Wednesday, April 16, 2008
Severfield Rowen: a new cheap share
Severfield Rowen is a quality company. They are a group of similar companies, the largest is Severfield-Reeve Structures. The principle line of business is putting together large steel structures, which later get made into big new buildings, bridges etc.
Severfield Rowen has just made a lot of hay, well, steel, on Heathrow Airport's terminal 5 building. The London Olympics in 2012 will deliver the company another bonanza. Severfield Rowen is expecting work in London to peak in summer 2009.
So, what are the shares trading at and what are future earnings expected to be?
price to buy: 323.5p
2008 forecast: 40.26p
2009 forecast: 42.17p
so, a company with forecast steady earnings trading on a P/E ratio of 8.03.
Severfield-Rowen has traditionally shown much strong growth. Let's look at the 5 year pre-tax profit figure:
2003: £9.12m
2004: £12.22m
2005: £19.65m
2006: £30.29m
2007: £38.36m
The growth is expected to dry up. This perhaps helps explain why the P/E ratio is so low. The market is concerned growth has finished. Is this a cyclical stock? Will earnings start to fall, have large construction projects now finished?
Let's look at the most recent company announcement:
Severfield Rowen enjoyed a fantastic 2007.
What do the next few years look like however, as much of the 2007 business will be Terminal 5 work. Let's look at the crucial outlook statement.
What I'd like to see from Severfield-Rowen is more business overseas and diversity of business. Big building projects are clearly what is needed - I think the market needs to see the company serving industries that won't be hit by consumer downturn. Investors won't be rushing to build shopping malls if they think the British consumer is all spent out.
In their statements management talk about prosperity and success but not growth and progress. The market is forecasting growth, but nothing like the growth that has been seen previously. Are there any signs that Severfield Rowen can do any better?
There's not much. Possibly, despite the low P/E ratio and the high dividend yield, the shares are probably fairly priced.
The Artful Dodger
(0) comments
Severfield Rowen has just made a lot of hay, well, steel, on Heathrow Airport's terminal 5 building. The London Olympics in 2012 will deliver the company another bonanza. Severfield Rowen is expecting work in London to peak in summer 2009.
So, what are the shares trading at and what are future earnings expected to be?
price to buy: 323.5p
2008 forecast: 40.26p
2009 forecast: 42.17p
so, a company with forecast steady earnings trading on a P/E ratio of 8.03.
Severfield-Rowen has traditionally shown much strong growth. Let's look at the 5 year pre-tax profit figure:
2003: £9.12m
2004: £12.22m
2005: £19.65m
2006: £30.29m
2007: £38.36m
The growth is expected to dry up. This perhaps helps explain why the P/E ratio is so low. The market is concerned growth has finished. Is this a cyclical stock? Will earnings start to fall, have large construction projects now finished?
Let's look at the most recent company announcement:
2007 2006
Revenue 300.7 295.1 1.9%
Underlying* operating profit 42.7 29.1 46.6%
Underlying profit before tax 42.9 30.3 41.8%
Underlying basic earnings per share 35.74p 25.64p 39.4%
Dividend per share 20.00p 14.25p 40.4%
Severfield Rowen enjoyed a fantastic 2007.
What do the next few years look like however, as much of the 2007 business will be Terminal 5 work. Let's look at the crucial outlook statement.
Outlook
• Despite global financial and economic outlook, the Board remains
optimistic of future growth with a record order book of £455m providing a
solid platform for the next 12 to 18 months
• 2008 has commenced well and our outlook is positive
• Diverse range of projects and geography, including Power Stations,
Hospitals and Retail Malls
What I'd like to see from Severfield-Rowen is more business overseas and diversity of business. Big building projects are clearly what is needed - I think the market needs to see the company serving industries that won't be hit by consumer downturn. Investors won't be rushing to build shopping malls if they think the British consumer is all spent out.
In their statements management talk about prosperity and success but not growth and progress. The market is forecasting growth, but nothing like the growth that has been seen previously. Are there any signs that Severfield Rowen can do any better?
There's not much. Possibly, despite the low P/E ratio and the high dividend yield, the shares are probably fairly priced.
The Artful Dodger
Sunday, April 06, 2008
RC Group hurts portfolio performance
RC Group made a few announcements recently. They are a large portion of my portfolio. I bought at 102p. Two weeks ago they slumped to 50p, despite excellent results from the company.
Since then, RC Group have let investors and the market know all about recent new orders and awards. This has led the share price to advance. Good. But the shares trade at only 67p to sell.
RC Group is the cheapest I have ever seen any stock ever. They are a profitable company in a booming market. The problem is, the daily share prices are dominated by private investors, 'retail investors' as they are sometimes known or even 'mug punters'. I hope I'm not the latter. What RC Group needs is what we call institutional interest, professional fund managers buying the company's shares. The number an institution needs to affect their fund's performance would be much larger than the aggregate of many thousands of Joe Bloggs investors like myself. This should bring some stability to the share price and hopefully a more rational pricing by the market. I now believe the shares are worth 180p. I hope they get there.
Another company that I expect to advance soon is Tandem Group. Tandem will probably announce results for the year toward the end of April. RC Group also have an AGM coming up in which they will hopefully provide more guidance on how 2008 is progressing.
Royal Bank of Scotland has rallied recently but still remains some way below my purchase price. SOCO International is encountering more delays on its key well, the 'E' prospect offshore Vietnam. This has proved a massive frustration. Barclays has recovered a bit too. Dividends should be arriving soon.
The Artful Dodger
(0) comments
Since then, RC Group have let investors and the market know all about recent new orders and awards. This has led the share price to advance. Good. But the shares trade at only 67p to sell.
RC Group is the cheapest I have ever seen any stock ever. They are a profitable company in a booming market. The problem is, the daily share prices are dominated by private investors, 'retail investors' as they are sometimes known or even 'mug punters'. I hope I'm not the latter. What RC Group needs is what we call institutional interest, professional fund managers buying the company's shares. The number an institution needs to affect their fund's performance would be much larger than the aggregate of many thousands of Joe Bloggs investors like myself. This should bring some stability to the share price and hopefully a more rational pricing by the market. I now believe the shares are worth 180p. I hope they get there.
Another company that I expect to advance soon is Tandem Group. Tandem will probably announce results for the year toward the end of April. RC Group also have an AGM coming up in which they will hopefully provide more guidance on how 2008 is progressing.
Royal Bank of Scotland has rallied recently but still remains some way below my purchase price. SOCO International is encountering more delays on its key well, the 'E' prospect offshore Vietnam. This has proved a massive frustration. Barclays has recovered a bit too. Dividends should be arriving soon.
The Artful Dodger
