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Flat share prices but rising dividends.

9/6/2015

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We have had results today from two companies that I have written on in the past namely Picton Property Income & RPC Group (click the names to read previous comments). In the case of Picton (PCTN) it is a little unfair to say a flat share price as that only really applies in the last 5 months or so as you can see in the chart below.
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Prior to that as I had flagged before this property trust had delivered decent shareholder total returns of 50% in their previous year and has followed that up with a further 32% return in their latest results for the year to March 2015. When I last wrote on this one back in March this year they were at 72p which is roughly where they are today, although the latest announced NAV is catching up with the price coming in at 69p so the premium is now smaller than it was.

Going forward they have already announced that they intend to increase this years dividend from 3p to 3.3p which at 72p will give a gross yield of 4.58% which should still be covered as they continue to invest the proceeds of their most recent fund raising in income producing assets with another deal also being announced today.

So as the commercial property market seems to have some momentum behind it maybe this one can make some further progress in the year ahead, but again I would probably expect the rate of progress to slow again this year. Despite that this still looks like a good way to play growth in the sector in a diversified fashion with a decent yield too.

Moving onto RPC Group (RPC) I guess this is one where the flat share price tag perhaps is more relevant if you look at their chart below in so far as it is at around the same level as it was a year ago when I last wrote it up after their results at that time. However this masks some distortions and big swings that resulted from their acquisition related rights issue. Last year I mentioned that this is often a good opportunity to add cheaply to a holding during the process. Indeed I followed my own advice from last year and picked up some more of this one around the 500p level during last years rights issue.

This has worked out OK as the issue has been digested and they have started to bed in the acquisition of Promens Group and they have doubled the suggested synergies from this to €30m per annum in today results announcement. In this
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they delivered revenues and earnings slightly ahead of consensus but the dividend was slightly light, due to the adjustment for the rights issue, coming in at 15.4p rather than the 15.7p that had been forecast, although it was still up by 12% in line with earnings against the re-based comparative. This extends their record to 22 years of rising dividends since the Group listed in the early 1990's (see my previous post for more history / Company details and today's results).

Looking at current forecast for the coming year, assuming no great changes after these figures suggests earnings of around 45p with a 17.5p dividend but up by around 11%. At a share price of 639p (+3.4% today) this would leave them on around 14x with a yield of 2.74%. This gives me a strange sense of deja vu as this is almost exactly the same prospective rating that it stood on when I wrote about it a year or so ago and back then I said it "seems fair for this well managed business."
It seems worth repeating this year so ditto and I note the shares are also approaching the highs of last year which could act as resistance in the short term as they approach over bought levels. I guess time will tell if they can break out from this range which might be a bullish sign for a re-rating, but in the absence of that I would suggest again that up here they remain a strong hold as part of a more broadly diversified income portfolio.
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Good News, bad news and music...

11/3/2015

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...for a wet Wednesday. First the good news from Picton Property Income Trust (PCTN) which I wrote up at the start of 2014 and again in June when it had produced a 50% total return over 12 months for me. Since then this one has been more about the income as, in common with most property trusts and REITS, it has moved onto a premium to its NAV or book value which is one of the more important metrics for property related companies.

So the good news today is that they have announced a dividend policy review which will see the quarterly payout rise by 10% from 0.75p to 0.825p for a full year indicated dividend of 3.3p. At today's price of around 72p this will give it a gross yield (as it is based offshore) of 4.6%. This is on the back of them having raised a fair amount of new capital and having invested this successfully plus a reduction in their vacant or void properties in the portfolio. This has all helped to boost their income and cover the existing dividend, hence the rise today.

Meanwhile the bad news, as I had feared towards the end of last year, came from N.Brown (BWNG) who announced their
Q4 trading statement for the 13 weeks to 28th February 2015 and effectively a profits warning. This came as they failed to secure sufficient sales in the 4th quarter to hit their targets and consensus forecasts. They blame this primarily on Financial Services revenue being weak, driven by measures to further improve the quality of the debtor book.

Thus they now say they expect
full year 14/15 continuing profit before tax to be slightly below the range previously guided to and current market consensus of £88m. They have also taken a further write-off of £11 to £13m for closing something called the Gray & Osbourn catalogue business. In addition the guidance for the current year seems to be flagging quite a few potential negatives like possible gross margin decline, increasing costs and extra capital expenditure, but they say further details to come with the full year results and there is no mention of the dividend which I think may well be flat.

Overall I like the business here and mail order seems to be in the sweet spot of the internet age. However, I still have concerns about the newish Chief Executive and her strategy to open more stores and re-organize the mail order side. So far there has been lots of talk and action, but the effect on the bottom line has been mostly negative as far as I can see.
Thus I'll continue to watch this one from the sidelines for evidence that the new strategy and all the investment might be bearing fruit.

Finally, as regular reader know, I have a habit of including some music with my posts on occasions. In the past I have included tracks appropriate to the day like Blue Monday, Ruby Tuesday and Black Friday. That set me thinking that the only day I hadn't included a track for was Wednesday. Looking this up didn't give a great deal of choice, so rather than clog the post up with a video I'll provide some links below for you to check out if you like depending on your mood, or ignore if music is not your thing.

An Easy Listening Classic for Night Owls or early birds -
Wednesday Morning 3 A.M.

Laid back - Wednesday Morning.

Rock on with - Spring, Summer and Wednesdays.

Or have you got the -
Wednesday Evening Blues?
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Busy day today...

21/1/2015

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...lots of results to plough through today so I haven't had a chance to write any up in detail. But of those that have reported in the last day or two that may be worthy of further research based on their announcements and ranking within the Compound Income Scores (in no particular order) are:

Computarcenter -  CCC
Fairpoint - FRP
WH Smith - SMWH
Diploma - DPLM


Meanwhile for income we have had an update from Picton Property Income Ltd (PCTN) which has seen some good NAV growth and has been raising fresh equity to invest as it stands at a premium. This has brought the gearing down a bit and they are paying a covered dividend which gives a yield of around 4.4%.

Finally, talking of yield while many of the telecoms companies have been racing up and getting excited about the prospects of quad play deals, KCOM has been sinking faster than Hull in the Premier league. This has left it towards the bottom of its twelve month trading range where it offers a decent well cover and growing yield in excess of 6%, which is the main attraction with this one as it is struggling to grow its top line. It looks good value and somewhat oversold to me as you can see in the chart below. If it can get back to around 100 pence which it has done on four occasions in the last couple of years then it could provide a decent total return from here.
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Mezzanine finance, property and films today.

18/11/2014

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We have had a few updates on stocks I have mentioned in the past so in brief:
  • Intermediate Capital (ICP) - which I wrote up back in May has announced its first half results for the six months ended 30 September 2014. They look fine in a steady as she goes kind of way. They are talking about having achieved a high single digits return on equity and they are looking to get this up to 13% over the next two years by a combination of growing our business, reinvesting our capital and re-gearing our balance sheet. The dividend was raised by 4.5% suggesting they are on track to hit the full year forecast dividend of around 22 pence which would be  growth of just under 5%. The shares have responded positively to the announcement progressing to around 430 pence where they yield just over 5%. So it has been a bit of a struggle with this one since May, like the market, but they seem to be moving in the right direction now, although they look a bit over bought in the short term. Medium term if they can hit their financial targets and if they can continue to deliver dividend growth, then 500 pence would still seem like a reasonable target.
  • Picton Property Income Ltd. (PCTN) - also announced results which  showed a total return of 13.3% for the period and they paid a covered dividend (not always the case for property Trusts) which gives a yield of 4.7%. The NAV came in at 62 pence and the shares still trade at a small premium to this, although they did give a total return of 15.5% over the period.Seems like a strong hold if you want exposure to a commercial property portfolio. If you want more London or Trophy asset exposure then you could always check out British Land (BLND) who reported today with a 2.5% rise in the dividend which gives them a yield of 3.7%.
  • Cineworld (CINE) - announced in an IMS that overall, on a pro forma basis, trading for the Group for the 46 week period has been in line with their expectations with total revenues up by 1.1%. But they did set themselves up for a cliff hanger ending to the year by saying: "The releases in the remainder of Q4 are comparable with the prior year. In light of this and our trading performance to date, the Board remains confident of delivering results in line with market expectations for the full year." That's just as well as strong growth is forecast for the full year but despite this they still look a bit expensive on around 16x with a 3% or so yield. So in the same way as I can't get excited about their Q4 blockbusters, the Hunger Games and the latest Hobbit film, I can't get that excited about the share either.
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Wednesday Write up

5/11/2014

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First up apologies for no post yesterday I just couldn't raise the enthusiasm to write about Legal & General's (LGEN) IMS, Greene King's (GNK) acquisition of Spirit or Imperial Tobacco's (IMT) results on the day. However having said that I suppose the 10% increase in the dividend and same rate of increase again for next year from Imperial Tobacco is good. Plus the shares have responded well despite the thin cover and high debt to approach all time highs. So it seems fair enough on around 13x
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with a 5% yield for the year to September 2015. I guess people who follow 12 month highs and breakouts might get excited, but it looks a bit over extended and nearly over bought in the short term so I personally wouldn't chase it up here. However, maybe one for the watch list to see if it does come back in the next couple of months to allow you to pick it up on better terms and collect the 89.3 pence final which goes xd on 14 January 2015 and offers a yield of over 3% on its own at the current price.

As for today I couldn't see much to get excited about although Schroder Real Estate (SREI) produced an impressive rise in their NAV although they still trade at a premium to this but do offer a gross yield of around 4% if getting exposure to commercial property is of interest to you.

Alternatively their was an update from Value and Income Investment Trust (VIN) which describes itself as investing in higher yielding, less fashionable areas of the UK commercial property and equity markets, particularly in medium and smaller sized companies. VIT aims for long term real growth in dividends and capital values without undue risk and offers a mix of 71% UK mid and small cap stocks, 27% UK property and 2% cash. They increased the dividend by just under 5% and offer a net yield of 3.3%. Given the unusual mix of assets it does tend to trade on a discount which is currently around 15% or 7 to 8% if you factor in the debt at fair value - so a way of getting some commercial property exposure plus mid and small caps at a discount. However, I guess you could get the same kind of exposure / discount by buying a pure small or mid cap trusts together with a property trust - so as ever I guess you pay your money and take your choice or not as the case may be.

Finally as I'm boring myself now just to flag AMEC which I have written up in the past, has announced that it is hoping to close the Foster Wheeler acquisition in the near future. I mention it because as I suspected the price has been weak into this, partly because of the weak oil price and I suspect also on technical grounds related to the deal. For example I note there are just under 7% short positions outstanding which I suspect will be arbitragers who are playing the usual time value discount in the bid terms. So once it completes and this unwinds I would hope we might see some recovery in the price. Talking of which this has strayed into my previously suggested buying range of between 950 pence and 1000 pence where it comes on around 11x next years earnings with a 4.5% 2x covered yield and it still cum the 14.8 pence interim until 26 November which is worth 1.5% at 980 pence. 

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