For those of you who like growth companies, here's an interesting story. Cupid is essentially a global on-line dating company achieving rapid growth through acquisition. The company, which joined AIM in June 2010, released it's half-year results today and exceeded market expectations. Revenues were up by 189% at £25.4m with 53% of the total achieved outside the UK. EBITDA increased to £5.7m, a rise of 137% and they have £8.4m cash on the balance sheet and no debt.
Cupid are building a truly global presence, and establishing a strong foothold in the North American market.
Monthly revenues now exceed £4.5m per month, which projecting forward should produce a figure in excess of £52.4m for the full year. EPS at the interim stage was around 4p, and broker's forecast's come in at about 9p for the full year. However, I could easily see them achieving 10p+ for 2011 giving a forward p/e of around 24.
The Chief Exec's statement is very bullish:- "We are in a very strong position and remain confident that we will grow value for shareholders in 2011 and beyond. The market for our services is global and growing and we are well placed to take advantage of the numerous opportunities that exist".
It's a truly impressive growth story so far, and I will be keeping a careful eye on the SP and future developments. However, I shan't be buying at the current share price.
At heart I 'm a value seeker, and my issue with growth companies is that forward p/e ratios of 20+ don't leave any room for mistakes. Essentially growth has to continue at the heady pace expected by the company and the market. Cupid currently has a market cap. of £200m which is about ten times its net asset value (including intangibles). Without a dividend and/or sufficient asset backing then any hint of slowing growth can have a catastrophic effect on the SP. I'm not that brave.
That said, if I was to have a punt on a growth company in the expectation that they could continue to produce impressive figures, then Cupid would certainly be of interest. The very nature of their business appears ripe for consolidation and rapid growth, and I can see the story running for many years to come.
In conclusion, and perverse though it may sound, whilst I can't justify buying Cupid's shares using my strict (largely value based) criteria , a gut feeling tells me that I might be missing out on the next ASOS like growth story here?
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Tuesday, 30 August 2011
Thursday, 25 August 2011
The very little research, but are these really hopeless cases? portfolio vs. FTSE250
Just for a bit of fun, I thought I'd pick a few companies whose share prices look a little battered and bruised and compare their performance against the FTSE 250 over the next two/three years. I haven't done any research on these companies, and all I'll do is make a few cursory observations in their favour. I don't currently hold any shares in the companies I shall mention. Those of you who do read the blog from time to time will know that I tend to concentrate my efforts on trying to find bargains in the small/micro cap sector (see previous blogs).
For simplicity, I am going to allocate an equal (but fictional) investment in each of the eight companies.
The companies and their respective share prices at the close of play today are as follows:-
Aviva 318.8p
Cable and Wireless Worldwide 34.44p
Cable and Wireless Communications 32.12p
Game Group 23p
ITV 55.85p
Man Group. 206.1p
Thomas Cook 43.55p
Vodafone 162.85p
The share prices are the mid-prices given on the ADVFN monitor at the time of posting (17:40 Thurs. 25 Aug 2011).
The FTSE-250 finished the day at 10,021.39.
Starting with Aviva. Well known Life Insurer that pays a dividend of over 8%. If it holds the dividend for the foreseeable future then that's a pretty good return when you compare it against other investments.
The two Cable and Wireless companies. Proof that performance after a demerger can be as unimpressive as it was before, so far investors have had the opportunity to be disappointed twice as often. However, the yields from both companies are quite high (again if they can maintain them), and aren't both companies possible takeover targets?
Game group. Is this company seen in the same light as HMV? Looks to have better prospects to me, and a cursory glance seems to indicate that it is adapting and fighting back with a growing online presence.
ITV. Can still attract huge audiences for popular shows e.g. around 20m for the X-factor final and hence still attracts the advertisers. Apart from the BBC, does it really have any credible opposition in the UK? Just re-instated a dividend payment. Possible takeover target?
Man Group. Nice dividend. Possible takeover candidate.
Thomas Cook. Pessimists think TC could go bust or at the very least need to issue more equity. However, TC will be merging with the Co-op to make it the biggest UK tour operator. Despite the many issues facing TC, Russian acquistion looks promising, the Brits still love their package holidays and the chaos caused by the ash cloud should benefit companies like TC in the long run. At today's share price the yield is about 25%. Market obviously believes a cut is imminent, but if it isn't or it returns to the same levels in a year or two then what a fantastic return. Directors have been buying at current levels.
Finally, Vodafone. Dividend yield must be over 7% with the special dividend in January. Will the special dividend be a one off? Probably not.
You can clearly see that I haven't done much research, but I am interested to see how the performance of this portfolio pans out against the FTSE250 over the next two or three years. Just to stick my neck out, my guess is that this portfolio will out perform the FTSE250, but I'm not recommending it and I certainly haven't done this myself.
As I said at the beginning, it's just a bit of fun that fits in with my value and contrarian instincts, and on a monthly basis I shall return to compare performance.
For simplicity, I am going to allocate an equal (but fictional) investment in each of the eight companies.
The companies and their respective share prices at the close of play today are as follows:-
Aviva 318.8p
Cable and Wireless Worldwide 34.44p
Cable and Wireless Communications 32.12p
Game Group 23p
ITV 55.85p
Man Group. 206.1p
Thomas Cook 43.55p
Vodafone 162.85p
The share prices are the mid-prices given on the ADVFN monitor at the time of posting (17:40 Thurs. 25 Aug 2011).
The FTSE-250 finished the day at 10,021.39.
Starting with Aviva. Well known Life Insurer that pays a dividend of over 8%. If it holds the dividend for the foreseeable future then that's a pretty good return when you compare it against other investments.
The two Cable and Wireless companies. Proof that performance after a demerger can be as unimpressive as it was before, so far investors have had the opportunity to be disappointed twice as often. However, the yields from both companies are quite high (again if they can maintain them), and aren't both companies possible takeover targets?
Game group. Is this company seen in the same light as HMV? Looks to have better prospects to me, and a cursory glance seems to indicate that it is adapting and fighting back with a growing online presence.
ITV. Can still attract huge audiences for popular shows e.g. around 20m for the X-factor final and hence still attracts the advertisers. Apart from the BBC, does it really have any credible opposition in the UK? Just re-instated a dividend payment. Possible takeover target?
Man Group. Nice dividend. Possible takeover candidate.
Thomas Cook. Pessimists think TC could go bust or at the very least need to issue more equity. However, TC will be merging with the Co-op to make it the biggest UK tour operator. Despite the many issues facing TC, Russian acquistion looks promising, the Brits still love their package holidays and the chaos caused by the ash cloud should benefit companies like TC in the long run. At today's share price the yield is about 25%. Market obviously believes a cut is imminent, but if it isn't or it returns to the same levels in a year or two then what a fantastic return. Directors have been buying at current levels.
Finally, Vodafone. Dividend yield must be over 7% with the special dividend in January. Will the special dividend be a one off? Probably not.
You can clearly see that I haven't done much research, but I am interested to see how the performance of this portfolio pans out against the FTSE250 over the next two or three years. Just to stick my neck out, my guess is that this portfolio will out perform the FTSE250, but I'm not recommending it and I certainly haven't done this myself.
As I said at the beginning, it's just a bit of fun that fits in with my value and contrarian instincts, and on a monthly basis I shall return to compare performance.
Tuesday, 23 August 2011
A doubled dividend works wonders
A very encouraging set of interim results from Densitron this morning. Caught me a little bit by surprise, since I wasn't expecting anything until September.
Revenues have increased by 31% and operating profit by 260%. The Chairman's statement indicates that these results were ahead of internal forecasts and that they are confident of meeting market expectations for the full year (EPS 1.49p) which puts the shares on a forward p/e of less than 8 (share price currently 11.6p). Seems far too low to me. Significantly the interim dividend has been increased 100% to 0.2p. I expect a further payment of 0.3p following the finals giving a yield of 4.3% for the full year.
I like their current focus on organic growth and growing the operating margin. India looks like it might provide a further substantial growth opportunity.
All in all, despite the uncertain global economic outlook and market gyrations, I see no reason to alter my views on my investment in Densitron, and shall enjoy the dividend payments whilst patiently waiting for what I hope will prove to be substantial capital growth in the medium to long term.
Surgical Innovations' share price continues to rise, and the market cap. is now around £50m. As mentioned before I took healthy profits from my investment here, but did I take them too soon? Clearly in the short term the answer is yes, although part of my reason for selling was that I couldn't see it multibagging in such a short period of time again.
The present market cap. is currently more than 7 times last year's revenue with a forward p/e of over 20. The shares look pretty fully valued to me. However, it will be interesting to watch. There is always the possibility of a takeover approach or a huge contract win etc. Besides, as I have often mentioned before in this blog, valuations of growth companies can get very heady indeed. Time will tell.
Revenues have increased by 31% and operating profit by 260%. The Chairman's statement indicates that these results were ahead of internal forecasts and that they are confident of meeting market expectations for the full year (EPS 1.49p) which puts the shares on a forward p/e of less than 8 (share price currently 11.6p). Seems far too low to me. Significantly the interim dividend has been increased 100% to 0.2p. I expect a further payment of 0.3p following the finals giving a yield of 4.3% for the full year.
I like their current focus on organic growth and growing the operating margin. India looks like it might provide a further substantial growth opportunity.
All in all, despite the uncertain global economic outlook and market gyrations, I see no reason to alter my views on my investment in Densitron, and shall enjoy the dividend payments whilst patiently waiting for what I hope will prove to be substantial capital growth in the medium to long term.
Surgical Innovations' share price continues to rise, and the market cap. is now around £50m. As mentioned before I took healthy profits from my investment here, but did I take them too soon? Clearly in the short term the answer is yes, although part of my reason for selling was that I couldn't see it multibagging in such a short period of time again.
The present market cap. is currently more than 7 times last year's revenue with a forward p/e of over 20. The shares look pretty fully valued to me. However, it will be interesting to watch. There is always the possibility of a takeover approach or a huge contract win etc. Besides, as I have often mentioned before in this blog, valuations of growth companies can get very heady indeed. Time will tell.
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