By johnrosier, 20-May-2013 06:51:00
Dolphin Capital (38p and 4.4% of JIC) has announced that its 49.8% subsidiaries, Aristo Developers and Venus Rock estates have sold their interests in Venus Rock Golf Resort in Cyprus for €290m, which includes a €48.5m conditional deferred consideration payable within six months. It has been sold to a Hong Kong conglomerate and real estate Group. The €290m purchase price represents 22% discount to the latest valuation of €370m and as such is expected to result in Dolphins NAV per share after deferred income tax liabilities falling by 5.6% to 76p and Dolphins share of the net proceeds of the sale of c.€117m will represents a 1.41x return on its allocated €83m investment cost.
The proceeds of the sale will allow the repayment of project loans and the release of existing mortgages on Venus Rock properties (on other Aristo projects) . For Aristo, it will improves its sales capabilities by freeing up additional land and residential projects for sale, improve profitability as debt service costs fall and enable the Company to build on its market leadership in Cyprus.
Dolphin is also expected to receive a net amount of between €25m and€40m which it says could be utilised for working capital, project development, further acquisitions and share buy backs.
Conclusion: At first sight it may look a little disappointing to sell at a discount to NAV but this is Cyprus we are talking about! Cyprus has clearly gone through a difficult six months and for Dolphin to realise value in the Venus Rock Golf Resort in a manner that will give it working capital to develop its other property developments in Cyprus as well as a giving a boost to its Group cash reserves has got to be good news. After this transaction the shares stand at a 42% discount to the most conservative measure of calculated NAV as at 31st December 2012. The shares have been a bit perkier in recent weeks and I expect them to make further progress. Very Happy Holder.
By johnrosier, 17-May-2013 12:03:00
Equity markets have made further progress this week prompting many commentators to try and call the top. I like the first chart below from Redburn Partners. It shows the performance of German 10 year Government Bonds relative to European Equities since 1991. When the line is heading upwards Bonds are doing better than Equities and vice versa. Whilst this will not tell you what is going to happen in the short term it at least puts into longer term pespective the outperformance of Equities over Bonds of the last 12 months. If the past has any bearing on the future then the outperformance of Equities over Bonds has a lot further to go!
Good results this week from easyJet and Dixons, two of the larger holdings in the JIC portfolio. Forecasts have been upgraded and the charts below show both stocks clearly in a beautiful uptrend. Fighting the temptation to take profits. Run your winners, cut your losers!
A few JIC stocks are mentioned in the press; Melrose is a buy in Shares Magazine. The Investors Chronicle is heading for the EXIT in easyJet but only from its sell recomendation! It recognises that the re-rating is probably justified and is now a holder! Simon Thompson in the same magazine re-iterates its Buy on Polo Resources with a 35p price target and in MoneyWeek the virtues of WH Smith are extolled by Martin Cholwill. WH Smith was, this week, the subject of heated debate at an Investment Club that I am a member of with many complaining about the poor shopping experience; I say "feel the cash flow!"
By johnrosier, 16-May-2013 06:58:00
Dixons (36.5p and 4% of JIC); Today's trading statement covering the 4th quarter and full year to 30th April 2013 is very encouraging. Like for like sales growth in the 4th quarter accelerated to 11% contributing to a figure of 7% for the full year. Northern Europe was particularly strong with like for like sales growth of 14% and 13% in UK & Ireland, whilst Southern Europe, (Italy, Greece and Turkey) saw, not surprisingly, sales fall by 5% on a like for like basis. Pixmania trading is described as challenging but management seem to be getting to grips with the problem. It took full management control in August last year and has exited from almost half of the countries in which it operates, closed all stores, exited non-core categories and significantly reduced headcount. It also disposed of Webhalen and PLS for c.£15m.
Dixons says it has been strongly cash generative which has enabled it to achieve a year-end net cash position for the first time in a number of years. It says that Group gross margins were down 0.7% , driven by product mix but that pre tax profits will come in at the top end of market expectations of £75m to £85m.
Conclusion: The strong sales figures are encouraging and the net cash position at the year end is some turn round from the highly indebted position of a few years ago. If it can make further progress reducing the drag of Pixmania and improve sales in Southern Europe in the coming year that will be aa bonus. The bulk of the Group is clearly trading well where it is seeing the benefits of its good multi channel offering, improved customer service and better store profile. Forecasts for the year we have just entered are for earnings per share of 1.9p, a near doubling of the current year's forecast. It puts the shares on a April 2014 PE ratio of 18.9x. Given that we are still in recovery stage at Dixons, it has net cash and the market capitalisation to sales is only about 15% I expect the shares to make further progress over the coming year. Happy Holder.
St.Ives(151.p and 5.3% of JIC) has made an acquisition this morning of Branded3 which is a leading search engine optimisation and digital marketing agency. It has paid £10.7m upfront and there could be up to a further £14.3m to pay dependent on its financial performance in the years ending January 2014, 2015 and 2016.
Conclusion: the acquisition makes sense in that it fits in nicely with the Company's strategy of shifting its business to higher margin marketing services. The share price has been strong in recent weeks; I do not think this acquisition will do it any harm. Happy Holder.
By johnrosier, 15-May-2013 06:46:00
easyJet(1130p and 4.3% of JIC); On April 5th easyJet said that it expected the loss for the first half of the current year, October 2012 -March 2013 to come in at between -£60m and -£65m. This morning it has announced a loss towards the bottom of that range at £-61m. It is a fairly lengthy statement which is re-assuring in both its confidence about the outlook and its description of its continuing strategy. The Company is continuing to generate strong cash flow with a net cash position of £433m at 31st March 2013 compared to £42m the year before. The Company says it is evaluating the next generation of short haul engine technology and if it concludes an order will be in the interest of all shareholders it will bring a proposal to shareholders. No doubt another spat with Stelios is looming!
Conclusion: easyJet, through its efficient management of the business seems to have a highly competitive business which is in a virtuous circle of sorts. It is generating a lot of cash which management has demonstrated it is happy to return to shareholders. On 11.4x September 2015 forecast earnings I believe the shares have further upside and will not be heading for the exit yet! Happy Holder!
By johnrosier, 15-May-2013 06:40:00
Polo Resources (27p and 2.2% of JIC); I was a little trigger happy yesterday reducing my Polo Resources holding down to 2% at 24p. I am however a little annoyed that the Company only told half the story in its statement at 11.38 am. A couple of hours later at 2.00pm it issued a further statement saying that Mettiz Capital, the investment vehicle of Michael Tang, the new Co-Chairman and Managing Director, had bought 31.8m shares (11.7% of the Company) from the other Co-Chairman, Stephen Dattels.This leaves Stephen Dattels with a 3.92% stake in Polo and gives Mr Tang a total interest in 14.55% of the issued share capital. The really important point was that he had paid 40p per share, a massive premium to the prevailing share price of 23p and made a very bullish statement "Polo has three important investments in coal, gold and oil and gas, all of which have potential to substantially enhance shareholder value in the next 18 months and as a result I consider that the current Net Asset Value understates the potential value of the Company's interests".
Conclusion: It would have been nice if the Company had produced the whole story in its first statement and also if all shareholders had had an opportunity to tender stock to Mr Tang at 40p! Not sure if there is anything I can do about that, so now to look forward. Clearly it is good news that Polo has a new active shareholder who is committed to creating value over the next 18 months or so. At 27p there is plenty of upside to the stated nav of around 36p and Mr Tang has backed up his belief that the nav will increase by spending £12.7m buying shares at 40p. Happy Holder and may look to add back to holding!
By johnrosier, 14-May-2013 11:54:00
Polo Resources (24p and 2.0% of JIC); All change this morning at Polo Resources. Neil Herbert is resigning as Co-Chairman and Managing Director but remaining as a consultant with continued responsibilities for Nimini and Signet, where he will be a Director. He will be replaced by Michael Tang who is joining the Board as Executive Co-Chairman and Managing Director.
Michael Tang is the principal of Mettiz Capital Limited, an investment company with significant corporate and financial experience in natural resources, power generation, manufacturing and real estate. He is expected to "provide Polo with a springboard to the valuations which the Asian markets provide for high quality natural resources such as those owned by Polo". The statement goes on to say "Commensurate with Michael's commitment to Polo and in addition to his executive compensation, he has been awarded 6 million options at an exercise price of 25 pence per share. The options expire 5 years from the date of grant and vest in three equal instalments on the first three anniversaries of grant".
At the same time Mr Kian Meng Cheah is joining the Board as a non-executive Director and Jim Mellon has resigned given his other commitments.
Conclusion: A bit of a surprise and I guess on the one hand it should be seen as good news in that hopefully change at the top may help speed up the realisation of value within the portfolio. On the other hand, uncertainty as to the future direction may weigh on the share price in the short term . The share price is up 16% since I last wrote about Polo on 24th April and is up 26% in May alone. I have reduced the holding to 2% of the portfolio. (See transaction history)
I have re-invested the proceeds in WH Smith, increasing the holding to 2.6%
By johnrosier, 10-May-2013 13:34:00
Quite a few of the 27 stocks held in the JIC portfolio are mentioned in the press today.
Buy recommendations for Melrose Industries in the Questor column in the Telegraph and for Vislink and St.Ives in Shares Magazine. The Investors Chronicle highlights WH Smith and Laura Ashley in a stock screen for companies with a high cash return on invested capital combined with strong three month momentum. The Investors Chronicle is also enthusiastic about Worldwide Healthcare Trust.
Whilst on the healthcare theme, the excellent John Baron, in his monthly Investment Trust portfolio review in the Investors Chronicle highlights the appeal of the Worldwide Healthcare Trust (WWH) and the Biotech Growth Trust (BIOG). Regular readers of JohnsInvestmentChronicle will know that I share his enthusiasm and currently have 5.6% of the portfolio invested in BIOG and 4.6% in WWH. In the same vein he has recently added a new holding to his Growth portfolio, the International Biotechnology Trust (IBT) which I must now consider adding to the JIC portfolio.
Both John Baron's Growth portfolio and Income portfolio have an excellent record and the monthly review in The Investors Chronicle is well worth a read.
By johnrosier, 09-May-2013 07:15:00
Anite (128p and 2% of JIC); I have bought a new holding in Anite this morning following a trading statement which shows it finished the year strongly. I have lifted the following description of Anite's business from Stockopedia.
Anite is a worldwide provider of hardware and software solutions, systems integration and managed services within its core markets of Wireless and Travel. It provides handset and network testing systems for the wireless market, and reservation and e-commerce solutions for the leisure travel industry. It has four operating segments: Handset Testing, which provides systems, hardware and software; Network Testing, which provides products for mobile network operators and network manufacturers to measure the coverage and quality of mobile phone networks, Travel which provides a suite of modules, supporting many types of tour operator and wholesaler models, from accommodation wholesalers to high volume package and dynamic packaging tour operations, and Group. In January 2013, the Company acquired Propsim channel emulation product set of Elektrobit Corporation of Finland.
The statement this morning showed strong results both from the handset testing business with revenue growth of around 10% and higher margins. Network testing also performed well with revenue growth of around 7 or 8%. Profits from the Travel division were in line with the previous year despite a shortfall in revenue due to a few customer delays which hopefully will come through in the current year. Propsim, which it acquired on 31st January "performed slightly above expectations with a particularly encouraging order intake".
Anite is a high margin, (19.6%) high return on capital (24.8%) business which generates substantial amounts of cash. At the 30th April the Company had net debt of £0.9m following the acquisition of Propsim in January which cost £26m.
Conclusion; Despite this morning's bounce the shares are still some 20% below their February highs of 160p. The Company is currently in a sweet spot with the roll out of 4G mobile services providing a boost to both its network and handset testing businesses. As the Company points out in its statement we are still at a relatively early stage in the rollout of 4G , which should sustain the business over the next few years. The shares are valued at about 14.5x April 2014 consensus earnings for growth of about 18% which seems to me to give ample scope for upside in the share price. It is also forecast to pay a dividend of 2p in the year to April 2014. (See Transactions)
By johnrosier, 08-May-2013 15:13:00
Quindell Portfolio (10.78 and 0.0% of JIC). I have sold the remaining shares in the JIC portfolio and have thus booked a profit of £1556.81. Including my earlier sales in January and March, I have booked a profit of £4669.39 in total.
Regular readers will have noticed that there has been a rather exasperated tone to my more recent blogs on the Company. I have had to write regularly to report on yet another acquisition. In the end it may all turn out fine but there are concerns in the market, which is weighing on the share price, that it is making too many acquisitions and will struggle to integrate them properly. It is also being too liberal with its shares, especially at such a low rating.
I try not to get emotional about individual holdings and am guilty in this case of getting a little too involved, so whilst breaking up is hard to do I think in this situation it is the best course of action. What really annoys me is the amount of time I have spent worrying about this holding compared to my other holdings. I should have sold out completely when the chart momentum clearly turned down in the New Year.
I shall watch from afar and who knows, one day our relationship may be re-kindled!
By johnrosier, 08-May-2013 06:39:00
Melrose Industries (245p and 4% of JIC) has announced that trading is in line with expectations in a statement issued this morning. Revenue in constant currency is 1% lower than last year but margins are higher. It says that further improvements have been made at Elster which was acquired last year and as a result results are significantly ahead of those a year ago in the pre-acquisition period. There is a strong hint that a return to shareholders, normally in the form of special dividends, may not be far away; "As disposals from the FKI acquisition starts to take place your Board remains committed to its strategy of returning value to shareholders as appropriate".
Conclusion: The Company continues to do "what it says on the tin"; buy, improve, sell! Elster, which it acquired last year is clearly improving under Melrose management and last week it announced the sale of Truth. The Board is clearly confident; "Overall the performance of the Group during the Period has been encouraging and your Board remains confident about the outcome for the year".
I added to the holding last week as the price has been weak in recent months on fears that results would be impacted by slowing economic growth. Hopefully today's announcement will restore confidence that despite a difficult trading environment the Company is improving the performance of its underlying businesses through self-help. On consensus forecasts the shares are valued at 13.7x 2013 earnings falling to 12x 2014 earnings for 14% growth and the prospective 2013 dividend yield is forecast at 3.3%. Very Happy Holder!
Laird has gone ex-dividend 6.6p per share today and Regenersis 0.67p
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