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I got mine paid in full. 4p a share.
I think these results are ok although not fantastic. Turnover was up 11% on the previous 6 months which is still strong for a company with such a low PE but not great compared to the growth over the previous 6 months. The operating margin was down from 32% to 30.5% which is actually a bit higher than I expected given the much discussed increase in spending such as the launch of the international trading platform. Cash generation continues to be excellent. Overall I think that the future looks good and I think we will have growth in the year of over 40% which is not bad when you consider that after stripping out the cash this is on a PE of 5.
Part 2 - It’s still my view that on fundamentals, and despite the downgrade, Naibu shares are woefully undervalued. They are also massively oversold from a technical perspective with the 14-day relative-strength indicator (RSI) on the floor, showing a reading sub-20. So although it will take a marked improvement in investor sentiment before the company is valued on a sensible basis, I am not bailing out and would advise taking advantage of the sell-off to average down the cost of your holdings.
Part 1 - A first half trading statement from Naibu (NBU: 45p), a Chinese maker and supplier of branded sportswear and shoes, has not been taken badly by investors with shares in the company falling 20 per cent in the days following the release. The news was mixed. On the plus side, revenues increased by 8 per cent in the first half, and marketing of the company’s autumn and winter collections has gone well. In fact, sales orders are 5 per cent higher than at the same trade fair last year. However, labour shortages have driven up labour costs in the coastal regions and the company has been unsuccessful in recruiting enough staff to operate six production lines at its Quangang facility. As a result Naibu is abandoning production at the plant and is in negotiations with third parties to rent it out. It is also being marked for sale. The net impact is that Naibu’s original equipment manufacturer suppliers will now supply the company’s branded shoes that were due to be produced at Quangang until Naibu’s new Dazhu facility becomes operational in the second quarter of 2016. But there will be a financial cost due to the lower margins earned on the outsourced production. Analyst Simon Willis at broking house Daniel Stewart now expects the company’s gross margin to decline by two percentage points to 25 per cent this year, and has edged down his volume growth estimate from 7 per cent to 6 per cent. This leads to an 11 per cent pre-tax profit downgrade. Also, a 3 per cent strengthening of sterling against the Chinese renminbi since the spring will impact profits once they are translated into sterling, resulting in a further hit to net earnings. Daniel Stewart now pencils in 2014 EPS of 46.1p on a fully diluted basis, down from 54.2p in 2013. This means with the shares falling from my recommended buy in price of 58p to only 45p, they are trading on less than one times earnings! That valuation implies the company has gone ex-growth which it has since Daniel Stewart’s hefty 17 per cent downgrade to 2015 profit forecasts means next year’s earnings are now predicted to be flat against the downgraded 2014 forecast. That said, post tax profits cover the 6p a share dividend more than seven times over, so the £3.5m payout looks secure enough especially since the company had net funds of £44.6m at the end December, or the equivalent of 76p a share. To put the valuation into some perspective, investor distrust of Chinese companies is so acute that the company now only has a market capitalisation of £24.6m, implying a negative value of £20m to the business itself. In fact, Naibu shares have derated to such an extent that its equity is being valued by the market at only 20 per cent of the company’s net asset value of £123m. Furthermore, with the share price bombed out at 45p, the 6p a share dividend equates to an historic yield of 13 per cent.
I just remember thinking how did you arrive at 40p. This business is valued at less than 1 times profit just like NBU and therefore either it's ridiculously undervalued or the company is hiding something that will virtually wipe out its profit and cash. Whichever you believe I wouldn't have thought a 40p price or 50p price would make much difference. "Good spot (dog's GC ?) " had me stumped - cycling joke?
I thought you were only interested sub 40p? What made you change your mind and jump aboard?
I think the price for both CAMK and NBU more than compensates for the red flags. Only time will tell.
I took the opportunity on Friday to buy some more of these along with NBU which is in a similar boat. Currently unfashionable and therefore a great opportunity. One day this will be fashionable and the share will be much higher. In the meantime we will get enormous dividends. What's not to like?
Nice divi though and at some point the share price will go up.
Jam4u, where did you get those estimates for 2014 from? Looks low to me. They made 99RMB in the second half of 2013.
Eeez I think it was NBU. Failing that it might be Camk. I'm in both.
Directors buying again. Very bullish.
2 excellent bits of news. Share price should kick on a bit from this.
Hi Rob, I was never very good at spelling and am surprised I only made one. Your spelling is normally of a very high standard but no one is perfect. The sudden drop in share price this afternoon after a good rise was a little odd but I'm glad you were able to take advantage and get a good price. I genuinely have no idea what will happen in the short term. I doubled my holding when it dropped to 55p but I do have a strict rule about not investing more than 7% in any one share so I won't add to this unless I add further funds. I suspect after another set of results and a trend starting to appear investors will start to take notice. WSG is an interesting one and I have been following it for sometime, I was invested once but got out a while ago. The trouble is that it is highly speculative and makes no money. This could change quickly if one of the long promised contracts is won but so far nothing has dropped and it seems to becoming clear that placing a complex long term contract with an African government is not so straight forward. Very difficult to value. I will continue to watch and wait. I am interested in LRM which I note you are invested in. All the best Oli
Familyguy you don't seem that positive today, understandable given the share price movement of this and others shares we are both in but it could be a lot worse. We could be in BLNX. I real feel for those guys. I think the future for XLM is bright. XLM took a beating when the results were released as I think the market was taken by surprise that profit for the second half was down on the first half despite the increase in turnover. This was explained as being down to an increase in G&A to prepare the company for growth and acquisitions. If this turns out to be a one off event and in future profits increase at least as quickly as turnover the share price will soon rise.
Don't forget we went ex div today to the tune of 4p. Taking that into account the shares are actually up.
Hey you are welcome Rob. I think this has a long long way to go. It's becoming clear why none of the pre IPO shareholders sold any shares on the IPO. Not many available for Jo Public now and given the amount of cash they generate not much chance of new shares being issued. If you think about the strategy sitting behind today's RNS the prospects for this company are incredible. I have lots of shares I like as you see from my postings but this is in the lead at the moment. I'm still happy with CRV. They have consistently pulled off good deals. When then exit a few this will become clearer and the share price will more closely reflect true value.
I view these acquisitions as positive. They need to do something useful with the huge amounts of cash they have generated and continue to generate and this should help continue the strong growth the business has enjoyed.