Document 6599733
Transcription
Document 6599733
No.31 Marketing Communication Your monthly guide to a range of equity ideas from the WH Ireland research team | November 2014 SENDING OUT A GROWTH MESSAGE Card Factory (CARD) WH IRELAND WINS AIM RESEARCH AWARD FTSE Mid 250 | Share price: 230p | Market Cap: £784m www.cardfactory.eu.com John Cummins, Head of Research (second from right) WH Ireland are delighted to announce that at the 2014 AIM Awards we won the much coveted “Best Research Award”. As a top 3 Adviser to AIM companies this award is a significant accolade and is further recognition of our tireless efforts to highlight interesting investment opportunities, both through weddings, Christmas etc. The £1.4bn card Card Factory is the UK’s leading greeting card institutional and private client focused research. specialist, trading from 749 stores nationwide. market is expected to grow by 2% per annum Chief Executive Richard Killingbeck said, but Card Factory should be able to outpace this Driven by an aggressive expansion plan of 50 “The AIM awards represent the leading by new store openings, growth in non-card sales new outlets a year the ambition is to grow to industry accolades for AIM participants and and the maturity of existing outlets. Management 1,200 sites in identified locations. to win the Best Research category are highly selective when choosing new sites – It trades at the value end of the market and against some lively competition is a great new store capex averages at just £60,000 and last year sold over 285m cards, with the vast achievement for our team”. typically new store payback is comfortably less majority of cards selling for less than £1, than two years. Operating margins are in excess and an average basket of less than £3. It is Miles Nolan of 20%, and as a highly cash generative business Editor profitable every month and is not exposed to it should pave the way for a sharp reduction fashion risk, moreover the UK card market is in debt over the next couple of years and a both mature and stable. Every year it designs over 4,000 new cards in-house, so can compete resultant hike in dividends. Having grown its volume share from 5% to 27% in effectively alongside the large supermarkets. the last 10 years and with management holding a Despite concerns of online players taking 20% stake, their interests are clearly aligned with market share, current online penetration of investors. With 16 years of unbroken like-for-like the card market remains at less than 3% by sales growth, this recent IPO looks attractive. volume, but this still involves the sending WH Ireland is acting as adviser to AIM hopeful of a physical card. There remains a strong Domaine Chanzy SA which is a leading Estimates (Jan) 2014 (A) 2015 (E) 2016 (E) producer of both red and white burgundy preference amongst UK card buyers, 85% of whom are female, to send physical, wines, ranging from Grand Cru to Regional Revenue (£m) 326.9353.9381.0 hand written cards. Card Factory has appellations. To further its expansion it PBT (£m) 67.272.779.8 exposure to online sales through its is planning to raise £2m by way of an EIS EPS (p) ** 16.418.2 www.gettingpersonal.co.uk division qualifying issue. P/E (x) ** 14.012.6 which sells personalised gifts and cards. New investors will be entitled to buy Pinot Noir Div (p) ** 6.67.3 and Chardonnay wine in the UK at a discount Yield (%) ** 2.93.2 of 20- 45% on estimated UK retail prices. What we like ** Pre-IPO If this is of interest please contact your financial We are a nation of card buyers, with the average Consensus forecasts. Analyst: Miles Nolan adviser who can advise on its suitability. Briton buying 30 cards a year for birthdays, DOMAINE CHANZY IPO Email your name and WHI client number to [email protected] to receive future issues. Warning to WH Ireland Clients. Important disclosures and certifications regarding companies that are the subject of this report can be found within the disclosures page at the end of this document. 11 St. James’s Square| Manchester | M2 6WH | T +44 (0)161 832 2174 | London office: T +44 (0)20 7220 1666 | www.wh-ireland.co.uk SWITCH IDEA Sell SL. Buy EMG Standard Life (SL.) Man Group (EMG) Share price: 123p | Market Cap: £2.1bn www.standardlife.co.uk | www.man.com Standard Life shares have performed well this year as trading has been solid. However, the shares trade at the top end of their valuation range. With around 30% of earnings expected to be generated from the investment division, any further volatility in the market will have a doubly negative impact as the group will suffer from falling asset prices and redemptions. We recommend investors take profits. For reinvestment, Man Group, a leading alternative investment manager, offers a more attractive opportunity. The main focus is on hedge funds, although recent acquisitions, notably that of GLG, helped to diversify some exposure into traditional long-only funds. The group thrives on volatility and is likely to outperform in falling total return of 18.6%. We believe this is likely to continue as the underlying market remains increasingly challenging. As performance improves, Man will benefit from further asset inflows and better fee income. Despite the improving outlook we believe the shares are still cheap and offer further upside. Estimates (Dec) 2013 (A) 2014 (E) 2015 (E) markets. Its flagship fund, AHL Diversified, is a trend following instrument. It identifies and follows trends in a broad range of markets, such as equities, foreign exchange and commodities. As volatility has picked up, so too has performance. For the nine months to the end of September, the fund made a Revenue ($m)1,1601,0031,073 PBT ($m) 56 285321 EPS (cents) 2.9 13.314.5 P/E (x) 111.114.5 13.3 DPS (cents)7.98.29.1 Yield (%) 5.84.24.7 Consensus forecasts. Analyst: John Goodall PLAY ON CONSUMER CONFIDENCE S&U (SUS) FTSE Small Cap – Share price: 1925p | Market Cap: £228.3m | www.suplc.co.uk Listed since 1961 and founded in 1938, S&U plc is not necessarily a name investors will be familiar with, but the company has developed its brand into two lending areas. It is a niche UK consumer and motor finance provider with Loanathome4U providing consumer credit, rental and retail trade credit and motor finance through Advantage Finance. Currently revenue is represented 57% by Loanathome4U and 43% by Advantage, however, the motor business is much more profitable and represents 66% of full year profits before tax. What we like The company’s business model is attractive and complements the overall strategy. In home loans it operates an agent based 3.3% projected yield well covered by earnings. Long term, a low interest rate environment will continue to grow its client base through cheaper loan terms and lower levels of defaults. If attractive deals on car forecourts continue, this will encourage consumers to replace their second hand cars. system with 500 agents in the UK with the emphasis on a personal client relationships. Its motor business is an innovative member of the financing and leasing association with a focus on quality deals. This has meant the group has delivered consistent profitability at very good margins. The strong returns have transferred to dividend policy that has grown 59% over the last 5 years. S&U provides a Estimates (Jan) 2014 (A) 2015 (E) 2016 (E) Revenue (£m) 60.172.681.5 PBT (£m) 17.322.426.6 EPS (p) 112.0149.9176.2 P/E (x) 17.312.810.9 DPS (p) 54.064.071.5 Yield (%) 2.83.33.7 Consensus forecasts. Analyst: Luke Tribe MELLO PRIVATE INVESTOR EVENT Derby 6-8 November 2014 Communisis, Crawshaw*#, Trakm8, Sprue Aegis, Accesso Technology and Advanced Computer Software to name a few. There will also be a number of high profile speakers such as fund manager Gervais Williams of Miton, Giles Hargreave of Hargreave Hale, Katie Potts at Herald Investment Trust, Judith MacKenzie at Downing Corporate Finance and well known Financial Times contributor Lord John Lee. Investors wishing to attend should visit www.mello2014.com for more information – using the code MELLO-DISCOUNT will entitle visitors to a 50% reduction on ticket prices. A bugbear of many investors is the difficulty in accessing senior PLC management, other than at Annual General Meetings or occasional seminars. With this in mind, serial investor David Stredder has launched a private investor focused event to be held at Derby later this month. The three day event includes a raft of interesting smaller companies such as: 1PM*#, Avation*#, * WH Ireland acts as Nomad and/or broker to this company. # WH Ireland makes a market in this company. Analyst: Miles Nolan. A QUALITY BUSINESS HIGHLIGHTED BY A SUCCESSFUL CAPITAL MARKETS DAY WYG (WYG)*# FTSE AIM – Share price: 110.5p | Market Cap: £69m | www.wyg.com The quality of the consultancy firm WYG came through strongly at the recent Capital Markets Day. An experienced management team which steered the company through the painful process of regeneration three years ago is now presiding over a firmly founded and robust revenue and profit growth cycle. Stringent analysis during the earlier reorganisation phase led the WYG team to focus on specific categories of work at the front end of projects. Typically we are talking about feasibility studies, planning and permitting and concept design, with WYG positioned as a programme and project manager in the UK and beyond. Add in the overseas businesses which tap into unusually long-term and robust funding streams and you have a consulting business significantly differentiated from the traditional engineering consultant with whom WYG is sometimes (wrongly) compared. What we like Regular positive newsflow from WYG has dramatically highlighted the quality of this business. Recent new strategic guidance builds on the £9m Profit Before Tax (PBT) target for FY2016E with a new £15m PBT target for FY2018E. With a strong £96m order book and a high (40%-plus) win rate, sales growth momentum is strong. At the same time, we see real margin opportunities from current margin forecasts (a highly conservative 6%). £15m PBT implies operating margins still shy of 10%, c.£1.5m of legacy cost-reductions post-2016 (already identified) and includes a healthy dose of contingency planning. We are preparing our 2017 forecasts in the spirit of the company’s new guidance and continue to see significant potential upside for the shares to our 165p target price. On c.11x PE for 2016, with forecast upside, and deals in the sector at double these levels involving less lively companies, we remain Buyers. * W H Ireland acts as Nomad and/or broker to this company # WH Ireland makes a market in this company Estimates (Mar) 2012(A) 2013 (A) 2015 (E) Revenues (£m)139.9 125.7 126.9 Adj. PTP adj. (£m)-5.8 0.7 4.2 Adj. EPS f.d.(p)-6.5 0.9 6.4 P/E (x) N/A N/A 16.3 EV/EBITDA -22.1 15.5 8.5 DIV (p) 0.0 0.0 0.5 Yield (%) N/A N/A 0.5 Source: WH Ireland. Analyst: Nick Spoliar. UPDATE: NATIONWIDE ACCIDENT REPAIR SERVICES (NARS) Leading vehicle repair specialist Nationwide Accident Repair Services is performing well, driven by new contract wins, solid organic growth and recent acquisitions. In the six months to 30 June the AIM listed company boosted sales 14% to £90m, as underlying pre-tax profits increased 86% to £2.5m. Cash generation also remains strong. 2014 (E) Contracts worth a combined £20m with Allianz Insurance and AXA should support ongoing trading and NARS is on the lookout for further consolidation opportunities, following the £9.5m deal to buy East Anglia based rival Gladwins. We highlighted the shares at 73p in June, so the rise since then is pleasing when 2016(E) 131.5 135.8 5.5 7.6 7.3 9.7 14.210.8 7.25.3 1.01.5 1.01.4 Driving ahead Share price: 82p | Market cap: £35m considering current equity markets. Full-year forecasts point to pre-tax profits of £4.9m, EPS of 8.4p and a 2.9p dividend. Insurance services outfit Quindell retains a 25% stake, but even ignoring possible corporate activity, the shares remain attractive. Analyst: Miles Nolan www.wh-ireland.co.uk FUND MANAGER SPOTLIGHT Guy Feld | www.hargreave-hale.co.uk Astute fund manager Guy Feld co-manages the £400m Marlborough UK Micro-Cap Growth and £100m Marlborough NanoCap Growth funds. He has amassed over 20 years of experience thanks to his days as an analyst at BZW, UBS and Teather & Greenwood, but he has carved out a particular niche in the technology space. Feld tends to see a huge number of companies every year, priding himself on nurturing a wide industry network which has helped him see opportunities at an early stage. One recent example is social media audio platform specialist AudioBoom – a stock he bought earlier this year at just 1.5p, and the price has soared 9-fold since. Feld says, “I like to find eclectic situations where the market may have misunderstood the fundamentals and opportunities of business”. He is not intimidated by ‘complex situations’ which he believes investors have ignored due to the level of work required to justify an investment decision. Balance sheet strength, the calibre of intellectual property, the ability to generate cash, charting and director dealing all factor in his filtering process, as does the strength of management. Feld has backed serial entrepreneurs such as Chris Akers and Vin Murria, and has enjoyed good returns as a result. He says, “I remain very bullish on smaller companies, there is always opportunity to generate attractive returns, but stock picking is key.” Both funds focus on delivering a total return of capital and income in excess of that achieved by the FTSE Small Cap. Co-managed with Giles Hargreave, the Micro-Cap Fund (with 257 holdings currently) has notched up a highly impressive return of 155% over 5 years. Diversification has helped, indeed the fund never holds more than 2.5% of its portfolio in any one company. He argues, “Technology is permeating down to the fibres of society and is effecting significant or disruptive change to almost every part of our lives”. Two stocks which have benefited from clever technology as well as a change in management are theme park software developer Accesso Technology and geospatial ‘Big Data’ company 1Spatial. Future trends he highlights range from increasing mobile payments to cyber security to the ‘Internet of things’ which enables the connectivity of devices using the internet, such as remotely controlling heating or lighting. Knowing when to sell is often the hardest trick of all and here Feld has called several situations right – such as offloading Big Data player WANdisco and acquisitive telco services company Coms when their valuations looked stretched. Analyst: Miles Nolan Editorial Team Miles Nolan - Editor John Goodall Luke Tribe Formerly editor of Growth Company Investor, Miles has worked on the buy-side and spent seven years at the Investors Chronicle. Having joined in 2007, John heads Private Client Research. He is a CFA Charterholder. Luke joined WH Ireland in 2010. He holds a degree in financial economics and is studying for the CFA designation. [email protected] [email protected] [email protected] Contributors: Nick Spoliar, Institutional Research Analyst Disclaimer This document contains investment recommendations of both a general and specific nature. It has been prepared with all reasonable care and is not knowingly misleading in whole or in part. The information herein is obtained from sources which we consider to be reliable but its accuracy and completeness cannot be guaranteed. The opinions and conclusions given herein are those of the research analyst or the analyst attests that the views expressed in this report accurately reflect his or her personal views about the subject, security and issuer and are subject to change without notice. This document is classified as being “non-independent” and is a marketing communication as defined by the FCA’s Conduct of Business Rule 12.3. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. WH Ireland is or may be providing, or has or may have provided within the previous 12 months, significant advice or investment services in relation to some of the companies and investments concerned or related investments. Clients are advised that WH Ireland Ltd. and/or its directors and employees may have already acted upon the recommendations contained herein or made use of all information on which they are based. Please refer to www.wh-ireland.co.uk for a summary of our conflict of interest policy. All recommendations and investments involve some degree of risk and may not be suitable for individual clients. The value of securities and the income from them may fluctuate. It should be remembered that past performance is not necessarily a guide to future performance. Shares purchased on the Alternative Investment (AIM) and ISDX markets (especially those known as ‘penny shares’) carry a high degree of risk of losing money. The requirements on companies that are listed on the AIM and ISDX markets are less stringent than those for companies with a full market listing. There may be a lack of liquidity and a wider spread between the buying price and the selling price of these shares. The price of these shares may move quickly. It may also be difficult to obtain reliable information about their value, or the extent of the risks to which they are exposed. Clients are advised to contact their investment advisor as to the suitability of each recommendation for their own circumstances before taking any action. If you are an execution only client we will not provide advice and investment decisions are entirely your responsibility. No responsibility is taken for any losses, including, without limitation, any consequential loss, which may be incurred by clients acting upon such recommendations. Investors who are resident in or citizens of countries other than the United Kingdom may be subject to local restrictions. For our mutual protection, telephone calls may be recorded and such recordings may be used in the event of a dispute. ction, telephone calls may be recorded and such recordings may be used in the event of a dispute. *WH Ireland acts as NOMAD/broker to this company. #WH Ireland makes markets in this company. ~WH Ireland provides Investor Relations services to this company Our ref: FP153 Birmingham I Bristol I Cardiff I Colwyn Bay I Isle of Man I Leeds I London I Lymington I Manchester I Poole www.wh-ireland.co.uk