Interesting announcement this morning from Sports Direct International confirming that they have seemingly written or sold some put options on Tesco. This references 23 million Tesco shares with a stated maximum exposure of £43 million suggesting a strike price of about 187 pence, although I'm not sure if this factors in and is therefore net of the premium they will have received for selling the options.
This would represent 0.28% of Tesco's market cap. and Sports Direct say: "This investment reflects Sports Direct's growing relationship with Tesco and belief in Tesco's long-term future."
This seems like quite an interesting development given all the negative news surrounding Tesco recently and given that Mike Ashley has proved to be quite a shrewd trader and buyer of retail assets over the years. Probably worth looking at Tesco down here given they have had several profits warnings, a new CEO, a dividend cut and accounting scandal already - can it get much worse? In addition it also seems like a good time now they are on special offer at less than half price in the stock market.
Not quite what I promised yesterday (that'll have to wait for another day, although you might hate this one too?) as we have had Incredibly strong interims from (SUS) the home collected credit and motor finance group this morning. The financial highlights were:
* Revenue up 21% to £34.7m (H113: £28.6m)
* Profit before taxation up 28% to £11.3m (H113: £8.8m)
* Basic earnings per share up 33% to 75.0p (H113: 56.6p)
* First interim dividend increased by 21% to 17.0p (2013: 14.0p)
This is from a continuation of strong growth from the motor finance side but joined this time around with growth from the home collected credit side too. This did require them to invest in the businesses which meant more borrowings and gearing rose as a result to 70%. However they have put new funding lines in place this year and have applied for a deposit taking licence, which if approved, could help them with further funding in the medium term.
Given last years results were split fairly evenly and if that pattern is repeated this year then it looks like there could be scope for a modest upgrade to earnings forecasts to around 150 pence for the full year. Given the hike in the first interim dividend it also looks like the full year dividend could also exceed current expectations and come in at around say 65 pence (+20.4%).
At last nights close of 1868 pence these numbers would leave it on a reasonable 12.5x with a 3.5% yield. However, if it was to trade on say an average 14x P/E for this year it would give a price target of 2100 pence and still leave it on a 3% yield. This would be a 12.4% upside from last nights close and as it was the peak price for this year seems like a reasonable target in the medium term.
Brief update on my post yesterday which is to share a sponsored research note from Edison on GVC . As I suspected this unsurprisingly includes an upgrade for this year but the outlook for next year is fairly flat. See the file below to read more if that is of any interest to you. I say this is the last word on GVC as I'm not currently in it and feel disinclined to chase it up here, so I probably won't be updating you on it, although it will stay on my watch list for now.
Otherwise just when it seemed the market was trying to have another go at the old peaks it has been hit by some shocking news from Tesco and a not so sweet profits warning form Tate & Lyle today plus the US and others bombing ISIS doesn't help either I guess,
Any way that's all for now but I hope to write up an even cheaper value stock for you tomorrow, but I reckon you'll hate the idea, but that's probably why its cheap.
I wrote about NetPlay TV plc (NPT) recently and in that post I mentioned that I had made money in the past on GVC, an on line betting stock. They have today announced interim results and a Q3 update which all reads very positively. In addition to this they have further increased their quarterly dividends such that they are up by 96% in calendar year 2014 over the previous year. They have also added a special dividend of 2.5c reflecting they say that:
"The Group remains highly confident for the outcome of this current financial year and this confidence is reflected in the enhanced dividend that we have announced today."
This takes dividend in the year to date up to 55c in total which compares to forecasts of 49c for the full year, so upgrades likely there. Overall a good set of numbers with better than expected dividends which this Company have been good at delivering in recent years. However, as a gambling related stock it tends to trade cheaply and is on around 9x with an 8% yield before any upgrades on the back of today's numbers. I wouldn't be arguing for a dramatic re-rating, but maybe it can progress in time if they continue to deliver as they have in the last couple of years.
Not an X Factor or Doctor Who fan and don't know what to watch on TV this weekend? Then check out this site and the first of a series of videos below which they have done entitled - How to Win the the Loser's Game. You can also follow them @InvestSensibly if it is of interest and Twitter is your thing - enjoy.