As I have observed in the past Thursday seems to be popular day for corporates to put out results and consequently, like today, we often end up with a throng of results on a Thursday.
So I'll cover in brief a few that I have mentioned in the past which are in size order Rolls Royce, Restaurant Group, Safestore & Norcros. So if any of those are of interest then click the read more.
If you have been following my posts you should have had today in your diary and also you cannot fail to have missed it in the media that today is the day when Super Mario has to come up with the goods, or rather Euros, to avoid upsetting investors everywhere. The latest thinking seems to be that they will announce €50 billion a month starting in March until the end of 2016 perhaps to give a total of €1.1 trillion. Whether this will be the case and if it does any good or not I guess we'll have to wait and see at 1.30 pm UK time today and beyond.
Otherwise today a couple of stocks that I have covered here in the past put out updates / results. Firstly there was the software provider to the healthcare industry EMIS which gave a trading update saying they expect to be in line with their expectations and that they are confident about the outlook for EMIS in 2015.
That all sounds good so lets see how its done since I first did a check up on it back in March 2014, see link for original write up, or the category list here for updates since then. Well not too bad as you will see from the graph below which has seen the shares rise from their depressed 600 pence level to their current 836 pence or so today for a rise of nearly 40% against a fairly flat market over the same time period.
This has been achieved on the back of slightly upgraded forecasts 40 pence of earnings and 18 pence of dividend and a more significant re-rating from 15x and 3% to 20x and 2.2% for the current year which makes it start to look expensive in my book, although still good quality. Some mid single digits growth for the current year to December 2015 is forecast which still leaves it on a fairly full looking 19.3x and 2.3%. The EBIT / EV yield is also only currently around 4.8% which combined with the yield puts it in the bottom quartile of value on my CI Scores, confirming my impression that it is starting to look expensive. Otherwise the quality metrics and the earnings revisions trend help to improve its overall score and put it just outside the top quintile. However, given the valuation and more limited growth forecast for this year I wouldn't suggest it as a new money buy and in fact it is only just about a quality hold for me given the rating.
The other stock which reported today is Safestore (SAFE) which I mentioned briefly in passing back in November 2014 when they updated and said they expected to be slightly ahead of the top end of the consensus range. It seems that analysts were too lazy to upgrade as they have today reported earnings and dividends about 4% and 10% ahead.
They seem to be doing well as they seem to be successfully filling more of their vacant space. I am kind of regretting selling this one but hey ho must move on.
Any way that's all for today while we wait like Pavlov's dogs for Draghi to ring the bell on QE in Europe but does it mean that the Euro will be a safe store of value going forward and will investors be in investing Heaven until '17 as a result?
Talking of which reminds me of an appropriate song for Mario Draghi today which appropriately saw Heaven 17 going all Eurotrash and trying to do a Kraftwerk with a track called I'm Your Money. So see and hear the video above which just seems so appropriate for today.
Lots of updates and items of news relevant to stocks that I follow today so I'll try and keep it brief in the main.
· a good strategic fit with the Connect Group's existing core competencies in time sensitive specialist distribution;
· a business with a strong track record, well positioned for further growth, and able to build upon its leading position in a market with sustainable growth characteristics;
· in line with the Group's ambition over the medium term to derive at least 50 per cent. of profits from outside of newspaper and magazine wholesaling;
· adds value to the organic revenue growth opportunities for the Enlarged Group, in particular via provision of a national distribution network;
· the opportunity to achieve pre-tax cost synergies across the Enlarged Group of £2.0 million per annum within three years and the potential to generate revenue synergies from shared infrastructure;
· creates significant value for shareholders:
o EPS accretive in year 1 and substantially accretive by year 3
o Post tax ROIC above cost of capital in year 1 (9%)
· in addition, the strong cash generation of Tuffnells supports the Group's progressive dividend policy.
I would say it seems like a reasonable deal which moves them to 38% of profits from outside their news distribution business on a pro forma basis and well on the way to their goal of 50%, plus it adds onto their other recently announced distribution business. The rights issue may also help to make the balance sheet look more healthy (depending on the assets it brings versus the price paid) and provide more distributable reserves to help maintain their progressive dividend policy.
However on the dividend they are unusually paying it on the rights shares too and as a result adjusting the final payment due next year. They explain this as follows:
Connect paid dividends per Ordinary Share of 9.3 pence and 8.6 pence for the years ended 31 August 2013 and 31 August 2012, respectively. The proposed final dividend of 6.6 pence per Ordinary Share for the year ended 31 August 2014 announced on 15 October 2014 in Connect's Preliminary Results Announcement will be adjusted to reflect the impact of the Rights Issue in connection with the Acquisition. The proposed final dividend will be adjusted to 6.0 pence per Ordinary Share to reflect the bonus element associated with the Rights Issue and both Existing Ordinary Shares and New Ordinary Shares will be entitled to receive this dividend.The proposed final adjusted dividend of 6.0 pence per Ordinary Share is subject to approval by Shareholders at the Annual General Meeting on 4 February 2015 and, if approved, will be paid on 6 February 2015 to Shareholders on the register of members of at close of business on 9 January 2015.
Following the Acquisition, Connect intends to maintain its existing progressive dividend policy, having regard to the availability of distributable reserves and cash, and taking into account the Enlarged Group's working capital and investment requirements.
Seems like a reasonable deal which furthers their strategy and should boost their earnings down the line and potentially bolster the balance sheet too so all in all seems sensible. But in contrast to Essentra I'm a bit surprised they are issuing equity at such cheap levels. So if you didn't get in before I suspect the usual fall on the back of it going ex rights and in the run up to the payment may give you an opportunity to get in at levels around 150 pence again and may even close the gap on the chart in the low 140's - something to watch out for I would say.
Finally, if you have made it this far and having spoken earlier about a hospital pass, as a reward to you if you are reading this on the web I offer a video of Top 5 Rugby Tackles gone wrong at the end of this post.