We have had a couple of updates today from stocks in the Compound Income Scores Portfolio (CISP), namely Games Workshop (GAW), Ferrexpo (FXPO) & one from Stock Spirits (STCK) which has been in the portfolio and which nearly made it in at the last re-screening this month. If none of those are of interest no doubt you'll click away now, but if they are read on.
First up Games Workshop which reported very strong interim results to 26th November 2017. This was the latest in a short series of very strong results as they continue to benefit from the most recent update to their main gaming product and also some growth in online licensing etc. The strength of these numbers suggests to me that they don't need to see much growth in the second half to meet the current forecasts. This may not be as easy as it sounds though as I believe they will be up against some tough comparatives from the previous year. The shares having blipped up first thing but seem to have settled back to about all square at the time of writing. So it will be interesting to see if this leads to unchanged forecasts or if we will see some more earnings upgrades on the back of this.
In the absence of that this leaves them on around 16x this years forecasts with a yield of 4.5%, although earnings are then forecast to decline by 15% in 2019 to leave them on closer to 19x which seems like quite a full rating now if indeed the growth is going to grind to a halt again. Technically (see charts at the end) it also looks quite extended on the chart and seems to have some negative divergence on the 14 day RSI which can also be a signal for a turnaround in the short term. So personally I wouldn't be surprised to see some profit taking in the short term, although I guess you could have said that earlier in its rise.
I'll not be selling for the CISP as there was nothing untoward in these figures, they still score sufficiently well and the portfolio follows a monthly screening process . So lets see what the February screening bring, but in the meantime hats of to a twitter investor called Small Cap who apparently sold all his holding yesterday having bought at under £10 well played sir.
Ferrexpo is next up which if you are not familiar with it, describes itself in today's announcement as follows:
Ferrexpo is a Swiss headquartered iron ore company with assets in Ukraine. It has been mining, processing and selling high quality iron ore pellets to the global steel industry for over 35 years. Ferrexpo's resource base is one of the largest iron ore deposits in the world. The Group is currently the 3rd largest exporter of pellets to the global steel industry and the largest exporter of pellets from the Former Soviet Union. In 2016, it produced 11.2 million tonnes of pellets reflecting a 2% increase in production of the Group's highest quality pellets to a record 10.5 million tonnes.
In today's Q4 2017 Pellet Production and Trading Update they saw:
· Total 2017 pellet production 10.4 MT compared to 11.2 MT in 2016 reflecting planned pelletiser maintenance.
· 4Q 2017 production increased 12% compared to 3Q 2017.
· Production of high quality 65% Fe pellets represented 95% of total production levels compared to 94% in 2016.
· 2017 sales volumes approximately 10.4 MT compared to 11.7 MT in 2016 due to production levels.
In terms of pricing they saw these rise by 22% on average while their costs were up by around 10%, so that seems good as was the cash flow as the debt at the year end reduced to US$400m from US$589m.
The shares are up about 1.7% and have recovered recently towards the highs just above 300p that they saw back in September. Thus they have had a good run into these figures and look overbought with a loss of momentum in the short term as indicated by a lower high on the 14 day RSI indicator. Thus looking at the technical picture in the short term I'm not sure I'd suggest chasing them up here in the on the back of these numbers. However on any pull back they might be worth considering again, if you want some cyclical metal and mining exposure that is, as they are on around 10x next years earnings which, like Games Workshop are expected to decline too.
Finally in brief, the one that got away from the CSIP - Stock Spirits, although I did hold onto it myself and I'm glad I did. This is according to them one of Central and Eastern Europe's leading branded spirits and liqueurs businesses, and offers a portfolio of products that are rooted in local and regional heritage. With core operations in Poland, the Czech Republic, Slovakia, Italy, Croatia and Bosnia & Herzegovina, Stock also exports to more than 40 other countries worldwide. Global sales volumes currently total over 100 million litres per year. Stock also has state of the art production facilities in Poland and the Czech Republic, and its core brands include products made to long-established recipes such as Stock 84 brandy, Fernet Stock bitters and Limonce, as well as more recent creations like Stock Prestige and Zoladkowa de Luxe vodkas.
In the pre-close trading update for the full-year ended 31 December 2017 they suggested that trading since the half-year results announced in August, and therefore for the full-year ended 31 December 2017, was slightly ahead of their expectations. I would take that to mean a low single digits beat so there should be some scope for some further modest upgrades on this one. The shares have accordingly responded with a modest 1.3% rise this morning so the rating will probably remain fairly full at around 18 to 20x depending on which years figures you use as this one, unlike the other two is expected to see some earnings growth still in 2018 too - cheers or na zdrowie as I believe they say in Poland.