Small Cap Value Report (14 Jun 2016) - NXR, DSG, TRI, CML, CYAN
Good morning!
EDIT: Forgot to mention, I've been nominated for an award for writing these reports! How exciting. Let's hope the judges didn't see last Thursday's, when I was plastered. It's the 2016 Small Caps Awards dinner this Thursday, and I'm on the shortlist of 3 for "Journalist of the Year". Here is the link, it's the 7th section down. So keep your fingers crossed for me!
Fairly busy for results today, so thought I'd better start a bit earlier to fit it all in.
As no doubt you've already seen, markets are really going wobbly at the moment, with all this uncertainty about Brexit. I enjoyed our reader discussion in the comments section here after yesterday's report. If only the politicians could have such a sensible & courteous discussion as we managed.
Taking everything into account, the only bit I'm really worried about is the impact on the financial sector. Although City veteran David Buick reckons there's nothing much to worry about on that front, in this video.
There's also a fascinating article from former Chancellor, Norman Lamont, in which he runs through some figures which suggest the UK would have a better trading arrangement outside the EU. His argument is that paying the 3-4% external tariffs to the EU would actually be cheaper than our present arrangement, which works out as the equivalent of a 7% tariff! Plus of course we would collect in a mint from taxing German cars ourselves with a 3-4% import duty. I wish there had been more commentators who had actually crunched the numbers properly. It's mainly just baseless assertions from both sides.
The betting odds have narrowed sharply to about a 40% chance of Brexit happening, and equity markets are floundering, I'm sure most of us are taking some pain in our portfolios right now.
There are lots of bargains appearing, especially in illiquid stocks. In normal circumstances I'd be snapping up those bargains, but given the Brexit uncertainty am sitting on my hands for now, probably like most other people. So I think we could see some even better bargains appear over the next fortnight from panic selling.
Volatility is part of investing in equities. I think it's important not to get shaken out of great companies at the wrong time & price, only to miss the rebound. Having said that, this is definitely not a time to be geared, in my view.
Anyway, on to what I'm supposed to do - looking at company results & trading updates. There are about 12 that I'd like to cover today, so will see how far we get.
Norcros (LON:NXR)
Share price: 177p (up 2.3% today)
No. shares: 61.0m
Market cap: £108.0m
(At the time of writing, I hold a long position in this share)
Results, y/e 31 Mar 2016 - these are good results in my view, especially given how low the rating of this share is. Although, as with other shares, there's unlikely to be much buying until the Brexit vote is done & dusted.
Here are some key points I noted down whilst reading the results:
Profit marginally ahead of expectations
Revenue up 6.3% to £235.9m (driven by acquisitions)
Underlying profit before tax up 29.1% to £20.4m - clearly a good result. That's a lot of profit for a business with a market cap of £108m.
Underlying diluted EPS up 31.8% to 27.8p - so the PER is currently only 6.4. That seems considerably lower than it probably should be.
The one item I would query in the adjustments, is the £1.7m administrative cost of the pension fund (see table below). To my mind that needs to be left in as a cost, when valuing this share. Note that exceptional items were a credit this year - on a land deal.
(Norcros table)
So the PER would actually be a little higher than 6.4, if you reverse this pensions adjustment. The latest note from Numis reports actual EPS as 24.6p for FY2016, so it looks as if they've possibly made the same adjustment.
The PER on Numis's figures is 7.2 - still dirt cheap, as they have been pointing out for some time in their reports on Norcros. It's a significant discount to sector peers. It remains a bit of a mystery as to why the market takes such a negative view in valuing Norcros shares, when the company is actually performing rather well, and making excellent acquisitions too. There's a clear opportunity for a re-rating here, but continued patience may be required.
Numis has a forecast of 27.0p EPS for this year (FY2017), giving a forecast PER of 6.6
Net debt is £32.5m - which looks reasonable to me. It is only 1.2x EBITDA (commonly used by banks as a key measure). There's plenty of headroom on a total £100m bank facility.
Pension deficit is £73.5m on the last actuarial valuation, clearly a big issue. However, overpayments of £2.5m + CPI look reasonable, and can be comfortably afforded.
The pension deficit on the balance sheet is lower, at £55.7m - but still clearly a big issue that needs to be taken into account when valuing this share.
Total dividends of 6.6p this year (up 18% on last year, so a usefully progressive dividend policy). The yield is 3.7% - a good return whilst we wait for the shares to eventually re-rate.
Three acquisitions - Vado last year, Croydex & Abode this year - are trading well.
S.African operations have absorbed currency headwinds, even reporting increased profit in sterling terms - impressive stuff. £4.1m profit this time (£3.2m last time). The 5.6% operating margin (4.4% last time) is starting to look more reasonable, although still well below the UK margin of 10.6%.
Overall group margin of 9.0% (7.6% last time) looks quite good, and surely justifies a higher rating than a PER of just 6.4? (even allowing for the debt & pension deficit).
Outlook - a bit mixed, but OK overall, is my interpretation of this:
The Group has made good progress towards its strategic targets during the year. Whilst the outlook for the market in the UK is somewhat variable in the short term, with general uncertainty caused by the UK's EU referendum exacerbated by challenges in our DIY retail sector, improved RMI spend and increased housebuilding activity in the medium term should benefit the Group with good growth opportunities.
Our South African businesses have continued to perform strongly, and, despite recent political and economic concerns, the medium-term outlook in South Africa remains positive, providing opportunities for the Group to gain added momentum.
With our leading market positions, portfolio of strong brands, continued new product investment and self-help initiatives focused on market share gain, the Board remains confident that the Group should continue to make further progress for the year ending 31 March 2017.
Remember that Abode was acquired at the end of the year, so didn't kick in any significant P&L activity, however its full balance sheet is in the group accounts on 31 Mar 2016. So that has distorted working capital movements somewhat. The benefit will be felt in the P&L in this new year.
Similarly, Croydex will contribute a full year in 2016/17, as opposed to a part year in 2015/16. So we should see a further increase in EPS.
My opinion - this is a core value holding of mine. I'm really pleased with these numbers. Everything looks pretty good, and the valuation seems a clear anomaly. In my view there's a fairly easy 50% upside on this share, to be had at some point in the future if things continue in the same vein.
It's a bit of a dead money stock though - there never seems to be a catalyst to take it higher, and the pension deficit might well put off some potential acquirers.
There again, I'm perfectly happy to continue collecting in the nicely growing dividends, and just wait for the value to eventually be recognised by the market.
(Norcros share price graph)
The group is clearly in much better shape than it was 2 years ago, but the share price is slightly lower. That doesn't make sense, so I'm expecting this one to re-rate decently at some point. No idea when though!
EDIT: I'm seeing Norcros management at a lunch tomorrow. So if anything interesting crops up, I'll edit this article to keep you informed.
Dillistone (LON:DSG)
Share price: 80p (down 7% today)
No. shares: 19.7m
Market cap: £15.8m
AGM Trading update - this is not the easiest of statements to interpret, as the first 4 paragraphs sound very positive, talking about excellent new order wins, etc..
However, the 5th paragraph suggests that additional licences from existing clients are drying up (possibly due to Brexit):
"Despite our excellent performance in the market, the Group has noted a softening of the economic environment over recent weeks. While we continue to win new contracts, it is apparent that many recruitment firms are not currently hiring additional staff, resulting in a reduction in the normal flow of incoming licence orders from existing clients. We would hope that with the Brexit vote imminent this will prove to be a short term phenomenon.
It then goes on to say that full year expectations are unchanged, but might be more H2-weighted:
"Nevertheless, we are pleased to confirm that the Group currently remains confident of delivering growth in revenue and pre-tax profit and meeting expectations for the full year. We reiterate our belief that the second half of 2016 will be better than the first half. The first half of the year is likely to show revenue growth when compared to the same period in 2015, but a slightly lower level of pre-tax profit, reflecting increased costs and depreciation. However, it is expected to show improvement over the second half of 2015.
"In light of these points, the Board is optimistic for the future."
Lots to take in there. The only way to work it out is to refer back to H1 and H2 last year:
| H1 2015 | H2 2015 | FY 2015 | |
| Revenues | £4.71m | £4.73m | £9.44m |
| Profit before tax | £566k | £506k | £1072k |
I've deduced the H2 figures by subtracting H1 figures from the full year figures.
Therefore what the company appears to be saying for H1 2016 is this:
- Revenue will be above £4.71m
- Profit before tax will be slightly below £566k
- Profit before tax will be above £506k
Why couldn't they have just spelt that out, which would have saved me some time!
My opinion - overall then, today's statement looks something & nothing. I bet it scared a few people out of the share though, probably for no good reason.
Looking at the valuation, I'd say it's probably about right.
Trifast (LON:TRI)
Share price: 135.25p (up 0.2% today)
No. shares: 116.8m
Market cap: £158.0m
Results y/e 31 Mar 2016 - this manufacturer of industrial fastenings put out a positive year end trading update, which I reported on here, on 19 Apr 2016. That said the y/e 31 Mar 2016 had ended well, towards the upper end of market expectations.
I've copied the financial highlights section below:
(Trifast table)
Underlying EPS up 15.1% to 9.99p is a good result.
The PER is about 13.5 - which looks sensible to me.
Net debt looks modest at £16.0m, I don't imagine that would cause any problems, unless demand fell off a cliff.
Dividends - 2.8p total for the year gives a fairly modest yield of 2.1%, but note that it's rising quite fast - a 33% increase on last year.
Outlook comments sound quite positive:
In FY 2016 we have seen another year of strong trading, making this our sixth year of continuous growth.
For us, Europe, Asia and the USA all remain key areas for growth both organically and non-organically. Our enquiry pipeline is strong, whilst our core organic strategy of focusing on our multinational OEMs looks set to continue to deliver growth. FY 2017 will be the first full year of trading from our latest acquisition, TR Kuhlmann, and we are already starting to see opportunities coming through as the result of us working together.
On the manufacturing side, the investments we are making to increase capacity and the focus we are putting on making better use of existing capacity, specifically in our Malaysian sites, should start to impact positively on results in the next year and beyond.
Our investment in the UK business, in to both senior sales resource and driving further operational efficiencies, is expected to continue to build on profitability in this region.
Looking ahead there are some macroeconomic factors that we cannot control, including the ongoing volatility in the foreign currency and raw material markets. However, building on the strong performance delivered last year and, with our geographical spread, balanced sector mix and our clear strategies for growth, the Board is optimistic for the current year and the Group's longer term prospects.
Balance sheet - looks fine to me, with a very healthy working capital position.
My opinion - it looks a good company, but I can't see any reason to rush out and buy the shares, with all the current uncertainty.
Brokers are only forecasting modest earnings growth, of about 4-5% p.a., in the next 3 years. So the group will need to do some more acquisitions to spice things up a bit, I suspect.
Overall, this share looks priced about right, in my view. I suppose the attraction to holding this share is that, given good performance in the last few years, it might out-perform against forecasts, giving further upside on the share price.
There's not much time left, so I'll just do some very brief comments on a few more companies:
CML Microsystems (LON:CML)
Share price: 365p (up 0.7% today)
No. shares: 16.2m
Market cap: £59.1m
Results y/e 31 Mar 2016 - a very interesting little company, which says that it: "designs, manufactures and markets mixed-signal and Radio Frequency (RF) semiconductors, primarily for global communication and solid state storage markets". I'm not at all familiar with that sector I'm afraid.
A few comments on today's results:
- Basic EPS up 8% to 18.03p
- PER of 20.2
- Good operating margin
- Low tax charge due to R&D tax credits
- Very strong balance sheet, includes £13.6m net cash
- Freehold property owned - 28 acre HQ site in Essex, with planned development work on surplus land - sounds material to the valuation
- R&D spend is huge, at 27% of turnover. £5.4m was capitalised onto balance sheet, which exceeded the amortisation charge, of £3.3m
- 3 biggest customers make up 33% of turnover - risk
- Positive outlook comments
My opinion - it's a special situation really, as you have the profitable business, but also considerable surplus assets on the balance sheet. Quite interesting, and possibly worth a closer look, in my view.
Cyan Holdings (LON:CYAN)
Share price: 0.195p (down 8.3% today)
No. shares: 7,111.3m before Placing. 14,114.1m after Placing
Market cap: £27.5m after Placing
(at the time of writing I hold a long position in this share)
Placing, subscription, and acquisition - Cyan has finally got away its fundraising, at a lower price of 0.18p per share. This is the one where Tom Winnifrith publicly revealed confidential, price sensitive information about the Placing (according to him at 0.21p), which of course was totally wrong. If anyone is in possession of price sensitive information, whether a journalist or not, they should keep quiet about it.
The result of which is that existing holders have now been diluted more heavily, as the company had to reduce the Placing price and do it at 0.18p. Thanks for that. We really need reform of this ridiculous system where shares continue to trade whilst discounted Placings are being negotiated.
My suggestion is that, if a Placing is being planned at a 5% or greater discount to the prevailing share price, then the shares should be suspended. Otherwise we simply have a false market.
Part of the funds are for acquiring a Swedish company called Connode Holding AB.
Management are putting up £304.5k into the fundraising, and unusually are also taking 1 year's worth of remuneration in shares. A nice touch. I like management putting (or being forced to, perhaps?!) some skin into the game, as part of a fundraising.
My opinion - the outlook for Cyan's smart meters business looks very interesting. Forget about its old activities, in micro chips, that's been abandoned. The £10m contract with Iran could lead to considerably more business. So I'm keeping an eye on this one, and hold a few personally already.
Mind you, I was taken aback by the level of cash burn in the recently published accounts. I vowed to stay away from this type of jam tomorrow share, as they can be very costly. Am already in the red, thanks to the shenanigans surrounding this Placing.
All done for today.
Apologies, but I had to remove all the pictures from today's article, as it all corrupted. Tried to rejig it and get them back in, but it corrupted again. Very frustrating. I believe we're getting a new user interface soon - it can't come too soon!
I have 2 company meetings tomorrow, so that report will be earlier & shorter than usual.
Regards, Paul.
(usual disclaimers apply)
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63 comments
Just a quick comment on CML Microsystems (LON:CML) and their R&D spend, as you've commented that it is quite high. Quick disclosure first though, I'm in the semiconductor industry, so I don't have any position in CML Microsystems (LON:CML). I try and avoid investments where my portfolio will turn down at the same time as potential employers.
Anyway, most people within the semiconductor industry are pretty well paid. CML Microsystems (LON:CML) products look like they are mainly mixed signal, meaning they have analogue circuitry and digital circuitry. People working on the digital side may be well paid in comparison to most people, but we're paupers compared to analogue designers. So anything will analogue circuitry in it will cost a fair chunk of cash to design and support. But since good analogue designers don't exactly grow on trees, provided you keep them happy, then you should have a competitive advantage.
Hi stock picking outstanding value companies with momentum and managing those positions in the context of an overall portfolio strategy and individual trade management of the position (size, target profit Stop loss) is clearly the cornerstone of a successful investment strategy. My question concerns hedging an equity portfolio -
Exit return to cash as per Stop losses
Gold
Or a short etf on the ftse x1 x 2
Clearly the intelligent investor would manage the hedge positioning dependent on market sentiment.
Any thoughts prior to me spending many hours tracking these tools against a great strategy portfolios over the last 10 years?
Jonathan
The positive thing for SCVR readers is that Brexit may well throw up some stonking good shares at silly prices.
For this reason alone I think I may have just persuaded myself to vote out. Who doesn't like a bargain! Plus the chance to give our complacent political elites a decisive middle finger. If hated Eurocrats, bankers, and failed politicians like Tony Blair, Gordon Brown, John Major and anachronistic irrelevancts like the Archbishop of Canterbury all agree on something it seems a fair combat indicator that if we do it it's going to end badly for the common man. We might on reflection want to decline their kind offer to Remain. Who else can they possibly wheel out to scaremonger next?
Noticed TRI in the heading and was looking forward to reading your thoughts - but no report there.
Figures and chairman's statement look good to me - and very nice 33.3% uplift in dividend so happy to keep on holding.
Hi Paul - Could you ask the management of Norcros (LON:NXR) at your lunch how they are planning on meeting the #1 strategic target of growing group revenue to £420m by 2018. Could they put a % confidence level on achieving it by 2018!
Best Wishes,
Ben
Hi all,
My daughter is a junior doctor and looking at buying her first home. She's horrified (rightly, in my view) at the price of houses : she works in London.
When I suggest it's a demand and supply issue, she wonders why we don't just build more houses. When I point to the shortage of doctors and nurses and say, shouldn't we double the numbers we train up ?, she says that's different....
The concept of 'vested interests' is something she hasn't grasped yet !
ATB
Housing is a demand issue http://www.civitas.org.uk/content/files/Restoring-a-Nation-of-Home-Owners.pdf
Paul
You think better bargains might appear in the next two weeks, but I think you’re too optimistic. The question is: when will the market nadir be reached, so here’s my thoughts:
The immediate impact of a Brexit vote will be a schism in the Conservative Party, the ousting of Cameron and Osborne (which might take a few days), then a closing of ranks as the threat of a no-confidence vote in the Commons threatens the re-election of Tory MPs. Presumably, there'll be a move to get Johnson, Gove and IDS in charge fairly quickly, but also a strong counter-reaction from amongst other Tory MPs.
I suspect that whoever wins will find themselves supping from a poisoned chalice - what matters is not the rational best-case scenarios that Leave dream up but the emotional reaction of markets, so there must be a high risk of a sliding pound, an economy slipping into recession and imported inflation (the wrong kind) picking up.
That means lower tax revenues, greater dependence on foreign borrowing (that might require higher interest rates), more spending cuts and a greater dis-satisfaction with our political masters. All this against the two year transitional pain, the uncertainty surrounding how Brexit will physically be achieved and the freezing of investment until the future becomes clearer. So a market dive, the inevitable overshoot, followed by a bounce-back but to nowhere near the levels that the market was a week or so ago, nor where it would be if the vote is to Remain.
If the referendum result is to Remain, it seems to me that the time to buy will be just before the referendum. But what about a Leave result? Would the time to buy be just before the new PM and Cabinet are chosen? Not in the next fortnight, but somewhat longer. Any thoughts?
Paul
Some interesting prices appearing: I would be interested to know what Brexit might do to Next?
Here is an article about filipino nurses: http://www.bbc.co.uk/news/world-asia-18575810
Its a few years old but its still the case now I believe, no shortage of nurses but the demand has gone down.
Seems the NHS is still taking some, why are they not all coming from EU countries? Is language the problem?
Can't see much immoral about offering a good job to a willing worker who wants to sell their labour for the very best price they can get. Stopping someone poor from selling their time to the highest legitimate bidder impedes their life chances, prevents remittances to the needy in the motherland, denies the individual's autonomy and thus is far more immoral (to the extent of being evil) in my view. Plus it's futile.
What sort of person denies someone's right to choose their own employer?
These are not slaves to be controlled, directed to whatever utopian vision we percieve provides the maximum moral outcomes, these are simply people aspiring to something better. Nowt wrong with that and good luck to em.
You are, of course entitled to your opinion, but that opinion doesn't take account of the money spent by governments of developing countries (or their tax payers) trying to improve the lot of their people - it is a very cosy arrangement for us. In all but the most hard-line communist countries highly-skilled employees will earn salaries that are high in relation to the cost of living. Personally, I do see wealthy countries exploiting poorer countries to subsidise their training budgets as a moral issue, but you voice the counter-argument well and I am glad this forum exists for civilised debate. Yesterday's EU debate in the Comments section was the best I've seen in the run-up to the referendum.
The issue of who funds our health service training budget (and the indirect subsidies to nursing salaries, especially in expensive areas such as London, from their better-paid partners) reminds me of how a protectionist European single market holds back development in African countries such as Kenya by erecting trade barriers, especially on agricultural produce. Though I shall vote to leave and am prepared to pay an economic price if necessary (though in the long-term that is not certain) - since I want our law-makers to be democratically accountable to our own electorate, and I am sure Britain can afford to be a democracy - I have been disappointed by the scare-mongering, lack of integrity and poor-quality debate from both sides. Though I take a definite position to exit, I can, of course, see many ways in which the EU benefits us, just as I can see that in other ways it hinders us and, to me, appears far more insular than I want Britain to be - I want Britain to engage with the world, not just the EU, on our terms. And as I say, it doesn't kill me to acknowledge a rational contrary view can be taken, but then I never was a politician.
So you think it's fine to lure doctors here from countries who won't have enough doctors of their own ?
It's not as if there is now or has ever been any shortage of our own kids wanting to study medicine, so why don't we give them the opportunity and great careers, and leave the doctors from poorer countries who have invested heavily in training them to keep them ?
good luck to em ? not such good luck to the poor and ill in their countries though eh ?
or to our kids who won't get the opportunity since we're taking the cheap way of importing doctors from poor countries, leaving them with less doctors.
I have no problem with doctors coming from rich countries to work here, although, why aren't we training enough doctors ? or mid wives ? or nurses ? while we have nearly 2 million unemployed ?
K
Its seems 37/57 uk applicants are rejected from nurse training, no doubt quite a few drop out as well: http://www.telegraph.co.uk/news/nhs/11689202/NHS-spends-huge-sums-on-foreign-nurses-yet-two-thirds-of-local-applicants-are-rejected.html
Why so many are rejected is not clear and maybe something that needs addressing.
Also maybe part of reason for doctor shortage: https://www.theguardian.com/society/2015/dec/04/al...
Plus 40% of EU doctors fail the language test.
So you think it's fine to lure doctors here from countries who won't have enough doctors of their own?
Yes. Do you think it's fine to prevent them from choosing freely between employers to better provide for their families?
As for the poor and ill in their countries of origin- while I would like the Phillipines to have First world levels of healthcare, it is not in your or my power to make it so, and not is it your or my responsibility. It is for the people of the Phillipines to arrange their own healthcare system via their elected politicians.
In any case you will find the needy are bloodkin of the migrant worker who is likely to be remitting money to support them, if not directly then indirectly by boosting GDP and thus taxes. If you read the article above it is clear that Phillipino nurses are often privately trained, so it is debatable if any third world taxes are expended on educating many of these imported skilled workers beyond the minimum high school level. Their families invest in educating them in the hope they will find work overseas. They are keen to work but there are no paying jobs in the Phillipines. This is not their fault, it is market forces and prioritisation of other programmes over healthcare needs by their own polity that allow such a situation to persist.
There is no shame in purchasing medical care from a willing provider any more than there is shame in falling ill. There is no shame in sending your nations clever children overseas to make money to send home. There is no shame in using the resources you have at hand are what you use to improve your situation, be that as a nation, a family or at individual level. Exporting healthcare workers is not a net negative for a third world nation. It is a beneficial move, like all good trades.
One shame is the decision not to allow market forces loose to establish private medical and nursing universities in the UK, which might unlock more British medical talent. I caveat that we have a full employment economy. The 2 million currently unemployed seem unlikely medics. Good luck finding many who might be suitable from the unwashed, unqualified JSA scrotes that are more my experience from that cohort. Perhaps the truth is that education overseas is cost competitive with such institutes and other countries like might have a pool of better educated, harder working people with a system that delivers more of a vocation to care than we have. All the young Brits with A Level STEM subjects I know want to work for Goldman Sachs, Google, or Simon Cowell.
Yes some good points there. Its always interesting to read articles which say we are robbing countries of nurses etc to fit their arguements. I have been to the Philippines many times and have friends there. The Hospitals are very good but as the Americans were there for nearly 50 years they have a similar system, so the hospitals are expensive and most filipinos can't afford them or if they do use them they soon go bankrupt. Anyway many girls get trained up so they can get a good job, many look to go abroad because the pay is so much higher and then they can support their families. So actually giving them a job is what they want and it will help them, their family and a lot of the money goes back home which supports their economy. So its not all one way as some people think. I used to think the Philippines survives on the 10m overseas workers, seems most families have someone working abroad. The wages in the Philippines are very low.
!In reply to post 31, I notice your high risk venture prospered during a period of EU membership but this point might be lost on you.
Andyin you are so right but many Brexiteers don't see it. Tragic and sad. That said the 20 thumbs up for Maddox post 20 (I can't remember seeing that many on a SCVR comment) gives me hope that a silent sensible portion of the population will vote the right way.
Additionally I suspect that what I read is skewed by the age and political profile of the average PI. Right wing, middle aged and middle class. Just like me. I just happen to have voted (postal) remain!
purpleski - please don't think this is solely directed at you, I just so happen to have read and replied to your post.
I've seen this kind of argument a number of times recently across forums and comments sections.
I think it quite unfair to label people and/or their views just because they have a different opinion to yours. I'm in the Leave camp and so far, if I'm to believe what I've read in the last few days, I apparently must be xenophobic, uncaring, rich, uneducated, sad and old to name but a few.
Why can't people have differing views without fear of being labelled as something?
Quite simply, we will all make our decision based on what we either fear or desire most, be that immigration, economics, politics, job security, laws, trade agreements and a whole host of other reasons a person may decide is an important issue to them.
There is no right or wrong way to vote, just different ways of interpreting the facts and propaganda we are being fed on a daily basis from both camps which will lead to a decision.
Hi James
Thank you for your reply and you may well be right. The labelling thing is what tends to happen in society and is indicative of broad tendency of a particular grouping. ie. For example I think you will find a majority of the young (under 35 say) most liberal (neither of which describes me) will be voting remain.
The point I was trying to make was that most of what I read is from PI sites like Stockopedia and that I think most PI's will be like me in profile middle aged, middle class and right of centre (if not right wing) and that that grouping tends to be more Brexit leaning and that therefore I might be getting a slightly skewed view of the way the country is leaning. I was not trying to be pejorative towards any particular grouping.
I welcome all those things that the Brexit camp is against:
- I like being part of a large multinational market that is the EU
- I like being able to travel as freely as I do
- I like being ask to run my uk based business in France as easily as I am able to (search purpleski)
- I like the immigration that brings I believe a net benefit to the UK economy
- I don't believe the EU is perfect (by a long way) but it will change and we, the U.K., can be part of the force for change. There many rediculous things I would get rid of but none of these things would make throw the baby out with the bath water.
Kind regards
Michael
Thank you, Michael, for your considered reply.
I believe you are correct in that as a society, we tend to want to label people if we disagree with someone, rather than accept people can have their own opinions. It's almost narcissistic to the point of if you don't agree with me, then you must be inferior. Again, nothing pointed at you and it's just an ugly observation of what this referendum has done by bringing out the worst in people (a them and us attitude).
You raise good and reasonable arguments for remain as part of the EU and if I had to pick a standout, I would choose your last point. Whilst I've settled on my decision to vote leave, if as a nation the majority want to stay, then my only desire is that we are not subsequently walked over by the EU insofar as 'you voted to stay, now do as we say or else'.
Best wishes,
James
p.s. As per your example, I am one of those 'young' ones as you put it, however I appreciate you wrote 'majority' though! I'm not middle aged, don't believe in a class system (as you can probably gather I have a problem being labelled!) and have no real view on politics or allegiance to one party, other than I find myself at times agreeing with all parties, other times not.
p.p.s your Méribel resorts look lovely. I wish you good luck with them and if being part of the EU helps in that respect, fair play to you. As mentioned, we all have our fears and desires of remaining/leaving.
I'm for Brexit even though I guess it won't do my portfolio much good in the short term, most of my friends in the North West agree with me.
I worked for a very large engineering company up to age 40, when I was offered a Directorship/shareholding investment in a medium size engineering company This was at a time when I had a mortgage, two children at a private school, and a wife who lived at home. Not an easy decision leaving a safe secure job for a high-risk venture. I opted for the risk and never looked back.
I retired 20 years ago with a self-managed Sipp and Isa. I am now 81 and enjoying life with no debts.
"We should not be afraid of the dark"
I am feeling some pain from the prevote drop, but I have to grit the teeth and remind myself not to waste a good crisis. I am building a portfolio, so crisis = opportunity so will be buying on the day, and keeping some powder dry for the aftermath, whatever that may be. Hopefully we will see a spike down equal to 2008 all over again so those with boldness and cash can make out like bandits...
Good luck Paul, hope you win!
Also pleased to see Bioventix (LON:BVXP) and Dr Stephen O'Hara of OptiBiotix Health (LON:OPTI) nominated, they've been great little companies for me.
Once again I find myself putting forward the view of someone who holds shares for the long term. This makes it easy for me to decide to do absolutely nothing in response to the Brexit vote. Good companies before the vote will still be good companies after the vote and will be able to respond to the situation after the vote if necessary. There could easily be volatility caused by the vote, but volatility is irrelevant to long term holders. It makes things easy being a long term holder of quality companies.
I'm pleased that we have an explanation for last Thursday's Report and tweets. Great that you didn't go down the 'I was hacked' charade. The only problem is that I now have a long position in cheese..
I'm no EUrophile and I have to deal with the tedious UK legislation that results - but at least it's effectively one set of legislation for a massive c.500m population market. True we don't need trade deals to trade - but one wonders why we'd be better off out of the EU to then negotiate trade deals with India and China - a Brexit claim. If trade deals are so pointless - why bother?
What I do know, working in financial services, is that Switzerland, US and Canada do not have access to the EU Single market for financial services. This is why UBS, Credit Suisse Bank, Goldman Sachs, JP Morgan, Chase etc, etc are all based in London. From London they can 'passport' into the EU Single Market - if we leave they will have to move a high proportion of jobs, not all, to another EU base. JPM would move 25% of their jobs (est. between 3000 - 4000) and other EU countries are lining up to attract them.
The EU has in the past attempted to favour Euro area countries - they attempted to restrict fx dealing in Euros from London. IN the UK was able to stop this nonsense - but OUT we'd be ignored and don't think for one minute that they won't be looking to weaken London's financial dominance.
The EU is not going to collapse or disappeared and, it's less of a threat to us if we're in it. The EU is a reality that we have to deal with - you think it's a problem now - just wait until we're out.
Regards, Maddox
Hi Maddox,
Good points, well made.
After talking to several other friends in financial services in London, I am increasingly worried about the potential impact of Brexit on that particular sector. As you say, there could be (highly paid) job losses, and the City could see its dominance reduce, or disappear.
Mind you, opinions differ on that. David Buick says London will be fine, as it's such a centre of expertise in so many areas.
I've heard other City people say that some activities would be moved to European subsidiaries, in order to achieve EU passporting, but that the bulk of things would remain in London.
Who knows? It does however seem likely that the City would probably suffer some, and potentially serious job losses. So we have to weigh up the cost of that, against the benefits of leaving.
I'm not anywhere near as confident as you that the EU will last forever, nor that it will be stable.
Things are pretty bad right now, but throw in say a sovereign debt crisis from Italy or France, and we're into uncharted territory. In that case, the UK wants to be as far away as possible from the EU.
Regards, Paul.
Paul:
1. I think one of the issues re the City is that we forget that it's success was partially by accident (President Kennedy IIRC taxing bonds leading to bond trading moving offshore to create the Eurobond market). People 'assume' we have an inherent right to be a major financial centre - we do not.
2. A lot of the major financial companies (think eg investment banks) are foreign owned and often manned (to a significant %) by non-UK nationals. If the EU requires Euro clearing to move to the Eurozone then there will start to be a movement into the EU. One has to think where the position will be in 20 years time - the boards major loyalty will be to maximise profit not location.
3. Surely post Brexit the mayors of Paris and Frankfurt will be on planes to NYC, Tokyo etc inviting banks to relocate - and lots of nice incentives?
4. Earlier there was a comment on manufacturing - again how many of the car companies are owned by overseas players - and is part of their strategic investment in the UK because of EU access.
5. PS I noticed I have an invite to the rewards ceremony - sadly I will not be able to go but best of luck to you.
R
Hi Roddy10,
Interesting points, thanks.
My view FWIW, is that if a Brexit vote happens, then the number one priority for Cameron & Osborne's successors next month, will be to call in all the big banks, and basically ask them to give a wish list of what is needed to keep them in the UK.
So the key point is that a new UK Govt would have to be highly active, not reactive or passive.
One key thing I would do post Brexit is to announce further falls in Corporation Tax, to continue the 1% p.a. falls we've had so far. If we indicate a direction of travel down to say 10% Corp Tax, then I very much doubt many big companies will be leaving the UK. They'll be queuing up to come in.
The Remain vote dismays me, in that it's so weak. They have nothing to offer, other than dire warnings of appalling consequences if we leave. It doesn't seem to even occur to remain people that the UK could have a dynamic, business-friendly Government which could do marvellous things outside the EU.
Regards, Paul.
P.S. Worst still, Osborne has said tonight that if there's a Brexit vote, he'll do an emergency Budget, and put up income tax by 2%! Pure scaremongering, and deceit. That reinforces my desire to vote Out.
Paul
That's a bit of a sweeping statement to say "It doesn't seem to even occur to remain people that the UK could have a dynamic, business-friendly Government which could do marvellous things outside the EU." It could just be that some of us have thought it through and realise that the paradise promised by the exit campaign just isn't going to be delivered. My view is pretty similar to Jak's in that we will retain very close ties to Europe in the same way as Switzerland or Norway -with all that entails.
As I said yesterday there are several EU countries with low corporation tax rates - and some of them have younger, much better educated and much better motivated workforces than the UK (as well as access to the 500million other EU residents). Why wouldn't companies chose those locations over a country with a limited workforce.
I also doubt that Cameron will go immediately - if its a vote for Brexit I would expect him to go in the Autumn.
Paul is very good at making sweeping statements about companies and he is so often right when he does so following his convictions. But in this instance o believe he is so so wrong.
I think it will be case in years to come that the UK will have its Joni Mitchell moment:
That you don't know what you've got
'Till it's gone
I am sure Cameron and Osborne will go (why would he want to stay?) and besides this has been Bonkers Boris and Give's plan A all along. They have bet the farm (of their political careers) on a Brexit vote. Why would they not grab as soon as they can.
Trump and Boris! It will give a whole new meaning to the phrase 'special relationship'.
Kind regards
Michael Broom Smith
Yes its interesting that you pick that song because thats about paving paradise, what happened in Hawaii, I feel that is happening to parts of England, we are building more and more houses for the growing population. "They paved paradise to put up a parking lot"
So yes I think you are right that the UK will have its Joni Mitchell moment but not in the way you think. People may regret they way they vote, no one knows what the future holds. Will the EU succeed or fail, at the moment its not doing very well and we are not even in a recession yet.
The EU needs to reform but it won't.
I think we will stay in, it will be similar to the Scottish vote, it will be close in the polls but some people will vote for the devil they know.
Hi Paul
Very best of luck at the small cap awards ceremony on Thursday. Your SCVR analysis has been a great source of information and has certainly saved me a great deal of research in distinguishing the rough from the smooth or more to the point what companies are worth further investigation.
All the best
PS - Probably best not to mention Brexit at the awards ;-)
Paul,
If you don't beat Simon Thompson for that award given your respective records on Globo, then the award isn't worth having.
On Brexit, as we are seeing definite short-term volatility, I am not sure I would sell anything at this point, I think it will rise pretty sharply once the bad sentiment has passed. Plus, data suggests that time in the market is better than trying time the market highs and lows.
In additional to Brexit, June is typically a terrible month for the FTSE in ordinary circumstances as has been shown by Stephen Ecketts analysis in the Stock Market Almanac. It shows the first few trading days of June are generally positive, but then begins a decline through the rest of the month, which we are currently in the midst of. The Referendum uncertainty and Fed decision on interest rates this June are exacerbating this downturn. That said, I don't think it is worth selling up completely - If in doubt, I'd hold on. Go abroad and come back in a couple of months.
http://stockmarketalmanac.co.uk/2016/06/the-stock-market-in-june-3/
Interesting to see how Gervais Williams will judge himself at the Small Cap awards -hes nominated and on the judging panel!
And good luck Paul. You deserve to win!
I am not sure that in the case of Brexit, then 'nothing will happen for the next couple of years' would be a positive. Surely the Market would be very volatile with downward pressure because of the extended uncertainty of eventual outcomes. Its uncertainty that causes the damage. The real economy would suffer from the uncertainty as well I would have thought. How long is of course completely unknowable.
That is not to say that Brexit is the wrong decision. The reasons for severing our current direct links with the EU are more complex & fundamental than economics (or demographic changes)
However, cannot disagree about likely buying opportunities !
Hi Paul,
I agree there seems to be something of a buyer's strike on this week because of increased Brexit fears. It's pretty painful with many of my small caps being beaten up in the last few days. I think we could all use tin hats for the next couple of weeks at least!
However, it was possible to predict this would happen nearer the day and so I went through my entire portfolio and sold a bunch of stuff that would not be in good shape were Brexit to happen a couple of weeks back, most notably housebuilders which I'd done pretty well on in the the past couple of years; dumped the lot! Most other companies I am happy to hold because they will gain as much as they lose in profit due to overseas earnings and the guaranteed fall in Sterling were Brexit to happen. Although that won't protect them in a market rout.
Only plus points today amongst a sea of red were very good results from Norcros (LON:NXR) and Trifast (LON:TRI).
Good luck with the awards. Although I don't read your fellow nominees you're fully deserving of the nomination IMHO
All the best, Si
Market turmoil post-Brexit will present an excellent buying opportunity.
Fear and panic will grip the market and we can expect some major sell-offs in UK equities and bonds.
Once people realise that nothing will change for the next two years and that we will in all likelihood maintain tariff free access to the single market whilst being free to strike free trade deals abroad then people will start buying again.
Irrational fear and subsequent overselling always create the best buying opportunities. I am keeping my powder dry come June 24th....
Paul
I appreciate your share analyses, but your comment about tariffs suggests to me that you have never engaged in any formal study of economics. The UK does not become richer by taxing one group of citizens with import tariffs.
If you want to understand what the single market is about, read my short piece "The single market – what it is and why it matters" at the link http://www.mohammedamin.com/Politics/EU-Referendum-my-issues-perspective.html#single
People are sick of being told that free trade means prosperity. As with the rise of Trump people are figuring out that it is not their personal prosperity that will increase, in fact quite the opposite.
Which is fine, so why does the EU impose so many external barriers to the Single Market if we don't get richer by taxing one group of citizens with import tariffs?
Mohammed,
your comment about tariffs suggests to me that you have never engaged in any formal study of economics.
Well you're completely wrong I'm afraid. I studied Economics at O-level Economics, A-level, and it was a major part of my Degree. Plus I did a 3-year chartered accountancy course, and passed all the economics in that (if not my finals exams).
I also spent 8 years as FD of a real world business, which was far more useful than any of the Economics I studied.
The big problem with Economics is that it's gone down a cul de sac of excessive mathematics. Even some economists are now admitting this - that probably 90% of books on economics could safely be dumped into landfill, as they serve little to no real world use.
It's difficult to think of any economists who consistently get things right. Which is why most people totally ignore them. Remember when Thatcher was presented with a letter from 364 economists, warning her c.1983 how her policies would drive the UK economy into a permanent depression? They were all completely wrong - the economy started to roar back into recovery, and was booming by 1987. Thatcher quipped, "364 economists. That's one for every day of the year, except All Fools Day!"
Where you have possibly misunderstood my comments on tariffs, let me clarify. What everyone is focusing on, is that the EU could slap tariffs onto British goods being exported into the EU, and how damaging that would be. They might well try to do that. In which case, the UK would simply reciprocate. As we import far more than we export, then tariffs would be a net fundraiser for the UK economy overall. Remember we're only talking about very low tariffs here - ballpark 3-4% is what the EU typically charges externally. That's not going to make a lot of difference to levels of trade.
This is an undesirable situation, as we all know that usually both sides flourish when tariff barriers are taken down, and businesses can trade freely across national boundaries. That's why I think any tariffs between the UK & EU would only be temporary, as both sides would quickly realise that it would make sense to get rid of them.
So perhaps you thought I was advocating tariffs, which of course I wasn't.
Paul.
regarding brexit im going to keep the portfolio as it is. I learnt the hard way earlier this year selling off then there was a rally back up, and I was at a loss. so im staying put as the bounce back up will happen in dur course.
and yes you cant believe the polls, are they perhaps cooking the books making us believe their is a brexit so people bet the wrong way. the bookies are making us believe people are all voting out.
I think even if people voted out, the books will be cooked in the end so we remain in.
Brexit ?
Do we believe the polls ?
I'm wondering , on the day, will people go into the booth, and say .... "you know what this leaving might sound like a good idea but it's uncertain for my job, and my familly "
or
Will they say ...... " I've been a bit embaressed to admit it, but I don't like this europe thing, I think it would be a price worth paying if we're a little bit less prosperous, but control our own laws and borders".
Most intellectual liberals, scientists , rich people who we look up to are in the remain camp. The leave camp has Boris, but beyond that ? the pm and mp's ? David Owen ?
I suspect like at a general election there will be people who are prepared to vote (conservative), but not admit it to a pollster, I suspect there could be a hidden vote for brexit, of people who are afraid to admit it ?
I could be wrong ? if I'm not I would say we are heading for brexit and some market turmoil.
Any thoughts ?
K
I believe there are strong arguments on both sides of the Brexit debate.
My two for remain are the inevitability that European politicians will seek to make life uncomfortable for the UK "pour encourager les autres", regardless of how irrational for trade that may be.
And above all that the UK has profited by being an attractive base for international capital. We build and export world-class cars here as a direct result of having guaranteed access to a huge market. That investment would dry up if we exit.
On the other hand the growth rate in GDP of the Commonwealth exceeded Europe for the first time the year we joined the EEC. There's a strong likelihood we swapped horses at just the wrong time. And the outers have other persuasive arguments as it is very easy to find fault with the EC.
But the bottom line is that the Out camp also contains every sad loser who wants to blame others for their shortcomings, wittering about immigration, TTIP, bureaucrats etc, without the vaguest grasp of economic reality. People who would vote for Trump, or Hitler, or anyone else who offers a target for their unhappiness. And I couldn't face watching them celebrate after the referendum, then searching for a new target as things do not miraculously transform for the better.
So I am a reluctant Remainer. I think our semi-detached status in relation to the EC - no Schengen, no Euro - is about as good as it gets.
Jon
PS If we vote out, and reroute our EC contribution into building new hospitals, who is going to staff them?
So you think we should remain because you're scared of what the EU will do to us should we use our right to self determination? You should be just as scared of what they will do once they have the "mandate" to force change on us because we voted to stay in. By voting to remain, the British people will hamstring the British Government in any future negotiations. You could argue that we've done ourselves no favours by having this referendum, as the threat of it was a decent bargaining chip that we've just used up, it's too late for that now the ship is slipping lines in preparation for sailing.
The UK will remain an excellent base for international capital, our car plants rank amongst the best quality and most efficient in the world, and lets not forget that Ford moved their Transit operation from Southampton to Turkey after the EU gave them a sweetener to move it there! The Japanese manufacturers might look to move their operations, but that will take a few years, and we get the opportunity to prove we're still the best place to be in the meantime. If the Germans want to sell us Audis and BMers they're going to have to accept Hondas and Toyotas on the same terms.
Our trade balance with the rest of the world is ok, and will get better once we leave the protectionism of the EU.
Umm, the ever hardworking and goodnatured Phillipino nurses will probably man the gaps in the hospitals, just as they do now? Would happily let 5 million of them in over the coming decades, and thank them wholeheartedly for their service.
Thats true, I used to live near a major hospital, most of the foreign nurses were either filipinos or from India. I don't think getting nurses will be a problem. Anyway people seem to be mixing up free movement of people with controlled migration, even with Brexit migration will be cease, if we want people to come here for work then it will still happen. Its the same now with workers from outside the EU. But that migration has been almost killed off now.
Sure, they do a great job and we're lucky to have them. The morality of the 5th largest economy plundering the developing world of its highly-trained medics because we can't be bothered to pay to train our own citizens, and provide jobs for them, rarely gets a mention and is not something we should boast about.
One could argue another reason for a shortage of our own workers in certain segments of the economy is because we make it so easy for whole families to live on social security. Where they actually have a higher living standard than working people in many parts of the world. Burdening our taxpayer like that & encouraging such indolence is also a morally questionable practice.
As for GPs, when we go along there, usually they just ask a series of questions and guess at a diagnosis. If we're lucky, the GP might get some blood tests or scans done, which is the kind of scientific approach I would expect. The whole process is hit and miss. I've seen cases where people are onto the third GP after many months, before they take the necessary steps that should have been taken first time and then cancer is diagnosed.
The part where they just ask the questions is ripe for automation. That part could be handled by a computer, which would be a lot cheaper and more reliable. If that goes well, they could refer the patient to the queue for the doctor. Possibly with a print out of the diagnosis and prescription to be signed or rejected.
This would free up loads of time and cash for doing tests & paying for treatment.
There is little hope of seeing such innovation within a state run monopoly. But this is exactly the type of innovation we could benefit from.
Some good comments and suggestions, Jeff. I found Herbie's news link on Filipino nurses (post 37) informative, and I'm glad to learn something - as one should in a good debate. Innovation in a state-run monopoly isn't impossible but is, I agree, unlikely, and runs against the culture pervading the NHS. For all its faults, a health service, universally free at the point of use (though already mostly lost in respect of eye- and dental care) is something most of us are proud of, though it might be more effectively and sustainably achieved by a different funding system, such as an insurance scheme.
Bringing the debate back to the referendum rather than the issues Jeff was responding to, like James RH, I don't want to be labelled and don't fit neatly into a category - no-one does. It is perfectly possible to want out of the EU without being xenophobic (indeed being very keen on Europe and Europeans) because one's ideology places different values on different things relative to the values of those that wish to remain in. It is very easy to call those we disagree with bigoted but often that isn't true.
In my view the EU didn't work well when it had half as many members than its current 28. Yes it does many good things. No, it never gets its accounts signed off - that's appalling. Its decision-making is snail's pace, as is inevitable when so many different and conflicting national interests are vying with each other. The EU is even more wasteful than our own seats of government and MEPs overpaid and over-expensed.
We may not be formally tied to an ever-closer union but the EU is a political project: those that run the EU want a single European state (they know that for the EU - and certainly the Eurozone - to function efficiently it needs to be). Being linked to such a project, even a little more loosely, drags my country in a direction I don't want to see, even if it were to give me a little more prosperity. I love Europe but I do not identify with European nationhood - that's not for me. We can certainly afford to be a sovereign nation, a democracy (which is not to say our political systems and institutions are perfect, far from it). If I didn't care about the sovereignty issue, the democratic deficit (e.g. most EU law can only be proposed by an unelected European Council; Lisbon Treaty repackaged as a treaty document and signed through, when a French referendum voted it down before we got our referendum on it), then I would vote to stay in. It is possible we will end up poorer if we leave: entirely possible that our political leaders and civil service will squander the bargaining power afforded a nation of 65 million relatively wealthy consumers with a massive trading deficit; entirely possible they will fail to use our £8.5B net annual EU contribution effectively, but if Australia and even New Zealand can afford their independence then I'm convinced we can and I should like to see Britain returning to its proper purpose as a trading nation fully engaged with the world, and not just an inward-looking Europe, dominated by German economic interests and saddled with economic problems and a debt crisis at its fringes that it won't face up to.
Even if the vote is for Leave, which I think unlikely, I don't think we will get out - as we've seen happen to Denmark - there will just be another referendum - we'd need a large 'Out' majority to make it stick, which I can't see happening. If we vote to stay in we will have lost our negotiating power to effect much needed change in the EU - knowing we are definitely not then going to leave, we will have to do as we are told: we'll be in but not even in the passenger seat - we'll be bundled in the boot - with Germany at the wheel (no I don't hate Germany, I love Germany) - which is great, for Germany.
Really I was trying to get a feeling for how accurate we think the polls might be ?
for a general election I always adjust a few % for the conservatives because people deny the way they're going to vote.
In this case, I have the working assumption, that people might deny they're brexiters because the cool sexy famous people mostly seem to be pro remain.
regarding
>>PS If we vote out, and reroute our EC contribution into building new hospitals, who is going to staff them?
I find this kind of comment crazy. Who will staff them ? why will this be a problem ? do you think people from europe won't want to come here for work just because they need to get some sort of permit ? People will come from all over the world. But I would say, perhaps we need to focus on training more british people to be nurses and especially doctors, dentists etc.
why is it that with a rising population, medical school places are falling ? Because it's cheaper to steal doctors from abroad ? from poorer countries ? must save us a fortune, but it's morally wrong. not only that we get inferior doctors in some cases. Ditto dentists etc.
No one is saying there would be no immigration, it just that it would be under the governments control, as opposed to a complete free for all, and very hard to get in from outside the eu.
How big a problem you think this is, depends in part on where you live and how effected the area has been by immigration. The rise of ukip shows that for many people this is a big issue. They get called rascist etc, but there are legitimate issues here. Many areas are being swamped with new housing to support this, Its not unreasonable to question whether this is a net benefit to the country.
K
I lived in good 'ole SA for 8yrs but this has no relevance to my point! :) I just wanted to note that the, fairly frequent, MASSIVE 100% swings in the exchange rate can't make company operation or profit forecasting easy! Have a look at the exchange rate chart. If you have the 'bulls' for it it could be more profitable to buy property there..... anything's better than equities!! :)
At the current exchange rate mansions are available there at a stunningly low price for us. Whether you can get your profits out of the country, if and when, when the exchange rates bounce back (and that's an unknown, of course) is another question. You may have to walk out with a bunch of diamonds in your pocket......
Regarding Brexit I have the suspicion that anyone who is confident with their voting decision hasn't perhaps fully grasped the enormous complexity of the situation and either way the future is quite impossible to predict. It's like chaos theory when the brexitfly flaps its wings.......
Take all the above with a large pinch of salt..... which, to be honest, is a prerequisite for investing in thestockmarket anyway!
Paul. Pan African Resources (PAF). A decent ranked stock (96), which I use as a small gold hedge in the current Brexit uncertainty. It bought in the remaining interests in a company to help it to comply with certain South African Black equality laws. It did a placing to fund the purchase. However, in the notes it says that at some point it will be able to cancel the issued shares attributable to it, and says this cancellation will be benefit its Earnings per shares.
The deal has some complexity, but it does appear that the issued shares that will be cancelled account for a decent percentage of its overall shares in issue, so the re-rating could be quite material, even after the placing dilution? I am not sure if I am reading it correctly.
Is this one you would have a look at, or is it not your bag?
Dare I say the stock doesn't have a sexy story line. Solid management rarely does. A hug and hold I feel for the longer term.
Re. Norcros (LON:NXR) I looked at this stock this morning (no holding todate) and generally speaking it is an attractive proposition.
- 6% growth in revenue giving rise to +25% in adj operating profits suggests strong operational gearing
- they seem to have contained the pension issue. A contribution of around 13% of PBT is fairly acceptable
- healthy OCF and FCF
- PE is ridiculously low at below 7.
Just a small query about the Numis forecast of 27p eps for FY17. Today's RNS shows an underlying diluted eps of 27.8 for FY16. So are they suggesting lower earnings for next year?
The only thing that is stopping me from buying is the Referendum cloud. I have no idea to what extent a Brexit might impact this company, and so not taking any long positions until 24 June.
ridavies, that is what I have always thought but I have looked upon the company's acquisitions policy as gradually improving the quality of the earnings. Record on executing additions seems pretty good so far. (Long holder)
Does the S African element put off people too do you think? Not on a logical economic basis as you have proved, but on a sentiment emerging markets unstable basis?
IMHO The S African economy will benefit from Brexit.
Sorry, in case of confusion, my comment was referring to Norcros (LON:NXR). Just another thought, how much goodwill is locked up in the balance sheet with the sreies of acquisitions, which may be written down in due course.
Yes I think it does, it was one reason why I sold mine, South Africa rand has fallen in value mainly because of commodity prices but the economy is not good there and close to recession. It is a cyclical and I'm looking to reduce my exposure there, I think property prices are near their peak, if we vote Brexit then I think they will fall. Also as Paul mentions there is pension deficit.