Albemarle & Bond Hldgs (LON:ABM) (ABM, 267.5p, £148.46m) Prelims for the year ended 30 June 2010 are in line with market expectations. Revenues increased by 48% to £82.0m, PBT increased by 37% to £20.0m, EPS rose by 34% to 26.2p and DPS increased by 34% to 11.75p. The core pawn broking division performed strongly, with the ledge book up 16% y-o-y. Albemarle and Bond derived £11.5m (2009: £1.4m) of gross profit from gold purchasing, driven by the high gold prices.  The strong cash flow reduced net debt to £21.1m (2009: £30.8m). The group has opened 17 new stores in the period bringing the total to 132 stores and 15 pop up shops. We anticipate 25 new store openings in the current financial year. The new stores will provide the underpinning for future profit growth. However we remind investors the scale of profits currently generated from gold purchasing is not sustainable. The outlook statement is positive. The market forecasts profits and earnings to remain relatively flat in the current financial year. We believe the scope of another downturn will benefit the group. The stock trades on a 2011 prospective PER of 10.2x, a premium to H&T, given its more mature estate. The historic yield of 4.4% encourages us to upgrade our recommendation to a BUY.  

Character Group (LON:CCT) (CCT, 149.0p, £36.98m), the designer, developer and international distributor of toys, games and giftware, has secured the master toy license for 'Bob the Builder' in UK and Eire. Under the multi-year agreement, the group has obtained the rights to develop all new toy products based on 'Bob the Builder' and his 'can do' crew and will be launching new ranges across vehicles, figurines, plush and role play. The products will be available at retail stores for the Autumn/Winter season 2011. The agreement highlights the group’s focus on broaden their product portfolio. Following the upbeat trading statement, the market has upgraded PBT to £7.2m, EPS to 21.07p and reduced DPS to 3.0p. We believe the group is undervalued trading on 7.1x in 2010 and 6.0x in 2011. The low valuation combined with a yield of 2.0% in 2010 and good growth prospects (Yr 1 prospective EPS growth of 111%) justifies our BUY recommendation. We upgrade our target price from 156p to 198p.  …

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