I Read The News Today Oh Boy! 31-Aug-2017

31st Aug '17 by matylda

13 comments 6980 reads

Morning all!

Huge rush this morning, loads to get through (although it maybe doesn't look like it) – Apologies now, for the late report and potential early morning rushed errors.

Do feel free to correct and comment…

Churchill China (CHH) – 6 Months Results To End June 2017 - Seems to grow Revenues slowly but on the other hand Profits rise quite nicely (CAGR 20%+) – Although this looks forecast to change…

Margins may have been improved now (almost doubled in 5 years to 12.5%) to their operating maximum – Perhaps! Nothing to excite me here (on a PER of 17) or to suggest this will do little more than range (could be a decent range trade spread bet 800p/1150p, perhaps!). There is a small Dividend of just over 2% (which is well covered) and also adequate cash (10% of current Mkt Cap) so for those seeking some income with the potential for (maybe) some growth - Could be worth a look.

This positive update confirms Revenues up just 8% and PBT up 30%...

And confidence to up the Interim Dividend 17%, impressive if it can be maintained!

FIH (FIH) – AGM Statement - A strange one this – A holdings company involved in what appears to be a mixed bag; “general trading in the Falkland Islands, the operation of a passenger ferry service across Portsmouth Harbor in the United Kingdom, and the provision of international arts logistics and storage services.”. Revenue growth is slow, Profits are falling, ROCE below 5% is poor. This has doubled this year – Perhaps I am missing something, perhaps not! Anyway, one for my “It’s complicated” bucket.

Note, this AGM confirms a new Chairman and seems to be trying to put positive spin on revenues and numbers which are down - Not as much as they were the previous year (if you know what I mean. Anyway, as I mentioned, for me – It’s complicated.

McColl’s Retail (MCLS) – 3^rd Quarter Trading Update To 27-Aug-2017 - This “neighborhood retailer” was on one of my watch lists for ages around the 200p mark. I liked the numbers but just couldn’t see the potential for growth. Since then of course it’s done a deal with Co-Op (298…

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iwright7

31st Aug '17

My 6p....

Arrow Global (LON:ARW) has delivered with +47% revenue and +36% underlying H1 EPS growth. Strong pipeline and “meet expectations” full year outlook. Arrow is a 10p/£ buyer of distressed European bank and credit card debt. With an Italian acquisition now completed and 2 new Irish ventures announced their growth potential increases substantially. Interesting to see what the brokers say? I continue to hold.

MrContrarian

AvangardCo Investments Public (LON:AVGR) H1 marginally below mgmt expectations, largely due to continued fluctuations in the Ukraine egg market.

SRT Marine Systems (LON:SRT) New contract to supply customised AIS products to one of the world's leading marine electronics companies. No numbers. Unclear if this is existing customer.
https://twitter.com/MrContrarian/status/903147720952602624

matylda

Yes spotted that Arrow Global (LON:ARW) update, being larger than my usual £500m Mkt Cap limit and due to time constraints I did not include - Thanks for sure for pointing it out - Seems a potentially risky business though!

Beginner

Re FIH (LON:FIH) the Rowland family and associates hold much of the company. Delisting was rumoured some time back. Probably worth avoiding (sorry to be so continuously negative!)

FREng

Do you know what methods Arrow Global (LON:ARW) uses to extract cash from distressed debtors? This feels like a risky business, and not one I would want to invest in.

cig

FIH (LON:FIH) price went up on an Argentine dude's bid (for the Falkland assets) that the board rejected to save the British Empire or some such gobbledegook. It's remained stuck in the vicinity of the bid price since for some reason that's not clear to me. (I sold out at that time.)

Wol

Re: ARW, relying to iwright7
ARW has been a strong favourite of mine for several years but the market has only just begun to cotton on. And the Stockopedia Stock Ranks don't rate it. I am not sure that the stock ranks work well for financials. Key points:
* EPS CAGR = 47%
* ROCE = excellent
* net gearing is negative - amazing for such an asset heavy company
* book value per share CAGR = 123%
* free cash flow is consistently negative - not surprising as they are buying up large books of debt
* the main business (as you say) is to buy up "unperforming" loan books at 10% of face value and then use their advanced systems to find the debtors and negotiate sensible repayment profiles. This is good for the debtor (slow / partial repayment) and good for ARW (recovering just 20% of the original loan is already a 100% gross profit for ARW)
* they also have an asset light income stream - providing these debt collection services third parties - lower profits but no need to buy the debt portfolios and no risk
* I think the market is scared that recoveries will tumble in the next recession. ARW say they had a good record of debt recovery during the last recession and are confident of continuing to profit across the cycle.
There has also been talk of a bid from private equity. I hope they don't succeed. The private equity model is to buy up under valued assets on the cheap. I'd rather wait for the continued re-rating as the market recognises the value of this business.
I have held for several years. This is one of my biggest holdings.

The ARW website has a lot of info on how they collect debts. They are clearly not a "knock on the door from a couple of local heavies" type of organisation.

beatingmrindex

Surprised no one has mentioned Restaurant (LON:RTN) - figures don't look good but you could argue a turnaround situation... Still on my radar and still not tempted.

Not sure that it's net good for debtors, being maintained with your head slightly above water for years might be worse than getting a personal bankruptcy done and dusted... and some will end up going through bankruptcy anyway, having vainly paid dividend to shareholders who are so much richer than them. On some less borderline cases it may genuinely help, but hard to see a net social benefit in such an unbalanced war (the debtors don't have behavioural scientists advising them on the best course of action towards creditors...).

Reply to cig e ARW.
Point taken.
Yes, maybe my saying it is best for the debtor too was a bit glib. There may be cases where a negotiated settlement eases the situation. I could even argue that facing up to the consequences of your actions can be a good learning lesson. And it is probably better than having the men with tattoos turning up at your door. However you are also right to say that being kept head just above water could often be worse than a personal bankruptcy.

Reply to cig re the morality of ARW's debt collection approach
You raise the bigger question of where to draw the line on ethical investments. Cigarette companies? Big Pharma? The banks who offer in-repayable loans to the poor at excessive interest rates? Armaments manufacturers? IT and technology companies whose services are used by governments to track the communications and activities of their opponents and anyone who might not support them?

Is there really any difference between a bank or credit card company negotiating re-payment of debt or a specialist agency, provided its within the law. When a bank is owed money and sells debt for 10p/£, they lose 90% and its the bank (and their shareholders) that pay this price for poor lending decisions/excessive borrowing. It's the banks that sell on the debt and it's not surprising that in a capitalist world some else takes on the collection risk, in expectation of making money from their endeavours. Suggest a finger is pointed at the banks first.

I Read The News Today Oh Boy! 31-Aug-2017

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Matylda

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