XP Power, one of the world's leading developers and manufacturers of critical power control components to the electronics industry, today issued an Interim Management Statement for the quarter ended 31 March 2014. In this they said the positive trend from the second half of their last full year had continued into Q1 of this year with robust order intake. Specifically they said:
"Group revenues in the three months to 31 March 2014 were up 7% from those achieved in the same period a year ago. Similarly, margins also improved, due primarily to increased factory utilisation. In constant currency revenues increased by 11% on the same period in the prior year." Net debt roughly halved to £1.6 to £1.7 million and the quarterly dividend was increased by a useful 9% to 12 pence and they say given the current trading they expect to report a rise in turnover this year. So all looks good with turnover, margins and dividend all on the up.
Last time I wrote on this one on 24th February 2014, it was on around 17x and about a 3.3% yield and I decided to run with it even though it was not such good value as when I bought it. Since then the shares have been quite weak and now look oversold (see chart below) and as a result they now look reasonable value on around 15x with a yield of nearly 4%. Technically, apart from being oversold it has recently closed a gap on the chart from December 2013 and is possibly bouncing off the 200 day moving average. Consequently if they don't go up too much today I might top up my holding given the positive trading background and improved value on offer today from Mr. Market. See also below a brief update from Edison today who suggest they look cheap compared to competitors / peers.
Meanwhile a couple of days ago another stock I wrote up recently called Fairpoint (FRP) announced a £9 million acquisition of a consumer legal business. This is reasonalby significant given the market cap. is only £60 million on this one. It is in line with Fairpoint's stated strategy to diversify its income streams into new sectors such as legal services.
The acquisition is expected to accelerate the growth of the Group and be immediately earnings enhancing on an adjusted basis. They also talked about an enlarged financing facility to fund the groups future growth. You can read the whole announcement if that is of interest to you.
The acquisition seems to be quite well received by the market and this one has done well since I last wrote on it on 13th March 2014 (see chart below). This has helped to offset the decline from XPP, which neatly demonstrates the benefits of diversification in a portfolio. You also have to be prepared to accept prices bouncing around and try and only deal when it makes sense for your portfolio or if Mr. Market is offering what you consider to be a reasonable or silly price. In this case the stock looks somewhat overbought in the short term after the run it has had so I'll not be rushing out to buy more of this one today and I wouldn't be surprised to see some profit taking. However, it does still look cheap on around 10x with a 4%+ yield although this probably reflects the slightly chequered past and nature of the business. This plus the small market cap. make me slightly uneasy about holding this one, but on balance I'll hang on especially as it is still cum the 3.85p final dividend which gives a 2.5% yield at the current 150p share price. Any traders out there holding this one might want to exit here?