Good morning! Churchill China (LON:CHH) issues a positive trading update today, saying that strong trading in Nov & Dec means that its operating performance for calendar 2013 will be "significantly ahead" of 2012, and will exceed current market expectations. It's a pity they have not quantified by how much they are likely to exceed expectations, as they have now created uncertainty. I would have much preferred if they gave an approximate percentage by which profits are likely to exceed the prior year, which should be possible if they have decent financial controls & reporting.
EPS for 2012 was 19.5p, and current broker consensus is for 23.2p EPS for 2013. So if they are likely to significantly exceed that, then I would imagine we're probably looking at somewhere in the 25-30p range? Maybe more, who knows? That's the problem now, we're being forced to guess what their performance might have been, which I don't like. They should have been more specific in the announcement, giving clear guidance by quantifying likely EPS, even if that means giving a range, rather than an exact figure.
I've re-written this section to reflect the big share price rise this morning:
The shares are currently 465p to buy, so a 25-30p EPS range means a PER between 15.5 to 18.6, probably towards the lower end of that range I would guess. The company also has net cash, and pays a decent dividend, which was held at 14p per share between 2008-2011, and started rising (slightly) in 2012. So a payout of 14.5p is forecast for this year, maybe they will pay 15p or more, as they have out-performed for the year? That equates to a dividend yield of 3.2% at the current buying price of 465p per share, which is fairly respectable.
The spread is very wide here, and it's a pretty horribly illiquid share. The three largest holders hold 50% of the shares, so that means the free float is quite small, and not many shares are traded on most days.
This one might make a good longer term investment though, as you would imagine that with many signs of the economy recovering, the hospitality sector is likely to be buying more crockery than in the last few years, indeed there is probably pent-up demand. So things are looking good for the company, well done to holders…
