New Year Review Of Holdings; Two More! Lamprell And Plastics Capital. Just Three To Go!

8th Jan '14 by johnrosier

7 comments 14737 reads

Dixons Retail (47.5p and 4.4% of JIC Portfolio); with an average in-price of 21.5p this has been a very successful holding so far. Management have done a great job sorting out the business over the last few years. It has exited most of its loss making business and is now pretty much focussed on its successful UK and Nordic businesses. In the UK it now has a much better offering through the PCWorld/Currys superstores with a greater emphasis on service and aftercare. In addition it has done a good job with its multi-channel offering; the internet compliments the in-store experience. As ever at this time of year there will be nervousness ahead of its Christmas trading announcement but I would hazard a guess that it has done okay. I could of course be wrong but electrical sales at John Lewis were strong and various utterances from the company on the likes of twitter suggest footfall was strong. Consensus forecasts suggest 30% earnings growth in the current year ending April 2014 to 3.1p, putting the shares on 15.5x, followed by 15% growth to April 2015 valuing the shares at 13.5x. which looks good value to me. In addition the company is now cash generative and has eliminated its debt. Another nice chart below; I guess I would only get nervous if the 200 day moving average (black line) did not provide support. I think the recovery has further to run and am thus a Happy Holder.

Worldwide Healthcare Trust (1235 and 4.5% of JIC Portfolio); up 56% since purchase, this is another play on the Biotech/Pharmaceutical theme described in my posting on Biotech Growth Trust below. It is also managed by Orbimed but focuses on larger pharmaceutical and biotech companies and is described as having lower risk than Biotech Growth Trust. I guess that has been born out with its performance; its share price has been less volatile but also not quite as strong. The chart below looks great with a nice uptrend. Happy Holder!

Biotech Growth Trust (473p and 4.9% of JIC Portfolio); Up 87% since purchase, this, my fifth largest holding is my way of playing a long term favourite theme of mine. I have met the management of the trust regularly over the last two years, most recently in November…

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johnrosier

7th Jan '14

Laird (279p and 3.7% of JIC portfolio) I built up my holding between June 2012 and June last year and am currently showing a 50% return on my investment. Unfortunately I reduced the holding last August at 189p as I was concerned about the interim results which showed a worse than expected first half. Fortunately, I only reduced the holding to 3% noting the prospective dividend yield of 6.2% and the directors’ confidence that the second half would show an improvement. On my part a case of looking backwards rather than forwards perhaps! On consensus forecasts it expected to grow earnings by 31% in the year just ended, December 2013 putting the shares on a PE of 15.7x. For 2014 it is on 14.0x (12.75 growth) followed by 12.0x December 2016 (16.0% growth). The forecast 2013 yield is now at 4.4% but with the dividend forecast to grow by 8.5% in 2014 the prospective yield is 4.7%. At this valuation I would probably think twice about buying a new holding but the shares clearly have a lot of momentum, see chart below, so for the time being I will not “fight the tape”. Happy Holder!

Berkeley Group (2674p and 3.4% of JIC Portfolio); anyone who has read my frequent postings on Berkeley Group will know that I love this Company. (The affair started in 1990 when I first met Tony Pidgeley on a day trip around some of his developments in Surrey and Berkshire.) It is superbly managed and is managed for shareholders with the directors having substantial shareholdings in the Company. The Company has ambitious targets to return cash to shareholders and to meet its first milestone has to pay out 270p per share by September 2015. Interim results issued in December gave me confidence that this will be achieved. Consensus forecasts are for a pay out of 185p in the year ending April 2015 putting the shares on an April 2015 dividend yield of 6.8% and a further 10% growth the next year putting the shares on an April 2016 yield of 7.5%.This continues to look attractive to me. The shares are clearly showing some momentum. Happy Holder!

Fusionex International (450p and 3.1% of JIC Portfolio) I bought the holding on 8^th October and after moving sideways for a couple of months it has taken off like a rocket and is now up 38%. The catalyst was the launch of its GIANT big data software suite in early December. A further boost was received when its broker, Panmure Gordon, named it as one of its small and mid-cap stocks for 2014. On Panmure’s existing forecasts it expects earnings per share of 9.6p for the year ended September 2013, (up 60% on the prior year), 11.9p (24% growth) in the current year ending September 2014 and 14.5p (22% growth) next year ending September 2016. That puts it on 46x September 2013, falling to 38x and then 31x. On the plus side, it is good to have exposure to a “big data” play that is actually making money but I think the valuation is getting stretched and for it to be justified, will need upgrades to the estimates above. I think that will happen and given the strong momentum the shares have I am a happy holder for the time being.

8th Jan '14

Melrose Industries (MRO) (298p and 3.0% of JIC Portfolio); another one of my long term favourites and very much a management story. The Chairman, Christopher Miller was schooled under the Late Lord Hanson at Hanson Trust but rather than building a conglomerate, Miller, along with long term business partner David Roper, has pursued a “buy, improve and then sell” strategy at Melrose and before that at their previous vehicle Wassall. (Wassall itself was sold to private equity house KKR in 2000). They are not afraid to return cash to shareholders after selling businesses or to ask for cash when they have spotted a new opportunity. The latest acquisition, completed in 2012, was the £1.5bn deal to buy German company, Elster, one of the world's largest providers of gas, electricity and water meters. The timing of the deal was excellent and it is delivering improvements in its operating performance faster and greater than Melrose originally anticipated. On consensus forecasts the shares are valued at 17.3x December 2013 earnings and yield 2.7%. Results should be announced in early March where there may also be news on a return of capital to shareholders from the proceeds of sales it has made in the last year. I have shown a longer chart, since the inception of Melrose, demonstrating to some extent, the value it has built for shareholders over the last 10 years. It is also worth noting that the directors are astute buyers and sellers of their own stock (the green “B”’s and red “s” along the top axis); the well timed buys in December 2008, October 2011 and June 2013 and the sell, ahead of the capital raising for the Elster acquisition, in April 2012. Very Happy Holder!

Igas Energy (108p and 2.9% of JIC Portfolio); the current holding has been built up in three trades during June and July last year. I confess to being a little disappointed with the performance thus far being down 3.5% on my in price. I bought because of the massive potential from its shale gas acreage but also because it has a conventional oil business, generating cash, which pretty much underpins the current share price. In my opinion there is very little in the share price for the potential of its unconventional exploration acreage. Exploration drilling, (for shale gas) is underway at its Barton site and is expected to be completed in Q1 2014, with full analysis taking up to six months; early results are expected before the end of March. In the last three months the shares seem to have gained support at around the 100p level and the 200 day moving average. Holding on in anticipation but would not want previous support levels to fail!

Sainsbury (361p and 2.9% of JIC Portfolio) I only bought this holding on 20th December as a short to medium term trade. See Company Blogs section above. Its Christmas trading statement this morning, although not as bad as some predicted, has failed to excite the market. I’m currently down 2% on my purchase price and although on the face of it a prospective yield of around 4.8% is attractive I fear that Sainsbury might be a “value trap”, in other words it looks cheap but gets cheaper or stays cheap for some time! Having said that I think today’s reaction was a little uncharitable and so will not be ditching it just yet; I will watch over the next few days. I know I am vacillating on this one; it will probably be a source of cash should I need it to purchase something else!

Fangorn

Two superb summaries there JR.
Wouldn't worry too much about SBRY. Despite their LFL Sales beat, Jefferies estimates., a supermarket in ones folio is a core requirement imo. Not just for the reliable cash flow but also for the relative defensiveness of the porty. Of the three main listed supermarkets I'd prefer SBRy as it has the added possibility of an outside takeover.That and the chunkier yield makes it a superior investment compared to Morrisons,and Tesco.

Personally I prefer to hold two, namely both Tesco and SBRY, looking to buy sub 300p/325p respectively, then selling at 365/395p respectively. Am hoping for a larger drop at Tesco on their update tomorrow.

As to IGAS. Definitely an interesting prospect and its had a decent run.Looking to enter on any further weakness ceteris paribus. Shale is certainly the future,political wrangling aside.

Thanks for the updates. Easy to read and a stonking performance your side I have to say.

9th Jan '14

Synectics (555p and 2.6% of JIC Portfolio) I bought this nearly a year ago and am currently up 66% on my in-price. It has drifted back slightly since I trimmed my holding at the end of November when in the short term it looked a little over bought. On 13th December it issued a trading statement saying that it expected results for the year ended November 23 to be in line with expectations. On consensus forecast the shares are valued at 17.1x Nov 2013, falling to 14.6x Nov 2014 (17% earnings growth) and 12.2x Nov 2015 for a further 20% growth. This looks pretty good value to me. I expect the next news to be results for the year ending November 2013 towards the end of February. From a chart point of view the uptrend seems to be firmly in place but I would not want to see it drift below the 540p level. Very Happy Holder!

Intermediate Capital (421p and 2.6% of JIC Portfolio) I bought back into Intermediate on December 18^th at pretty much the current price. In my posting that day I said

“Results for the six months ending 30th September 2013, issued last month, were I thought, pretty good. Fund raising had been strong, with €2.4bn committed to its third party funds and it anticipated further growth in the second half. This should help mitigate the fall in assets under management, which fell by 6% to €12.1bn in the first half, due to a strong period of balance sheet realisations of previous investments. Encouragingly it says that it has a strong pipeline of new investment opportunities, so should be able to put the funds raised to good use.

Earnings per share came in at 33.7p compared to 10.7p the previous year but this figure is a bit of a moving feast, as it depends to a great extent on the timing of realisations of investments in the Investment Company. The dividend was increased by 4.8% to 6.6p and is on course for the consensus forecast of 21.3p for the full year, putting the shares on a prospective yield of 5.1%, which I think looks attractive given the company’s prospects.

Nothing has changed since then; the shares seem to have support at around 420p and although I would not like to see them fall below 400p I am a Very Happy Holder and suspect I could be tempted to add!

Crawshaw Group (24.5p and 2.9% of JIC Portfolio) I bought this holding following a presentation by the Chairman, Richard Rose at the end of November and then added to it on 7^th December having done a little more work on the Company. Including todays 8% rise I am now up around 75% and whilst it might be tempting to take profits I am going to resist. When I did my further work on the stock (see 7^th December post) I came to the conclusion that it would be difficult for it not to achieve at least 1.0p of earnings in the year just ending January 2014, which compared to its broker’s forecast of 0.6p! Since its trading statement on Monday its broker has increased its forecast to 1.0p for this year ending January 31^st 2014 and 1.3p for next year putting the shares on 24x for 23% growth and 18.8x next year for 30% growth. Arguably it still looks okay value on those valuations given the growth. I suspect however that both of these sets of figures will be upgraded and, we will soon have a forecast for January 2016. I think the Company has good medium and long term growth opportunities from rolling out its format from its 20 odd current estate and so will let this position run! Very happy Holder!

10th Jan '14

Lamprell (133p and 2.4% of JIC Portfolio) I bought back into this stock in mid-October, (see posting in Company Blogs tab above) as a recovery play following its travails of 2012! Thus far it is down 13% on my acquisition price and is my worse performing holding. The last news from the Company was a trading update on 14th November which I have re-read this morning; it said it expected results for the year ending 31st December 2013 to be in line with expectations and the overall tone of the statement was reassuringly confident. I believe that the next news will be a full year trading statement at the end of the month. The share price has been disappointing so far; I am starting to run out of patience but as long as the 130p level, which has acted as support for the last 6 months holds, I am minded to hang on for the next news as I still believe in the initial premise behind my purchase.

Plastics Capital (137p and 2.3% of JIC Portfolio); I purchased my holding on November 26^th (see Company Blogs tab above for my explanation) and am up 18% so far. The shares are behaving well and look to be in a nice uptrend. An engineering business like this, although extremely well managed and focused on some niche businesses where it is building strong market shares, is never going to command a huge rating given the cyclical nature of its operations. Having said that, it is building up its presence in fast growing markets such as China and is forecast to grow earnings at some 20% per annum in 2014 and 2015. On its broker’s estimates it is valued at 12.9x the year ending March 2014 (79% growth), falling to 10.7x March 2015 and then 8.7x March 2016. Notwithstanding my earlier statement, to me this seems too cheap given the quality of the management and business and its growth opportunities over the next few years. Happy Holder!

New Year review of Holdings; Two More! Lamprell and Plastics Capital. Just three to go!

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