This is a continuation of an earlier post (part 1). I have split them into two parts, as the length of the post was causing formatting problems.
"What would I buy today?"
Mark Slater then circled back to his stock picks, and zoomed in on his current favourites, as follows:
Entertainment One (ETO)
Peppa Pig is doing well
Single digit forward PER, unusual for growth company.
Shares held back by large Sep 2012 Placing.
Very low risk.
Benefitting from move online, e.g. NetFlix.
I like this one, and the forward PER does indeed look good value for a growth company. I shall wait until the next set of results, due on 23 May 2013.
Huchison China Meditech (HCM)
Share price 541p - market cap £280m
"There's normally something wrong with overseas companies that want to List in the UK"
I couldn't have put it better myself, so I switched off and didn't take notes on this company, but mention it for completeness.
Alliance Pharma (LON:APH)
Share price 36p - market cap £90m
Last two years fairly quiet
Problems largely behind them now.
Buys up old drug rights cheaply.
On a PER of 10.5.
None of brokers have included any growth from acquiring new products.
Growth should actually be double-digit.
Very impressive operating profit margin, so they have a lucrative niche. Once debt is factored in though, it looks reasonably priced to me, rather than particularly cheap.
Share price 125p - market cap £142m
- Document storage company
- Cheaper for e.g. solicitors to securely store documents, than more expensive scanning.
- Buys smaller companies.
- Low PER of 10.8.
- More deals likely.
Share price 278p - market cap £415m
Has 25% of the UK cinema market Resuming its roll-out, currently has 78 sites. Will add 4 new sites this year, and 5 each year thereafter. ROCE is 20%, so roll out makes commercial sense. Managing its estate well. Digitising screens, so they can be used for other purposes. 11% p.a. growth. PER is quite low at 11.8 Good dividend yield of 4.6%
As with almost everything, the shares have had a good run, so the question is whether they are still good value? The PER looks reasonable, but bearing in mind that CINE also has £127m of net debt, then the Enterprise Value is probably about right, in my opinion.
IG Group (LON:IGG)
Share price 540p - market cap £1.97bn
Clear market leader (in spread betting & CFDs) Still growing, especially outside the UK. PER is 14 times. Dividend yield is good at 4.3% Higher market volatility will increase earnings by 13%.
Galliford Try (LON:GFRD)
Share price 915p - market cap £749m
Bought land cheaply at the right time. PER is reasonable at 12.4 times. Dividend yield of 4.4% Management say will grow rapidly.
Share price 481p - market cap £626m
PER of 10 Dividend yield of 4.6% Order book growth. Well positioned in Middle East. Conservative accounting policies. Management are targeting 80% growth in EPS in next three years. This is well ahead of market forecasts. Good operational gearing.
Glaxo SmithKline (LON:GSK)
Share price 1570p - market cap £77bn
Dividend stalwart Drugs shares lead the stock market in the USA, but not in the UK. PER of 13 Dividend yield of 5% Unpopular with investors = good, more likely to be a bargain. Massive & deep pipeline of products. Already passed the "patent cliff" (i.e. expiry for key products) Non-cyclical.
I don't have any views on large caps, so didn't add any of my comments for the last few.
Thanks again to Mark Slater for an informative & enjoyable presentation.
Regards, Paul Scott.
(of the shares mentioned, Paul holds no long or short positions in any of them)
P.S. Sorry for the awful formatting, something has gone wrong with the coding & I've re-done it 6 times now, and it corrupts every time, so it's staying like this now I'm afraid!