A Leisurely Update: All Leisure Group, City Of London Investment, And Signet Global

20th Feb '13 by CantEatValue

2 comments 5822 reads

Now I'm not expecting to do frequent portfolio updates as I don't trade very often and most short-term market movements are just noise anyway but quite a lot has happened to my portfolio in the past month and a half so I thought I'd better get my thoughts together. Yesterday, my largest position - All Leisure (LON:ALLG) - announced their 2012 results. It's risen quite a lot this year, ~57% even after the pull back after the results, but I'm getting increasingly bullish on this share and don't see any need to trim it yet. It's actually my pick this year (and last year!) for the Motley Fool's share competition and I did a write up here as well as follow up comments so I recommend reading that first before reading this blog post.

The results at first seem very subdued. Revenue takes a large jump up but full year profits were tiny at £0.8m. What's there to be excited about? Well, 2012 is pretty much a transitional year for ALLG. Due to a weak cruising market (partly due to the Costa Concordia tragedy) and a fleet in need of a revamp the directors took the decision to pull three (out of four) of their ships out of service for a good part of the year for upgrades. Also, for one of their ships a third party charter pulled out and left the vessel out of service (during which they decided to do the upgrades). As a result, their cruising division showed a stonking loss for the year of -£6.9m - they say the loss of the charter 'contributed significantly' to this loss. However, this is in the past and we now have a fleet that's been recently upgraded and ready to operate at full capacity again. This appears to be paying dividends already:

"At the start of the winter 2012, mv Voyager was in the exceptional position of being 82% sold for that season prior to her inaugural sailing. Currently revenues per diem for mv Voyager are forecast to be 20% higher than achieved 2011/12 on mv Discovery. This is driven by the increased number of outside and balcony cabins and less capacity."

"Over the winter 2011/12, mv Minerva was out of service for just over three months, whilst a substantial technical upgrade was carried out. During this time…

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fek47

17th Jun '13

Good morning CEV,

Any thoughts on City of London Investment (LON:CLIG) 's results this morning? I personally think the results are quite positive (since we already knew FUM were going to be well down on last year, but sounds like things are moving in a positive direction now.

I like the non-sugar coated tone of the RNS as well - no making of excuses or down-playing of poor results, just telling it as it is. 10% dividend yield not to be sniffed at either (at today's SP).

Francis

CantEatValue

Hi Francis,

I still hold CLIG and have added a bit more recently. I think the price here is pretty daft given the inherent characteristics of asset management companies - high margins and returns on invested capital - normally mean they trade at premium multiples because any growth requires so little invested capital to achieve (and can hence be distributed to shareholders or used for non-organic growth). CLIG is essentially being hurt by the weak performance of emerging market equities over the past few years, leading to outflows generally from investors (This isn't unique to CLIG but a whole market trend http://blogs.barrons.com/focusonfunds/2013/06/14/investors-pull-money-from-stock-funds-led-by-hong-kong-and-emerging-markets-etfs/). In the long run, I think EM equities will do perfectly well and relative to other markets they look pretty attractive right now on CAPE and dividend yield metrics (http://www.mebanefaber.com/2013/04/02/investing-in-high-dividend-years/) and it's always better to buy after a good period of underperformance as you can benefit from mean reversion. There's also mean reversion to come from their discount-to-NAV closed end fund approach closing. The market is pricing these as though they are structural issues whereas I believe they are cyclical and will eventually mean-revert. The key word though, is 'eventually' - it could well take years before this happens.

The trading statement today was pretty much in-line so the P/E now is ~10 and given all earnings are being paid out that's a generous 10% yield. I like management's confidence in maintaining the dividend. The market is valuing this business very much on the short term problems but CLIG's long term history & growth is very positive as a result of their superior investment performance (they've comfortably beaten their benchmarks over very long time periods) and their owner-operator culture.

That being said I'm still concerned by the recent departures of senior management but with Barry & other insiders still owning a large chunk of the company I trust he'll take the actions most appropriate to steer the business for the long term.

A Leisurely Update: All Leisure Group, City of London Investment, and Signet Global

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