UK Investor Show - Mark Slater (Part 2: Share Picks)

Tuesday, Apr 16 2013 by
11
UK Investor Show  Mark Slater Part 2 Share Picks

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)

Film distributor

Peppa Pig is doing well

Single digit forward PER, unusual for growth company.

Shares held back by large Sep 2012 Placing.

Modestly geared.

Very low risk.

Benefitting from move online, e.g. NetFlix.

 

My comments:

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.

 

My comments:

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.

 

 

Restore (LON:RST)

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.

 

 

Cineworld (LON:CINE)

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%

 

My comments:

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.

 

 

 Interserve (LON:IRV)

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!

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IG Group Holdings plc, based in the United Kingdom, provides retail traders with access to the financial markets. The Company offer trading opportunities on interest rates, government bonds, exchange-traded funds (ETFs) and a number of other markets. The Company provides contracts for difference (CFDs), spread betting, stockbroking and North American Derivatives Exchange (Nadex). The Company operates in five segments: United Kingdom, Australia, Europe and Rest of World. The United Kingdom segment includes financial spread bets, contracts for difference (CFDs), margined forex and binary options. The Australian and European segments includes CFDs and binary options. The Rest of World is engaged in the operation of a regulated futures and options exchange as well as CFDs and binary options. more »

Share Price (Full)
756p
Change
1.0%
Mkt Cap (£m)
2,741
P/E (fwd)
16.8
Yield (fwd)
4.2

GlaxoSmithKline plc. (GSK) is a healthcare company that researches and develops pharmaceuticals, vaccines and consumer healthcare products. The Company operates in two segments: Pharmaceuticals and Vaccines, and Consumer Healthcare. The Pharmaceuticals segment develops and makes medicines to treat a range of acute and chronic diseases. Its human immunodeficiency virus (HIV) business is managed through ViiV Healthcare. GSK's Vaccines has a portfolio of over 30 paediatric, adolescent, adult travel vaccines. GSK's Established Products Portfolio includes over 50 off-patent products, as well as its branded generics business and other local products. The Consumer Healthcare business develops and markets products in four categories, such as wellness, oral health, nutrition and skin health. Its brands include Sensodyne, Panadol, Horlicks, Polident, Paradontax, Tums, ENO, NiQuitin/Nicorette, Abreva, Zovirax and Aquafresh. It operates in the United Kingdom, the United States, Belgium and China. more »

Share Price (Full)
1400p
Change
0.3%
Mkt Cap (£m)
74,110
P/E (fwd)
16.9
Yield (fwd)
6.2

Interserve Plc is a United Kingdom-based support services and construction company. The Company provides a range of integrated services in the outsourcing and construction markets. It has four operational segments: Support Services, Construction, Equipment Services and Investments. Support Services focuses on the management and delivery of operational services to both public and private-sector clients in the United Kingdom and internationally. Construction segment offers design, development, consultancy and construction services for building and infrastructure projects. Equipment Services operates globally, designing, hiring and selling formwork and falsework solutions for use in infrastructure and building projects. Investments segment is engaged in project-investment activities and manages the Company's equity investments both in Public Private Partnership (PPP) and private-sector projects. more »

Share Price (Full)
639.5p
Change
-0.9%
Mkt Cap (£m)
937.3
P/E (fwd)
9.7
Yield (fwd)
4.0



  Is IG Group fundamentally strong or weak? Find out More »


5 Comments on this Article show/hide all

CantEatValue 15th Apr '13 1 of 5
3

I don't like Entertainment One (LON:ETO) for the following reasons:

1) Heavy dilution has pretty much meant no growth in per share attributes. Sales per share were £2.63 in 2009 and were £2.58 in 2012. There has been further dilution since then. Amazing growth if you can completely ignore heavy share issuance, which you can't.

2) Aggressive profit accounting. The company has since 2009 been a net consumer of cash to the tune of 18.7p per share (I'll ignore 2008, which makes this figure even worse, because I'm being generous). All the 'profits' are accounting ones and the company has not translated these in to cash. Perhaps it's a case of the business needing to consume lots of cash in order to finance growth (As per point 1 - what growth?!) but that's not a positive sign.

As I'm a fan of businesses that end the year with more cash than they started with or can demonstrate that their extra investment is leading to genuine growth (ETO has failed both these metrics since floatation) ETO doesn't interest me and I think it's one Slater's weaker picks. My favourite is £C21 (the only one of his I own) so I hope he's right there though :)

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andybe 15th Apr '13 2 of 5
1

Mark Slater also mentioned Restore (RST), records management/archiving. Market cap is £141m, they are growing through acquisition and the forward P/E is 11.7.

I see that on 20 March, alongside their final results for y/e 31 Dec 2012, they announced the acquisition of File & Data Storage Ltd for £6.1m, with the intention to raise £7m from institutional investors through a share placing. Net debt is £17.8m which looks a bit high for me compared to profit and forecast profit, although I haven’t looked at this company in any detail.

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Paul Scott 16th Apr '13 3 of 5
1

In reply to andybe, post #2

Thanks for flagging up this omission. I did include Restore in the report, but it vanished at some point due to technical problems! So I've put it back in now, many thanks for flagging up this problem. I also didn't feel particularly warm about Restore when I looked into it following the meeting.

P.

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bsharman 23rd Apr '13 4 of 5

I note that Mark didn't mention NCC and since the UK investor event the company has issued a warning on a lower than expected profit (3-4% below expectations). The share price fell on the news and is today trading at 111p. This is the first profit warning for 10 years and is due to "small, unrelated factors have held back the Group's overall rate of expected growth" any thoughts on NCC. Would this be a good opportunity to buy at a discounted value or perhaps there will be more warnings to come in the future...

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About Paul Scott

Paul Scott

Paul trained as an accountant, then spent 8 years as FD for a ladieswear retail chain.He became a professional small caps investor in 2002 to date.Paul writes a small caps report for Stockopedia.com on weekday mornings. He joined Fundamental Asset Management Ltd as a research associate in 2014, as part of their Small Cap Value Portfolio team. more »

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