http://www.stockopedia.co.uk/Stockopedia - http://www.stockopedia.co.uk/ExpectingValueSat, 25 May 2013 12:54:32 +0100 See part one here: this leads directly on. Introduction   I finished part one, after a brief introduction and a discussion of the industry, with a soap opera-esque - ok, perhaps not quite that good - cliffhanger relating to returns on capital. I'll reproduce the graph and the question just below, since it very nicely sets the scene for this post: The most important point is, of course, returns on capital. What does the company do with my money inside the business? How well does it use it? Lookers uses it very well indeed - they earn consistently higher returns on capital than their competitors, even while acquiring (you might expect it to take a while for big acquisitions to get 'firing' and drag down returns in the interim).  Vertu's lowly valuation in asset terms is also explained - its returns on capital sit stubbornly at a rather low 6%... ... My next post will focus on that big question, then. What really separates the performance of these businesses, and where are they likely to go? It's a lofty ambition - as investors we're used to dealing with rather incomplete information, as we scavenge what we can from financial statements and use our...http://www.stockopedia.co.uk/content/car-dealerships-vtu-camb-look-pdg-part-2-dissecting-returns-73581/http://www.stockopedia.co.uk/content/car-dealerships-vtu-camb-look-pdg-part-2-dissecting-returns-73581/WexboySat, 25 May 2013 00:58:55 +0100It’s six months now since I did a write-up on KWG Kommunale Wohnen AG (BIW:GR) (the ultimate post in a 5-part series). Actually, a recap’s in order here amp; probably the best introduction for this post: Part I amp; II:   German residential property has been (recently) described as: ‘Perhaps one of the safest amp; most attractive asset classes in Europe, or even the world‘. Its attractions include: - Demographics:   German population growth is broadly neutral, but is experiencing pronounced trends in favour of urban migration, smaller households amp; increasing floor size per capita. Investor horizons are often limited when it comes to property – they’d do well to note Germany has the largest population in Europe, the 16th largest in the world amp; Berlin is Europe’s 2nd largest city with 3.5 million inhabitants! - Supply amp; Demand:   Annual housing demand’s around 250-350 K pa, well ahead of housing completions which are now accelerating but only recently bottomed out at 175 K pa in 2009-10. Germany’s second-hand property also trades at a major discount - e.g. in Berlin, existing housing stock can be purchased at a 30%+ discount to new...http://www.stockopedia.co.uk/content/kwg-kommunale-wohnen-ag-73583/http://www.stockopedia.co.uk/content/kwg-kommunale-wohnen-ag-73583/Ben HobsonFri, 24 May 2013 13:07:57 +0100Screening the market for companies where brokers have recently upgraded their earnings forecasts has proved to be a great investing strategy this year. Ignoring ‘buy’ and ‘sell’ recommendations in favour of watching for positive changes in analyst sentiment with our Earnings Upgrade Momentum screen has delivered a 36% return over five months. But the recent promotion of food delivery business Ocado (LON:OCDO) to that screen raises a couple of interesting questions. With a business model that divides opinion and shares that are a magnet for short sellers, could Ocado be an earnings upgrade Trojan horse?  Last week I wrote about how broker upgrades tend to have a lagging impact on share prices. Rather than just producing a ‘pop’, evidence suggests that the full implications of this type of improving sentiment can sometimes take months to get fully priced-in to a share. This so-called price momentum effect can be triggered by all sorts of events, including upgrades, earning surprises and changes in consensus expectations. But critically, momentum works because investors have been found to react slowly to positive news. Academics Phillip McKnight and Steven Todd, who have studied the impact of broker upgrades,...http://www.stockopedia.co.uk/content/ocado-boosts-our-earnings-upgrade-screen-but-is-it-time-to-worry-73555/http://www.stockopedia.co.uk/content/ocado-boosts-our-earnings-upgrade-screen-but-is-it-time-to-worry-73555/Edison Investment ResearchFri, 24 May 2013 09:19:56 +0100A preclinical anti-TLR3 candidate in IPH33 (anti-inflammatory) has been selected for preclinical studies, which is now ready for partnering. Meanwhile, an IPH41 (anti-cancer) anti-KIR3DL2 candidate should be selected by the end of 2013. Lead product, anti-KIR antibody lirilumab (IPH2102), is in a Phase II trial for acute myeloid leukaemia (AML) and in two Phase I trials for solid cancers. One trial is in combination with ipilimumab (Yervoy) and the other in combination with anti-PD1 antibody nivolumab. IPH2201 is in a Phase I trial for rheumatoid arthritis. The IPH2102 and IPH2201 programmes are licensed to Bristol-Myers Squibb (BMS) for cancer and Novo Nordisk for inflammatory diseases respectively.http://www.stockopedia.co.uk/research/new-anti-inflammatory-and-anti-cancer-progress-73548/http://www.stockopedia.co.uk/research/new-anti-inflammatory-and-anti-cancer-progress-73548/WhichInvestmentTrustFri, 24 May 2013 08:13:35 +0100 Buying into unloved sectors at the right time can be a highly profitable strategy. One sector that stands out as being out of favour presently is mining. The FTSE World Index – Mining is down over 18% since the start of the year. So is it best avoided or time to buy in? Expectations for the mining sector rest on ‘super cycle’ theory, which states we are in a period of robust global growth driven by increasing trade in emerging markets, urbanisation and technological innovation. As a result, demand for raw materials is anticipated to continue growing, benefiting firms that produce them. History affords some precedents. The world has experienced two previous economic super cycles: the second half of the 19th century when innovations such as gas lighting and mechanisation transformed everyday life and the mid-20th century, a period of industrialisation and urbanisation between 1945 and 1973, when the world economy grew at an annual average rate of 5%, spurred by post-war reconstruction and the wide adoption of new technologies. Proponents of the super cycle theory believe a third and even more powerful multi-decade cycle is underway. Developments in IT and telecommunications are linking economies together in an unprecedented way and emerging...http://www.stockopedia.co.uk/content/is-it-time-to-buy-into-mining-stocks-73545/http://www.stockopedia.co.uk/content/is-it-time-to-buy-into-mining-stocks-73545/Edison Investment ResearchFri, 24 May 2013 07:55:51 +0100Following a frustrating FY12, which saw declines in both production and reserves, Petrominerales is moving forward with a lower-risk drilling programme aimed at stabilising operations and cash flow. Trading at 7.9x FY13e earnings and at less than half of the company#8217;s reported 2P NAV, we are of the opinion that markets are attributing little success to this year#8217;s drilling programme. While we have concerns surrounding the sustainability of the current dividend stream, we are also of the opinion that company#8217;s drilling program deserves some credit. http://www.stockopedia.co.uk/research/moving-forward-73541/http://www.stockopedia.co.uk/research/moving-forward-73541/Edison Investment ResearchFri, 24 May 2013 07:40:15 +0100CytRx is now focused on fully exploiting the potential of aldoxorubicin in advanced soft tissue sarcoma (STS) following the failure of tamibarotene. The aldoxorubicin clinical programme has delivered important data points in recent weeks, which increase our confidence in both the first- and second-line STS indications. We now include first-line STS in our model and project peak aldoxorubicin sales of $971m. Our revised rNPV is $127mhttp://www.stockopedia.co.uk/research/focus-turns-to-aldoxorubicin-73540/http://www.stockopedia.co.uk/research/focus-turns-to-aldoxorubicin-73540/Edison Investment ResearchFri, 24 May 2013 07:06:33 +0100In a brief trading update released in conjunction with its AGM, SCISYS has said it is on track to meet full-year guidance. Having begun the year with a solid order book, this has resulted in further improvements; hence we are maintaining our forecasts. We continue to believe the shares look attractive, trading on a modest single-digit P/E and a FY13 FCF yield of c 12%. Our DCF model, incorporating a longer-term margin target of 7.9%, suggests a valuation of 100p.http://www.stockopedia.co.uk/research/in-line-trading-update-73539/http://www.stockopedia.co.uk/research/in-line-trading-update-73539/Edison Investment ResearchThu, 23 May 2013 12:50:42 +0100While uncertainty over the timing of the issue of restart permits abates, we turn our valuation focus to the potential geological upside at Rio Tinto. Our site visit highlighted progress being made at the plant and the identification of opportunities to expand the existing reserve estimate beyond 123Mt of ore. Meanwhile, management has indicated it hopes to preserve the H214 production start by continuing to receive restart permits in the sequence formalised in April and May 2013.http://www.stockopedia.co.uk/research/rio-tintos-geological-potential-73522/http://www.stockopedia.co.uk/research/rio-tintos-geological-potential-73522/Paul ScottThu, 23 May 2013 11:21:17 +0100Pre 8 a.m. comments Good morning! My Twitter feed is buzzing this morning with chatter about the Japanese market having dropped 6% overnight. I'm really glad I didn't get sucked into that particular bubble. Just look at the chart - a major index going from 8,700 to 15,700 in six months is ridiculous! FTSE futures are currently looking to open down 110 points or, 1.6%, which in my view is overdue, and a good thing. As I've mentioned here several times lately, this market has felt far too frothy and a correction is healthy. I hope everyone is prepared, with gearing at sensible levels (if at all), and gains in frothily-priced stocks having at least been part-banked. All the stuff I'm in is reasonably priced already, or I wouldn't be in it! So whilst I'm expecting to lose a bit of money today, it doesn't change the investing case for the stocks I'm in, so I won't be selling anything today.   It's not a small cap, but Halfords (LON:HFD) have cut their final dividend by 35% from 14p to 9.1p. The full year payout is reduced from 22p to 17.1p,...http://www.stockopedia.co.uk/content/small-cap-report-23-may-hfd-kbc-ssy-qed-hyd-emr-nrr-pym-73507/http://www.stockopedia.co.uk/content/small-cap-report-23-may-hfd-kbc-ssy-qed-hyd-emr-nrr-pym-73507/Edison Investment ResearchThu, 23 May 2013 10:19:40 +0100Alexza#8217;s US marketing deal with Teva for Adasuve (orally-inhaled loxapine) enhances the product#8217;s US sales prospects given Teva#8217;s expertise in the psychiatric and hospital markets. Adasuve is a potentially disruptive new product for acute agitation in schizophrenia or bipolar disorder, given its advantages over existing options (injection/oral/buccal). The investment case is shifting from a development/regulatory play to one of commercial execution by Adasuve#8217;s licensees, Teva in the US and Ferrer in Europe.http://www.stockopedia.co.uk/research/stage-set-for-adasuve-73515/http://www.stockopedia.co.uk/research/stage-set-for-adasuve-73515/Edison Investment ResearchThu, 23 May 2013 07:17:08 +0100Aastrom#8217;s Q1 results show its consolidation onto affordable clinical studies and a determination to achieve a solid cash basis. The focus is on the Phase II ischaemic cardiomyopathy (IDC) orphan indication. The ixCELL-DCM study will cost about $7m and has recruited its first patients. If recruitment completes by early-2014, the data will be presented in Q215. Aastrom is reducing its headcount and cash burn by about 50% and plans to raise up to $25m in new equity. This will enable the ixCELL-DCM study to be completed by mid-2015 before further equity or a deal is needed. http://www.stockopedia.co.uk/research/patients-and-cash-73508/http://www.stockopedia.co.uk/research/patients-and-cash-73508/investorschampionWed, 22 May 2013 13:54:49 +0100The UK headquarted drilling contractor listed on the Oslo Stock Exchnage recently announced excellent 1st quarter results with the proposed dividend payout ahead of estimates. With the UK sector of the North Sea extremely active there is the prospect of much larger dividend payouts to come!  http://www.stockopedia.co.uk/research/18-yield-on-offer-from-this-uk-oil-services-group-73497/http://www.stockopedia.co.uk/research/18-yield-on-offer-from-this-uk-oil-services-group-73497/Edison Investment ResearchWed, 22 May 2013 13:20:05 +0100NetDimensions (AIM:NETD, OTCQX:NETDY) has announced a further acceleration in its growth strategy on the back of a $6.1m fund-raising in early-May. Under the new business plan, which has a goal of attaining $50m revenues and growing, sustainable profits in five years, headcount is being increased by c 65% from end-2012 levels. This includes a significant increase in front-line sales people. In our view, the strategy is the correct approach required to capitalise on the fast-growing Talent Management Systems (TMS) sector, which has recorded growth in the high teens in recent years, and we expect this strong growth to continue. Nevertheless, the shares trade at just 0.7x our new FY14 sales forecast, a large discount to the group#8217;s larger US peers, which trade on 3-8x FY14 sales.http://www.stockopedia.co.uk/research/growth-acceleration-73494/http://www.stockopedia.co.uk/research/growth-acceleration-73494/Paul ScottWed, 22 May 2013 11:21:21 +0100Pre 8 a.m. comments I'll comment on Zytronic (LON:ZYT) after 8 a.m., as it's not especially time sensitive. Things that might be time sensitive include a contract win announcement from Pilat Media Global (LON:PGB). This is an Anglo/Israeli company with interesting-sounding company which supplies software to the television sector, globally. I have been a shareholder since being very impressed with their cheap valuation (in my opinion) relative to what struck me as good results, and also an amazing balance sheet which has around half the market cap in genuinely surplus net cash. Pilat (pronounced "pill-at") had already issued an upbeat outlook for this year, so another contract win should give things a nice boost. It's for AUS$7.5m which at £1= AUS$1.5 translates to £5m, which is pretty material to Pilat's results, although it's a split of licences amp; implementation revenues that will be spread over this year amp; next year. At 40p, Pilat's market cap is only £25m, yet it had £10.7m in net cash at the last set of results, for the year-ended 31 Dec 2012, announced on 25 Mar 2013. Moreover, that's real surplus...http://www.stockopedia.co.uk/content/small-cap-report-22-may-zyt-pgb-inl-chh-pmp-sid-aph-73472/http://www.stockopedia.co.uk/content/small-cap-report-22-may-zyt-pgb-inl-chh-pmp-sid-aph-73472/Edison Investment ResearchWed, 22 May 2013 10:12:56 +0100The Q1 IMS confirmed that estate agency operations traded well relative to a weak market overall and strong Q112 comparatives, while surveying and valuation services performed satisfactorily, allowing for contract losses in June 2012. Wider-ranging expansion plans will entail additional upfront costs, but given the strengthening market, we maintain our forecasts and will revisit them as new data are released.http://www.stockopedia.co.uk/research/accelerated-investment-on-market-recovery-73485/http://www.stockopedia.co.uk/research/accelerated-investment-on-market-recovery-73485/Edison Investment ResearchWed, 22 May 2013 09:42:47 +0100Headline Q113 results from IS Yatirim Mekul Degerler (ISY) appear weak, with net profits down 64%, but are distorted by a number of factors. Subsidiary profit contribution was lower, while 2013 costs have been recognised earlier in the year against broadly flat core investment banking revenues. We have maintained our FY13e forecasts, believing subsidiaries#8217; contributions will normalise and operating expenses attributable to the firm will revert back to our FY13e cost income ratio of 62% (Q113: 79%). ISY#8217;s FY13e P/E of 5.5x (European peers: 8.6x) and dividend yield of 5.9% (Turkish market: 3.8%) presents an undemanding valuation for a company generating an FY13e ROE of 17.0% (European peers: 8.9%).http://www.stockopedia.co.uk/research/challenging-year-on-year-comparatives-73484/http://www.stockopedia.co.uk/research/challenging-year-on-year-comparatives-73484/ExpectingValueWed, 22 May 2013 09:20:30 +0100 Part 1: Introduction and basic value I like doing sectoral comparisons between companies. I think most of us intuitively understand that, at the most basic level, similar companies should command similar prices in the market - though defining 'similar prices' (what metric? how similar?) is slightly more slippery than I've made it sound. The necessary clarification is that the companies involved really do have to be alike. It might sound obvious, but sectoral comparisons are only really relevant when the companies involved have very analogous business models - comparing the supermarkets, or the large national housebuilders, for instance. This is something which I suspect is often forgotten when trying to justify a small-cap 'rerating', for instance - the old chestnut of putting X next to the more lavishly valued Y, and forgetting the myriad things which make the businesses two entirely different entities. Car dealerships are a good example of where I think comparisons are relevant. These companies tend to have those similar business models - though with obvious internal differences and some different segments. Given that, I plunge on into the abyss of car company accounts seeking some sort of logic that'll deliver me a winner - a best value car dealership, only for the...http://www.stockopedia.co.uk/content/car-dealerships-vtu-camb-look-pdg-73474/http://www.stockopedia.co.uk/content/car-dealerships-vtu-camb-look-pdg-73474/Edison Investment ResearchWed, 22 May 2013 09:00:06 +0100FVI offers exposure to German commercial property, with creditworthy tenants in secondary, regional locations, which have seen consistently high occupancy rates (c 95%) in recent years. FVI#8217;s core strategy at launch in 2007 was to consolidate unquoted real estate funds. The ongoing process of optimising the acquired portfolio continues to drive property disposals and debt reduction, a gradual increase in ownership of the funds it invested in, plus a welcome simplification of the corporate structure and an increase in distributable income. Management is particularly optimistic about prospects for higher-yielding retail property on long leases and is seeking potential acquisitions that will require shareholder support for a capital increase. An issue of shares at or near the current price would dilute NAV per share, but this could be offset by the enhanced operational efficiency that should come with increased scale and the greater dividend-paying capacity provided by a higher share of directly-owned properties.http://www.stockopedia.co.uk/research/rationalising-and-reinvesting-73483/http://www.stockopedia.co.uk/research/rationalising-and-reinvesting-73483/Edison Investment ResearchWed, 22 May 2013 07:29:17 +0100At its AGM, Optimal Payments (OP) updated the market on trading year to date, with both businesses performing ahead of expectations. We have upgraded our revenue forecasts for both businesses driving strong earnings upgrades (FY13 +47%, FY14 +39%) as the gross profit upside drops to the bottom line. On our revised forecasts, OP trades at a discount to its peers.http://www.stockopedia.co.uk/research/strong-trading-continues-73475/http://www.stockopedia.co.uk/research/strong-trading-continues-73475/