Voyager RNS Log July 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 to 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. As I mentioned in the RNS Log at the end of June, the company news release is going through its usual summer quiet period so rather than fill the pages with irrelevant padding, I hate that approach so much, I said I would restrict July and August to monthly logs, so here we are for July. Note: as it’s a month rather than the usual week, there are quite a few RNSs to cover so to restrict boredom especially in this hot spell, I have been briefer than usual (hooray I hear you all shout!). It was really nice in early July to have a lunchtime meetup organised by our Wheeliedealer; great to meet Diana Patterson, Treesie, Zyg (Zyg Suzin) & of course the very amiable Pete himself. What a nice way to spend a lazy hot summer Friday afternoon in such good company as we sorted out the stock market, the world cup and a few other worthy subjects. Then on leaving the pub behind, it was a quick dash off to the Coopers Arms in Hitchin for a swift half or two before Luton’s first pre-season friendly. Why can’t league football be played on summer evenings rather than cold February afternoons as you freeze your arse off on a sub-zero plastic seat! The World Cup; well England did very well if getting to the semi-final and if the FA one day have to balls to tell Sky to walk the plank, then we may eventually go on one day and win it as we develop more premier league players that qualify to play for England; currently it stands at about 36% v’s vastly higher percentages in France, Germany and Spain. Gosh would you believe it, those three mentioned countries were the winners of the last three World Cups. All the summer has continued with my fairly ruthless clinical approach to jettisoning losers from the Voyager and also selling those that have maybe done as much work as they are capable of for now; in fact, I am doing more short-term trading as my medium to long-term confidence reduces with. Having said that, this summer has been very kind to me in terms of portfolio returns. I firmly believe that once an investor has developed the capability to identify very attractive quality stocks and I don’t mean speculative blue-sky dreamers or holes in the ground, that investing can be simple if you forget about your ego, ditch losers very early and add to the quality performers (whilst at the same time ensuring one stock does not become overly dominant) . However, I can only really speak of what has worked for me over the years; each to their own. Anyway, enough of the waffling on, let's have a look at the new log for July 2018. A few portfolio updates to start with: Firstly a few recent trades as I whittle my holdings down to around 20 stocks and even on that 20, I have top slice profits a fair amount as I bank some profits and build a cash pile for later in the year. I notice that quite a few investors who have been in the market as long as I have and during that time experienced a good number of bear markets, are doing a similar thing. I have made very good returns over a prolonged number of years and am simply derisking in the short term. The following sales took place with profits ranging from 25% to 500%: PSN, G4M, KWS simply a top slice of a large holding but I still retain a lot, AIR, TSTL, ABDP, AMO & BON. One sale at a loss RFX @ -7%. Note: the reasoning behind this batch of sales was simply taking good profits and reducing risk exposure as we move into some possibly uncertain times. Note: ABDP possibly a bit overheated so for now placed on the watch list. Very short-term profitable trades in July: MPAC (only held for 1/2 hour) & BDEV Purchases in July: further top up of BVXP, CCC & SCT a new purchase in early July. I also bought into FDEV again having made some decent profits on my last holding/sale of the stock: currently, the only member of the Voyager slightly in the red but to be fair, it’s heavily shorted. Note: for clarity when a stock fails to perform after a reasonable time and becomes red, I watch it closely and when I judge it as a risk to capital, it's sold. I probably make as many unsuccessful stock selections as most investors but I try to jettison them before any real harm is done. July RNS Review for stocks within the Voyager portfolio 09/07/2018: Xpediator: XPD: Mkt Cap £105m: Proposed Acquisition of ISL & Placing My View: looks a sound acquisition at an initial cost of £9m which is 5x the PBT of ISL (2017); note another £3m may be paid in 2020 contingent on performance. The market seems to like the acquisition and the shares soon maintained their position at around 80p. I have only held since April this year and XPD has at the time of writing appreciated by about 30%. Whilst looking attractive, I am also very conscious of the fairly modest EBIT margin and feel that once we have an economic downturn that margin could be easily squeezed. I note it XPD is quite a darling with private investors. 10/07/2018: Softcat: SCT: Market Cap £1550m: Trading Update Following the positive statement released on 23 May outlining a successful third quarter, the Company has continued to perform exceptionally well. Market conditions have been very favourable and growth against prior year has accelerated. As a result, the Board now expects that full year 2018 adjusted operating profit will be materially ahead of its prior expectations. Preliminary results are scheduled for release on 17 October 2018. My View: a very encouraging trading update with that joyous phrase materially ahead of its prior expectations. What does materially ahead mean? Well, I take it as over 10% ahead of expectations. Strangely it took the market a couple of days to react to the news. I will continue to hold. 12/07/2018: Portmeirion: PMP: Mkt Cap £126m: Trading Update: sales are up 11% for the six months ended 30 June 2018 relative to the same period last year. On a constant currency basis, total Group sales are 15% up on last year. positive start to the year with strong progress in both our ceramic and home fragrance divisions. With the seasonal weighting of our business, trading in the second half of the year remains important to the Group. We remain confident that we will achieve profits for the full year in line with market expectations. My View: Sometimes when companies declare that trading will be weighted to the second half of the year it raises a red flag. However, in the case of PMP the turnover is always biased to H2. In the past PMP has been weighted towards the second half with the full year usually about 2.5x the H1 turnover. Note we are speaking turnover and not profits. To my reckoning, the fag packet suggests a year-end turnover of about £93m which compares to a market expectation of £87m. Now as it’s half-year weighted, PMP are wisely just saying “comfortably meet expectations”. In my view, there is a very good chance of beating expectations by about 5 to 6%. I will continue to hold. 12/07/2018: Telford: TEF: Mkt Cap £300m: Trading Update Key messages from AGM TU: Company continues to perform well London (where TEF concentrates) remains robust & in line with forecasts Continued strong progress in the build to rent sector which now forms a significant part of our future growth strategy We remain well placed to achieve our stated goal of exceeding £50 million of total pre-tax profit for the year to 31 March 2019. My View: regular readers will know that I rate TEF as a quality business being in a unique position compared to other builders on the market; I have no change in that view. Current forecasts suggest that TEF will comfortably pass their £50m PBT target for 2019. The shares are modestly valued at Price to Nav 1.3, a PE of 7.2 and a yield of 4.7%. 12/07/2018: Dart Group: DTG: Mkt Cap: Final Result In a year of strong passenger growth for both Jet2.com and Jet2holidays, Group Revenue increased by 38% to £2,391.8m (2017: £1,729.3m). Jet2.com flew a total of 10.38m passenger sectors (2017: 7.10m), an increase of 46%, which included a 45% increase in demand for our Real Package Holidays™ as 2.50m (2017: 1.73m) customers enjoyed a Jet2holidays package holiday.
Profit before taxation improved by 49% to £134.6m (2017: £90.1m). This result includes a £20.0m gain on foreign exchange revaluations (2017: £10.9m loss). Before accounting for these revaluation gains / (losses), profit before FX revaluations and taxation improved by 13% to £114.6m (2017: £101.0m). The increased profits reflect the continuing strong demand for our Leisure Travel products - holiday flights with our leading leisure airline Jet2.com and package holidays with our ATOL protected tour operator Jet2holidays. Demand for our leisure travel product has strengthened since the start of the new financial year and given current forward bookings we expect that Group profit before foreign exchange revaluations and taxation for the financial year ending 31 March 2019, will substantially exceed current market expectations. Outlook Demand for our leisure travel product has strengthened since the start of the new financial year and given current forward bookings we expect that Group profit before foreign exchange revaluations and taxation for the financial year ending 31 March 2019, will substantially exceed current market expectations. My View: well this is another long-term holding going back to around 200p when I first purchased in 2013. I liked the company then and like it just as much if not more today. In summary, an excellent set of results and the outlook statement does not get much better than that for any business. 12/07/2018: Computacenter: CCC: Mkt Cap £1820m: Trading Update Following a strong start to the year, as indicated in our Q1 2018 Trading Update published on 27 April 2018 (the "Q1 Trading Update"), the Group has seen continued momentum in the second quarter within the Supply Chain business across all geographies, but particularly in Germany. The six months of trading to 30 June 2018 shows considerable progress for Computacenter in adjusted profitability, and even further progress in adjusted earnings per share following the buyback completed in February 2018, against the same period last year. Whilst there is still a significant amount to do in the second half of the year, Computacenter's Board believes that the Group's trading result for the 2018 financial year will now be comfortably in excess of its previous expectations set out in the Q1 Trading Update. My View: CCC is a share that I both got right and wrong and hopefully write again; we will see. The first right was buying then at around 700p and selling them for a decent profit a couple of months ahead of the Brexit referendum. The wrong was not repurchasing vigorously earlier in 2017 when the RNS newsflow became very encouraging: Note to self “read your own RNS log numskull”! Anyway, following yet more positive news, CCC another top up for the voyager. 17/07/2017: Somero: SOM: Mkt Cap £220m: Trading Update Positive trading momentum, in line with expectations Solid H1 2018 trading as anticipated with four of the Company's six territories, including the Company's largest markets, reporting growth over H1 2017. This positive trading momentum, the continuation of the healthy market conditions across Somero's global footprint, along with robust margins and operating cash flow generation has underpinned the Company's continued expectation that trading for the full year will be in line with market expectations. Net cash at 30 June 2018 was in line with management's expectations. Jack Cooney, CEO of Somero, said: "The first half of the year has seen solid growth in terms of profitability and cash flow generation. The positive momentum of our business and favorable market conditions point to a positive H2 2018. In addition, we are truly excited about the significant opportunities for Somero that lie ahead derived from our continued investment in new product development, a key element to our long-term growth strategy." My View: a good solid trading update from SOM. China whilst not being massive in terms of profits contribution may well continue to prove to be a difficult one to grow but even if that goes nowhere, I feel there is enough going on elsewhere including the previously talked about new product to sustain growth for this well managed conservative company. 20/07/2018: Keywords: KWS: Mkt Cap £1.1b: Acquisition of Snowed In & also Yokozuna Data My View: well this business simply grows and grows in Market Cap as it reaches well over £1b; when I first bought into the business the market cap was well under £250m. The acquisitions appear to be sensible according to Day’s comments & he really seems to know his stuff. Snowed In has a decent EBIT margin of 33%: all sounds decent enough to me. Note: as this stock had become overly dominant within the Voyager as discussed previously, I have top sliced a touch more at over £18 a share. Whilst it’s still easily in the top five in terms of value in the Voyager, it’s no longer overly dominant as it has been previously. Why rebalance the bias of such a successful stock as KWS in the Voyager? Well, it's simply about balancing risk. Let’s say for example you have a folio with 10 stocks and you decide the maximum percentage of any stocks influence exerted on the folio should not be more than say 20% or 25%, you simply top slice a little of that very successful stock occasionally manage risk; as I always say, the next profits warning may just be around the corner for ANY stock. With KWS due to its remarkably acquisitive nature & the significant task of managing all of those acquired businesses, the bad news risk is to my view appreciable higher than say if Coca-Cola was a very dominant stock within your folio. I should also mention BVXP and the new release from Siemens Healthcare Diagnostics in mid-July: an appetiser note was included the last interim report in March. I feel troponin will be a very significant source of revenue for BVXP an almost unique business having an EBIT margin of around 80% & a ROCE of 62. How many businesses do you see like that on the LSE? Again, another stock I have held for a long time having first bought in 2014 and also topped up on various occasions. I am very happy to continue to hold BVXP and although it is a large position, I will continue to add on weakness. Incidentally, being the conservative company that BVXP is, I don’t really expect we will see an RNS covering troponin progress until they announce the date for the finals along with a TU; expect the TU to be around late August early September with finals in October. Tuesday 24/07/2018: IQE: Mkt Cap £770m: Trading Update An incredibly wordy in-line trading update; not much more to say really. I seem to have has an affair with Lady IQE for more years than I care to remember & if you will excuse the term, I have been in and out quite a few times. Still profitable to the portfolio but a favourite with the shorters. Wednesday 25/07/2018: Medica: MGP: Mkt Cap £128m: a fairly encouraging in-line TU & reassurance that they are not having difficulty in recruiting radiologists. Trimmed my position as it has difficulty finding the momentum I previously thought it displayed. Holding remainder. Wednesday 25/07/2018: Norcros: NXR: Mkt Cap £172m: Trading Update: In-Line With Expectations Not a lot for me to say here about boring old NXR; doing what it says on the tin & I will continue to hold; I just love a bit of boredom. Wednesday 26/07/2017: ITV: Mkt Cap £6.9b: Interim Results: Strong operating performance in an uncertain economic environment • Total external revenue up 8% at £1,593 million (2017: £1,469 million) with non-advertising revenues up 14% at £958m (2017: £837 million) • Total ITV Studios revenue up 16% at £803 million (2017: £692 million), including £12 million of unfavourable currency impact • ITV total advertising revenue up 2% as expected, with 48% growth in Online • ITV Studios adjusted EBITA up 7% at £118 million (2017: £110 million) • Broadcast & Online EBITA down 12% to £257 million (2017: £293 million) reflecting the timing of the Football World Cup as previously guided • Adjusted EBITA down 7% at £375 million (2017: £403 million) • Adjusted EPS down 8% at 7.1p (2017: 7.7p) • Statutory EPS up 4% at 5.3p (2017: 5.1p) My View: a decent enough yet not outstanding set of results for ITV and the picture painted splendidly by Carolyn McCall; maybe she should try her hand at writing the odd episode of Coronation Street; she makes relative dullness seem almost exciting; I will probably feel “over the moon” & indeed honoured when she issues a profits warning. I think they have a fair amount of work ahead of them but are it seems, on the right track but nothing to get overly excited about. I still reckon they will be the subject of a takeover bid before long. Just about convincing myself to continue to hold. Thursday 26/07/2017: Bodycote: BOY: Mkt Cap £1.9b: Interim Results Highlights Revenue growth of 8.7%; headline operating profit growth of 15% Further improvement in return on sales to 19.0% Free cash flow of £39.4m Specialist Technologies' growth of 11% Emerging Markets' revenue growth of 22% Interim dividend of 5.7p, up 8% (by no means a dividend stock!) Outlook Bodycote has enjoyed a strong first half of 2018. Robust growth has continued with double-digit revenue progression in Specialist Technologies, contract wins on automotive and aerospace programmes, and excellent growth across the Emerging Markets. We continue to invest in the ongoing growth of the business through capital expenditure and increased resources. While our business by its nature, has limited forward visibility, at current exchange rates, the Board expects that the full year result will be marginally ahead of current consensus My View: my trusty fag packet back in May proved right with BOY now saying “the Board expects that the full year result will be marginally ahead of current consensus”. Happy enough with these H1 results in general and will continue to hold what I consider to be a high-quality business. Well, that’s it for this month. I hope we have a continued good summer during August but let's just hope that it rains each night from around 10 pm to about 4 am the next morning; looking after a garden can be hard work without that rain. Catch you on the Voyager next month & as ever, happy investing!
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