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

Tuesday, Apr 16 2013 by
12
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,…

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As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested.


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Change
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Mkt Cap (£m)
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P/E (fwd)
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Yield (fwd)
3.9

GlaxoSmithKline plc (GSK) is a healthcare company. The Company is engaged in the creation and discovery, development, manufacture and marketing of pharmaceutical products, including vaccines, over-the-counter (OTC) medicines and health-related consumer products. The Company's segments include Pharmaceuticals, Pharmaceuticals R&D, Vaccines and Consumer Healthcare. The Pharmaceuticals business develops and makes medicines to treat a range of acute and chronic diseases. The Vaccines business develops, produces and distributes over 1.9 million vaccines every day to people across the world. The Consumer Healthcare business develops and markets products in various categories, such as Wellness, Oral health, Nutrition and Skin health. The Pharmaceuticals Research and Development (R&D) focuses on the discovery and development in various areas of research, which include human immunodeficiency virus (HIV) and infectious diseases, oncology, immuno-inflammation, respiratory and rare diseases. more »

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Mkt Cap (£m)
80,857
P/E (fwd)
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Yield (fwd)
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Interserve Plc is a United Kingdom-based support services and construction company that offers advice, design, construction, equipment, facilities management and frontline public services. The Company provides a range of integrated services in the outsourcing and construction markets. It operates through three segments: Support Services, Construction and Equipment Services. The Support Services segment focuses on the management and delivery of operational services to both public and private-sector clients in the United Kingdom and internationally. The Construction segment offers design, development, consultancy and construction services for building and infrastructure projects. The Equipment Services segment operates globally, designing, hiring and selling formwork and falsework solutions for use in infrastructure and building projects. It provides outsourced services in sectors, such as hospitality, leisure, education, defense, retail, and oil and gas across the Middle East region. more »

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280.25p
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Mkt Cap (£m)
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P/E (fwd)
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Yield (fwd)
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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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