Tipped in the IC12 Jun 2015 10:19
Tipped by Simon Thompson in the Investors Chronicle on 10/6 (cheers mate) - imo 165p-180p is on the cards soon if all goes well:
"'On the crest of another run
Shares in small-cap marketing communications company Creston (CRE:135p) have reacted positively to yesterday’s full-year results and have passed through my original target of 135p, a price level that was also achieved at the end of last year after I initiated coverage at 118p in the late autumn (‘Buy the break out’, 4 November 2014).
However, I still feel that a run up to the 150p level is on the cards as I noted when I last updated the investment case (‘On the acquisition trail’, 23 April 2015). If this target is achieved the rating would still only be 10.5 times conservative looking EPS estimates of 14p for the fiscal year to end March 2016 based on forecasts from brokerage N+1 Singer. For the fiscal year just ended, the company delivered 11 per cent EPS growth and diluted earnings of 13p a share beat analyst expectations by around 4 per cent. In turn, this supported an 8 per cent hike in the dividend to 4.2p a share. A further hike to 4.7p is predicted this year to give a prospective dividend yield of 3.5 per cent.
At the end of March the company had an £8.3m cash pile, since when the board have been deploying these funds wisely. In April, the company acquired a 51 per cent stake in How Splendid, a London-based digital design and development consultancy, a deal which I analysed in depth at the time (‘On the acquisition trail’, 23 April 2015), and has just announced another strategic investment alongside yesterday’s results: a 27 per cent stake in 18 Feet & Rising, a London based advertising agency.
Established in 2010, 18 Feet & Rising works with brands including Allianz, Cuprinol, Nando's, House of Fraser and ŠKODA, for which they created the world's first ad campaign to use eye-tracking technology. Half of the £1m cash consideration will be invested in the business to help accelerate its growth. In 2014, 18 Feet & Rising grew revenue by almost a quarter to £2.7m, so the business is being valued on a reasonable 0.7 times’ sales. This means that Creston has now deployed virtually all its net cash after the period end, but with annual operating cashflow of around £8.6m and credit lines of £35m in place, the company is well funded.
The bottom line is that with the company posting organic revenue growth for the first time in four years, and utilising its cash position wisely, then investors are likely to continue to warm to the strong investment case which I outlined when I initiated coverage at the end of last year.
Offering a further 11 per cent share price upside to my new target price of 150p, and underpinned by a 3.1 per cent historic dividend yield, I continue to rate Creston’s shares a buy on a bid-offer spread of 133p to 135p."
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