Voyager RNS Log WC 11/02/2018
As ever, although I may get keen about a stock, what I put into print here is purely me sharing my rambling thought process and NOT INVESTMENT ADVICE to either buy or sell a particular stock.
The key for the colouring of text within these notes:
Text in normal black: just my thoughts.
Text in blue italics: direct lifts or copy & paste from the RNS issues by the business.
Text in green: loosely, the investment principles that I feel comfortable with.
Red is a disclaimer in that what I write is NOT investment advice.
Well, the markets have certainly had their touch of volatility over this last couple of weeks as we have gone through what appears to be an expected correction. I often feel that the random movement of Mr Market is rather like a very drunk man trying to make his way home. He lurches from side to side, sometimes he even goes backwards or dangerously drifts into the road but despite all of these random lurches, he eventually goes in the right direction.
Anyway, enough of this and onto this weeks review:
Monday 12/02/2017: XP Power: XPP: Mkt Cap: £608m: RNS Regarding US Tax Changes:
The recently enacted Tax Cuts and Jobs Act in the United States is expected (subject to audit) to result in a non-cash tax credit in 2017 relating to the revaluation of US deferred tax balances of circa GBP5.2m, based on the net deferred tax liability at the end of 2017. This credit is as a result of the reduction in the federal tax rate from 35% to 21% and will be excluded from adjusted earnings.
The Company has also received notice that claims relating to the Development and Expansion Incentive (DEI) in Singapore have been accepted by the Inland Revenue Authority of Singapore resulting in a circa GBP1.3m refund of Corporation Tax paid in 2015 and 2016. This will also be excluded from adjusted earnings.
We will continue to work through the full impact of these changes but expect the Company's future effective adjusted tax rate to be in the range 15-17% depending on regional mix of profits.
My View: I have been a fan of XPP for quite some time and bought my first batch in early 2016 and have enjoyed a superb share price ride since that time. The shares got a touch of a boost from this tax gift on an RNS with the US & Singapore at a combined value of £6.5m. Now whilst the company is still evaluating the effects of this good fortune, they state that the Company's future effective adjusted tax rate to be in the range 15-17%, which to me can only be good news and may just lift some brokers forecasts a touch. As I say, nice company and I will continue to hold.
Tuesday 13/02/2018: RWS Holdings: RWS: Mkt Cap £1.2b: RNS AGN & Trading Update:
The current financial year has started well as we continue to build on this record performance, with our Patent Translation & Filing, newly formed Life Sciences, and Information divisions all contributing in line with our expectations.
"In addition, RWS acquired Moravia on 3 November 2017 for a cash consideration of US$320 million. Moravia is one of the leading providers of technology enabled localisation services to some of the largest technology companies in the world. Its acquisition enhances RWS' global presence, adding operations in the Czech Republic, USA, Japan, China, Argentina, Hungary and Ireland; provides further geographic and currency diversification; and adds an additional profitable, cash generative division of scale to the Group.
Current Trading and Outlook
The Group has performed in line with the Board's expectations in the first quarter of the current financial year. Our focus now is upon the integration of Moravia together with the successful exploitation of the opportunities provided by our recent acquisitions.
"Notwithstanding US exchange rate headwinds, the Board is confident of further substantial progress in 2018 as RWS consolidates its global leading positions in its chosen sectors.
My View: well that’s a sound enough trading update for the first quarter of RWS’s financial year & let’s remember this is Q1 so a long way to go in the current FY. I guess some punters will be continually expecting to see “ahead of” trading update but in real life, this does not happen so expect there could be a minor sell by punters which may create another buying opportunity. Note I recently topped up at an attractive price on one of the dips early last week as the market had a little shakedown. In my opinion, a quality business that I am happy to continue to hold for a long time and top up when decent opportunities are presented.
Wednesday 14/02/2018: Galliford Try: GFRD: Mkt Cap: £800m: RNS Half Year Report
14 FEBRUARY 2018
GALLIFORD TRY PLC - HALF YEAR REPORT FOR THE SIX MONTHS ENDED 31 DECEMBER 2017
The Group has brought forward plans to increase dividend cover to 2.0x pre-exceptional earnings. Reflecting this, and the Group's strong underlying performance during the half year to 31 December 2017, the directors have declared an interim dividend of 28.0p per share (H1 2017: 32.0p) which will be paid on 6 April 2018 to shareholders on the register at close of business on 16 March 2018.
We then move on to the CLLN legacy:
Galliford Try continues to operate well within its financial covenants.
However, the compulsory liquidation of Carillion plc ("Carillion") has placed additional financial obligations on the Group arising principally from the joint venture with Carillion and Balfour Beatty plc on the Aberdeen Western Peripheral Route contract ("AWPR").
The over-run costs on AWPR, compounded by the compulsory liquidation of Carillion have increased the Group's total cash commitments on the project by in excess of £150m.
The Group continues to make good progress in resolving both AWPR, the construction of which is expected to complete during summer 2018, and other legacy contracts. The Group no longer undertakes fixed price, all risk major projects of this nature, and has improved its tendering and project selection processes.
The Group has sufficient financial resources to meet its obligations, including the estimated impact of Carillion's liquidation. However, this would involve diverting capital away from the Linden Homes and Partnerships & Regeneration businesses, thereby reducing their ability to capitalise on the material growth opportunities these businesses would otherwise be well positioned to exploit.
Galliford Try therefore intends to raise £150m of new equity capital in the coming weeks to strengthen further the Group's balance sheet and ensure that the Group's businesses can continue to pursue their respective growth opportunities that were set out in the "Strategy to 2021" announced in February 2017 (the "2021 Strategy").
My View: Looking at the numbers you could argue that they look reasonable but then we come to the sting; the poisoned challis gifted by the CLLN joint venture which has necessitated a capital raising and inevitable dilution of about 15-20% for shareholders. We also have a dividend cut which is to my mind, not a particularly big issue compared to the CLLN legacy. At the time of writing these notes, the shares are some 50% down from their February to March price range. All of those who employed a trailing stop loss as an alarm call may well have got out as I did on the day of the CLLN news. I thought that was a sensible move selling at 1250p and it preserved my capital from a considerable further fall. However, I got my reentry into a fairly smallish position at 980 wrong last week as I incorrectly judged that the CLLN was built into the share price despite my reasoning of caution with my original sale (see Voyager RNS WC 21/1/18). Never mind, an unfortunately timed purchase but thankfully only a small position; it happens, don’t waste time justifying a wrong one, simply sell at the bell and move on. Had the RNSs been more positive, I would have considered adding more but simply too much risk for now in my opinion. I know some investors will think deeply and justify themselves for remaining faithful from that good 1550p share price 10-11 months ago and I accept that investment styles differ. However, as ever, capital preservation is paramount in my mind.
Thursday 15/02/2018: NewRiver REIT: NRR: RNS
Acquisition of two retail parks for GBP26.5 million representing a blended yield of 9%
NewRiver is pleased to announce that it has completed the acquisition of two retail parks for a combined consideration of GBP26.5 million, representing an initial yield of 8.9% and a capital value of just GBP141 per sq ft. Both retail parks have good occupier demand and present NewRiver, as a specialist retail asset manager, with the opportunity to add value through a variety of identified active asset management initiatives.
The Rishworth Centre and Railway Street Retail Park, Dewsbury
The Valegate Retail Park, Cardiff
Allan Lockhart, Property Director commented: "These acquisitions are in line with our strategy of acquiring fundamentally good quality assets with untapped enhancement opportunities which NewRiver is well placed to exploit as an active and specialist retail asset manager.
We are confident of significantly improving the retailer profile and the sustainability and quality of underlying cash flows so that these assets will deliver attractive returns for our shareholders. Importantly we have retained our capital discipline on entry price, acquiring these assets at a blended yield of 9%."
My View: this is one of the stocks I hold within my high yield portfolio and from what I can understand, it seems like another decent acquisition bt the competent management team at NRR. Just checking my records and I see that I first purchased NRR quite some time ago in fact back in mid-2013; I am happy to continue to hold and reinvest the generous dividends.
Friday 16/02/2018: I am afraid I have an early start and will be away from home before the RNS flow so will catch up on anything significant in next weeks Voyager.
Glad I Am Not There: well this week lets have a look at UP Global Sourcing Holdings plc, UPGS, an IPO at the start of March 2017 & it appears a top tip from a subscription service tipsheet or at least so I am told. Now I should say that I simply do not do IPOs: been there, done that, got the T-Shirt or correctly got out with what’s left of the T-Shirt. Absolutely years since I have done one as they are just not my style as I like proven track record companies that have been tested by the financial markets; each to their own and all that.
Also, although the intention of these comments is not to knock the business concept, it’s not a business model that appeals to me. Anyway, UPGS issued a profits warning on Monday 12/02/2018 that say the shares fall by an astonishing 45% an absolute horror for investors. The horror story began to unfold last year with a first profits warning on 11/09/2017 just six months after coming to market; an absolutely horrid place for holders to be especially after such a short space of time on the market and really does question the business in total (model & management credibility). However, I digress as I just wanted to use this as a reference example to a couple of items a continually bang on about. Firstly, are experts really experts i.e. tipsters are like all of us in that they don’t get it right every time. Secondly, although you may not have got it right with your tip/purchase, the important thing for me is what action you take when bad news hits and believe me, sooner or later it will hit a stock within your portfolio.
With rapid action in mind, look at the graph below and consider how investors on the day of the first profits warning back in September, may have escaped by selling at close to the opening bell maybe a 25% loss or worst case as much as a 50% loss with the share closing down at 104p having closed at 210p on the previous trading day. Well, that was bad but further procrastination over the next five months would see another 50% wiped off that already beaten up 104p. On the trading day before this Monday’s profits warning, the share price closed at 61p and on the day of the warning fell sharply to around 40p where if you were lucky, you may have been able to get. By the close, on the day of the second warning, the share price had hit 32p i.e. a 48% drop on the day. Will there be continual drift? Will investors see value in the business at these levels? I honestly don’t know the answer to either question but what I do know is that the smarter investor who exited on the day of the original profits warning on 11/09/2017 would despite the original pain, be so much better off than the investor who remained blindly loyal to their original investment decision. A lovely example of what I feel are combined capital destroyers: not acting on a profits warning and the application of wealth destroying procrastination.
This weekend I have a Hatters free as our game at Coventry has to be rescheduled due to their continued progress in the FA Cup. I may well pop on a train and go to watch Cambridge United at home and that will at least give me a good excuse to call into that wonderful backstreet pub, The Cambridge Blue with its massive range of well kept real ales.
Whatever you are doing, have a good weekend and happy investing.