Persuaded to sell by this comment..28 Mar 2014 14:27
....from stockpedia (plus negative reiteration by Numis). There may be some mileage in this stock eventually but it's likely to involve a substantial fundraising or a debt for equity swap.. Either way, small shareholders will probably lose out. Also, it will take a long time, and there are lots of opportunities elsewhere. (Mind you, the directors bought at 14.75p, so you never know...)
From Paul Scott, stockpedia
Having had a quick look at these results, my previous view that the company has too much debt to survive as things stand, looks very much correct. Results for 2013 are out today, and whilst the operating profit of £54.9m is impressive, most of that is swallowed up in finance costs, leaving just £13.9m in profit before tax (before huge exceptionals).
Net debt only dropped £17.3m in the year, to remain at an insurmountable £302m.
The only solution here would be for a substantial equity fundraising, to pay debt down to levels where normal financing charges can be negotiated. Otherwise the bank will just continue to swallow up the cashflow in interest charges. Remember that it's a declining business too, in newspapers, and the floundering attempts of newspaper groups to develop digital divisions can I think be pretty much fully discounted - it's not old companies that triumph in new technology areas, it's start-ups that grow rapidly & slay yesterday's giants in the long run.
That Balance Sheet is horrific, with net tangible assets negative to the tune of around £450m!
Hence I wouldn't touch the equity with a bargepole, as in my view, it is worth zero, for the above reasons. The company might survive if they can raise fresh equity, but why would anyone pour fresh money in, to bail out the Banks? I'd be more inclined to insist on the Banks doing a debt for equity swap before asking investors to inject any more money. Why would anyone want to put in money into a declining print business anyway? We are in a bull market though, and I'm told that management here are very persuasive, so who knows, they might pull something out of the hat. However, as things stand the equity clearly has zero fundamental value, unless something radical changes, so the shares are just a Call Option on there being some value in the equity after a restructuring, in my opinion. That does not justify anything close to the existing market cap of about £165m at 23p per share, that is lunacy in my view. You do wonder sometimes if investors even look at the Balance Sheet of companies?
There might be some upside on freehold property values here, in which case the company needs to revalue them & get them on the Balance Sheet.
- See more at: http://www.stockopedia.com/content/small-cap-value-report-28-mar-2014-kmk-jpr-rnwh-82301/#sthash.8zm88Vtk.YNg4ll7h.dpuf