Good morning! Judges Scientific (LON:JDG) announces a Placing of 0.5m new shares at 1625p, raising £8.125m before expenses. This represents a discount of 7% to Friday's closing price of 1747p, which looks reasonable. Dilution of existing holders is just over 6%, which again looks reasonable to me. The shares have done very well, and are on a forward PER of 20.5 this year's earnings, and 17.2 times 2014 forecast earnings, which is pretty racy rating considering they are buying businesses at considerably lower ratings.
However, that's the beauty of their business model - having not put a foot wrong with roughly 10 acquisitions to date, investors have rightly put a management premium on Judges shares, betting that its CEO David Cicurel will continue his unbroken track record of adding shareholder value from shrewd acquisitions. Judges operates in the medical instruments sector, where small businesses can be bought at reasonable prices, often because the founder wishes to retire for example. This creates growth at Judges, so investors then put a premium rating on its shares, making the whole thing self-fuelling, as more cheap acquisitions continue to drive growth, and hence the share price. Clever stuff.
We will have a chance to consider this in more detail tonight, as Cicurel is giving an update presentation at Mello Beckenham tonight, which myself and several dozen other investors will be attending. He's a charismatic speaker, and always has some great insights, so should be an interesting & enjoyable evening, as usual.
The Placing proceeds are being used to pay down debt, and is described as "substantially oversubscribed". This will give them the financial flexibility to make more acquisitions, and looks a sensible move to me - shareholders should be happy that more equity is being raised at a high rating, as that minimises the dilution to existing holders, yet enables the growth to continue from more acquistions.
I've never held shares in this one, as it's always looked too expensive, but the lesson learned is that when you spot a great business model & top notch management, maybe it's a question of just paying up, even if the price is a bit warm? With the shares having been an 18-bagger in the last 5 years, I suspect Mr Cicurel will have a queue of people offering to buy him a drink tonight, as quite a…
