholders, and £1.10 will be returned at the end of this month. The share price dipped on Friday to reflect the return of cash as the shares went ex-dividend. Avesco's shares now trade at £1.25. With a declared dividend of 5p this year, the yield is a generous 4% with a progressive dividend policy in place. To see why I believe that the 2014 dividend could be considerably more generous read below:-
http://michae1mouse.blogspot.co.uk/2013/12/proposed-share-buy-back-and.html
The shares of course trade at a considerable discount to NTAV, and needless to say, I consider the shares to be undervalued.
In other news, another of my holdings Trakm8 released a RNS detailing their biggest ever contract win with a UK insurance group. Whilst the £1.2m hardware order is significant, the bit I like best is this:- "This hardware order is expected to be followed by a service support contract providing additional and long-term recurring revenues for the Group."
http://uk.advfn.com/news/UKREG/2014/article/60634813
The group boasts a significant percentage of revenues as recurring, and coupled with high margins and good cash generation, Trakm8 remains a very promising long term hold for me. For further details:-
http://michae1mouse.blogspot.co.uk/2013/12/trakm8-interims-and-brief-updates.html
Finally, a mention of my speculative holding in Angle. It's becoming increasingly difficult not to get excited about this company and it's Parsortix product following a string of positive news flow. Following on from the news last year of CE mark approval, they have recently announced the appointment of an eminent Scientific Adviser, Dr Harold Swerdlow and an agreement with the Medical Research Council's Cancer Unit at the University of Cambridge to investigate "several exciting research avenues to test different applications of the Parsortix system in the diagnosis and personalised treatment of cancer."
Angle will release their interim results on Thursday this week (30th January). I don't expect to see much evidence of revenues from sales yet, but I am looking forward to reading about any further progress.
As ever, no advice intended or given.
Sunday, 26 January 2014
Saturday, 11 January 2014
Fairpoint and H&T Group
Continuing with my very brief analysis of the value portfolio, I shall take a look at Fairpoint and H&T. Please note that this is not intended to be in-depth research, merely a snapshot based on the current financials of each company.
Starting with Fairpoint. The company describes itself as :- "The leading provider of advice and solutions to financially stressed consumers".
An initial glance at the figures reveals that the company is currently trading on a P/E ratio of less than 7, and yields a 4.3 % dividend which is covered more than three times by earnings. The company appears to be highly cash generative. Net cash at the June interims was £2.8m vs. net debt of £2m at the same period in the previous year. The current market cap. is around £54m. They operate a progressive dividend policy, and increased the dividend by 10% at the interim stage to 2.15p (2012: 1.95p). Basic EPS was also up at the interim stage by 21%. Their outlook statement indicated solid progress.
Based on the financials and outlook it certainly appears to be an attractive investment, and probably undervalued? We shall see.
H&T Group has had a decent week, and the shares are up around 5%. They released a trading statement on 7th January confirming that full year profit will be in line with management expectations. The trading statement also mentioned that they had reduced net debt by around £7m to around £20.8m, although they mention that market conditions are challenging.
H&T are a pawnbrokers, and based on last year's earnings the historic p/e ratio is less than 5 and the dividend around 7.7% covered more than three times by earnings. It should be noted however that at the interim stage the dividend pay out was reduced from 3.8p to 2.1p in light of the challenging trading environment. EPS (interim) had fallen from 14.5p to 9p. If you strip out goodwill and intangibles from the balance sheet then tangible NAV is around £68m against a market cap of £56.5m.
This is one of those stocks where most of the bad news could already be priced in? Again only time will tell.
It's probably not too surprising that both of these companies have appeared on the value list given the nature of their businesses. Certainly, investors would perceive (possibly) that their prospects are inversely proportional to the health of the economy, and all indications point to a growing recovery.
Starting with Fairpoint. The company describes itself as :- "The leading provider of advice and solutions to financially stressed consumers".
An initial glance at the figures reveals that the company is currently trading on a P/E ratio of less than 7, and yields a 4.3 % dividend which is covered more than three times by earnings. The company appears to be highly cash generative. Net cash at the June interims was £2.8m vs. net debt of £2m at the same period in the previous year. The current market cap. is around £54m. They operate a progressive dividend policy, and increased the dividend by 10% at the interim stage to 2.15p (2012: 1.95p). Basic EPS was also up at the interim stage by 21%. Their outlook statement indicated solid progress.
Based on the financials and outlook it certainly appears to be an attractive investment, and probably undervalued? We shall see.
H&T Group has had a decent week, and the shares are up around 5%. They released a trading statement on 7th January confirming that full year profit will be in line with management expectations. The trading statement also mentioned that they had reduced net debt by around £7m to around £20.8m, although they mention that market conditions are challenging.
H&T are a pawnbrokers, and based on last year's earnings the historic p/e ratio is less than 5 and the dividend around 7.7% covered more than three times by earnings. It should be noted however that at the interim stage the dividend pay out was reduced from 3.8p to 2.1p in light of the challenging trading environment. EPS (interim) had fallen from 14.5p to 9p. If you strip out goodwill and intangibles from the balance sheet then tangible NAV is around £68m against a market cap of £56.5m.
This is one of those stocks where most of the bad news could already be priced in? Again only time will tell.
It's probably not too surprising that both of these companies have appeared on the value list given the nature of their businesses. Certainly, investors would perceive (possibly) that their prospects are inversely proportional to the health of the economy, and all indications point to a growing recovery.
Monday, 6 January 2014
21st Century Technology Plc
21st Century Technology (C21) is the second of the value plays on my list, and it is a company that I'm reasonably familiar with. It has been on and off my monitor a number of times. My impression to date is that it has been somewhat of a serial disappointer. Just when you think it's turned a corner a profit warning suddenly emerges out of the blue. In fact I wrote a few lines about C21 in my August blog with particular reference to Jan Holstrom, the outgoing Non-Executive Chairman:-
http://michae1mouse.blogspot.co.uk/2013/08/updates-ubc-media-densitron-ddd-group.html
However, it's a company that's always looked like it had promise, and with the recent Directorate changes, it is a company that is firmly back on my monitor.
C21 describes itself as "a leading supplier of public transport CCTV and other monitoring systems, including their award winning EcoManager". Looking at the figures from last year's results the company looks very much like a value share with (in theory) potential for significant growth. Buying growth companies when temporary circumstances render them attractive as a value play can turn out to be very rewarding for medium to long term investors. What investors will need to weigh up here though is whether C21 is a genuine bargain or simply a value trap.
Based on last year's earnings, the historic p/e ratio is less than 6, the dividend yield is around 9% covered twice by earnings and the market cap. is £7m. The tangible asset value is around 4p or 8.5p including intangibles.
However, I mentioned that this could turn out to be a value trap because at the half year, Jan Holstrom had this to say about trading in the second half:-
".... We are now experiencing a significantly lower than expected order pipeline for H2 2013. We have received indications that revenue receivable from one of our largest customers is likely to be 70% lower in H2 2013 than H1 and below our previous expectations, whilst a four-year contract with the GoAhead Group is due to expire very shortly.
"In view of the above, the Board has sought to reassess the Group's order book and pipeline opportunities and anticipate that its financial performance for the year ending 31 December 2013 is likely to be significantly below its previous expectations and of the previous financial year, should the pipeline remain at its current levels."
So I suppose the question is can the new faces that have joined the Board put C21 back on track and re-establish a growth trajectory, and if they can, just how long will it take?
In October of this year, Russ Singleton, the Chief Executive Officer and Glenn Robinson the Group Finance Director, purchased over £160,000 worth of shares between them at 6.5p, and so it would appear that they are confident of steering C21 back in the right direction.
Only time will tell of course, and as ever please DYOR, and no advice is intended or given.
http://michae1mouse.blogspot.co.uk/2013/08/updates-ubc-media-densitron-ddd-group.html
However, it's a company that's always looked like it had promise, and with the recent Directorate changes, it is a company that is firmly back on my monitor.
C21 describes itself as "a leading supplier of public transport CCTV and other monitoring systems, including their award winning EcoManager". Looking at the figures from last year's results the company looks very much like a value share with (in theory) potential for significant growth. Buying growth companies when temporary circumstances render them attractive as a value play can turn out to be very rewarding for medium to long term investors. What investors will need to weigh up here though is whether C21 is a genuine bargain or simply a value trap.
Based on last year's earnings, the historic p/e ratio is less than 6, the dividend yield is around 9% covered twice by earnings and the market cap. is £7m. The tangible asset value is around 4p or 8.5p including intangibles.
However, I mentioned that this could turn out to be a value trap because at the half year, Jan Holstrom had this to say about trading in the second half:-
".... We are now experiencing a significantly lower than expected order pipeline for H2 2013. We have received indications that revenue receivable from one of our largest customers is likely to be 70% lower in H2 2013 than H1 and below our previous expectations, whilst a four-year contract with the GoAhead Group is due to expire very shortly.
"In view of the above, the Board has sought to reassess the Group's order book and pipeline opportunities and anticipate that its financial performance for the year ending 31 December 2013 is likely to be significantly below its previous expectations and of the previous financial year, should the pipeline remain at its current levels."
So I suppose the question is can the new faces that have joined the Board put C21 back on track and re-establish a growth trajectory, and if they can, just how long will it take?
In October of this year, Russ Singleton, the Chief Executive Officer and Glenn Robinson the Group Finance Director, purchased over £160,000 worth of shares between them at 6.5p, and so it would appear that they are confident of steering C21 back in the right direction.
Only time will tell of course, and as ever please DYOR, and no advice is intended or given.
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