The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
2016 – The Great Irish Share Valuation Project (Part II): Company: First Derivatives (FDP:LN) Last TGISVP Post: Here Market Cap: GBP 494 Million Price: GBP 2,038p ….. (GBP 0.517 Adj Dil EPS * 20.0 P/E + (117 M Rev * 1.33 P/S + 15.1 M Cash + 23.1 M Debt Adjustment * 50%) / 24.2 M Shares) / 2 = GBP 893p Again, First Derivatives looks massively over-valued. Which reflects the fact it’s one of those stocks where investors will inevitably have a totally binary posi itive/negative perspective, depending on which figures & accounting statement(s) they focus on – not unusual for a serial acquirer. As long as revenue (& earnings momentum) is maintained, growth investors will ignore anaemic cash flow, potentially fudged accounting, dilution, any potential increases in leverage, and keep buying at almost any price…the optimistic outcome is for FDP to eventually grow into its valuation. On the other hand, if something goes horribly wrong here, and/or investors’ expectations are dashed, my new fair value may end up looking pretty generous for what could become a pariah stock… Price Target: GBP 893p Upside/(Downside): (56)% — For related links/graphs/files, and more TGISVP analyses/price targets, see: https://wexboy.wordpress.com/2016/05/30/2016-the-great-irish-share-valuation-project-part-ii/
2016 – The Great Irish Share Valuation Project (Part II): Company: First Derivatives (FDP:LN) Last TGISVP Post: Here Market Cap: GBP 494 Million Price: GBP 2,038p My last write-up was bang in the middle of a sickening price reversal. While FDP got nearly sliced in half at the time, my price target’s been massively adrift ever since. Clearly, I was wrong to speculate FDP’s consulting business* might eventually grind to a halt – as banks continue to retrench, we’re actually seeing an increasing reliance on IT outsourcing, while reduced head-count & market evolution demanded ever greater technology capacity & automation. [*Let’s not forget consulting (64% of revenue) remains FDP’s primary business, and its margins are far less scale-able than software]. And revenue’s continued to forge ahead, at an average 28% pa in the last three years, assisted by FDP’s serial acquisition strategy (three new acquisitions & a consolidation of Kx Systems in the last 18 months, or so). Earnings growth trailed though, as FDP essentially bought revenue/technology (rather than profits…with new Big Data & IoT opportunities also being touted) & the share count’s been diluted almost 25% in the last couple of years. [Even on a revenue basis, those acquisitions look damn expensive – averaging over 7 times sales, vs. a 4.2 P/S multiple for FDP]. But FY-2016 was clearly a real gang-busters year, boasting 41% revenue & 33% EPS growth. However, we’re still seeing a huge disconnect between EBITDA & operating free cash flow margins (Op FCF: Operating cash flow, less net PPE/intangible expenditure). But presuming software is the ultimate driver of the business, EBITDA will become increasingly relevant: A decent compromise for now is to use an adjusted margin, averaging the latest 19.9% EBITDA margin & Op FCF margin of 7.2% (noting a prior year margin of just 2.6%) – a 13.6% adjusted margin deserves a 1.33 Price/Sales ratio. And noting FDP’s financial strength (with net debt of just £15 million), we can adjust for (surplus) cash & also add a debt adjustment. [Based on this adjusted margin, I calculate another £23 million in debt (at an assumed 5% rate, for acquisitions etc.) would still limit finance expense to 15% of adjusted margin – as usual, let’s apply a 50% haircut, just to be conservative]. Of course, we also need to value FDP as a growth stock: While earnings growth has accelerated to 33%, we should still recognise the huge/ongoing disconnect vs. cash flow (& reported earnings, which are now about 40% lower than adjusted diluted earnings) – limiting ourselves to a 20.0 Price/Earnings ratio, based on adjusted diluted EPS, seems only prudent (or maybe even generous): (GBP 0.517 Adj Dil EPS * 20.0 P/E + (117 M Rev * 1.33 P/S + 15.1 M Cash + 23.1 M Debt Adjustment * 50%) / 24.2 M Shares) / 2 =
2016 – The Great Irish Share Valuation Project (Part I): Company: Fyffes (FFY:ID) Last TGISVP Post: Here Market Cap: EUR 477 M Price: EUR 1.605 https://wexboy.wordpress.com/2016/04/26/2016-the-great-irish-share-valuation-project-part-i/ Price Target: EUR 1.46 Upside/(Downside): (9)%
2016 – The Great Irish Share Valuation Project (Part I): Company: Hibernia REIT (HBRN:ID) Last TGISVP Post: Here Market Cap: EUR 870 M Price: EUR 1.277 https://wexboy.wordpress.com/2016/04/26/2016-the-great-irish-share-valuation-project-part-i/ Price Target: EUR 1.224 Upside/(Downside): (4)%
2016 – The Great Irish Share Valuation Project (Part I): Company: Kerry Group (KYG:ID) Last TGISVP Post: Here (also, see here & here) Market Cap: EUR 14,280 M Price: EUR 81.15 https://wexboy.wordpress.com/2016/04/26/2016-the-great-irish-share-valuation-project-part-i/ Price Target: EUR 36.45 Upside/(Downside): (55)%
2016 – The Great Irish Share Valuation Project (Part I): Company: Mainstay Medical International (MSTY:ID or MSTY:FP) Last TGISVP Post: Here Market Cap: EUR 69 M Price: EUR 16.10 (average of MSTY:ID & MSTY:FP prices) https://wexboy.wordpress.com/2016/04/26/2016-the-great-irish-share-valuation-project-part-i/ Price Target: ZERO Upside/(Downside): (100)%
2016 – The Great Irish Share Valuation Project (Part I): Company: Origin Enterprises (OGN:ID) Last TGISVP Post: Here Market Cap: EUR 856 M Price: EUR 6.814 https://wexboy.wordpress.com/2016/04/26/2016-the-great-irish-share-valuation-project-part-i/ Price Target: EUR 6.64 Upside/(Downside): (3)%
2016 – The Great Irish Share Valuation Project (Part I): Company: Aryzta (YZA:ID) Last TGISVP Post: Here (also, see here & here) Market Cap: EUR 2,932 M Price: EUR 33.03 https://wexboy.wordpress.com/2016/04/26/2016-the-great-irish-share-valuation-project-part-i/ Price Target: EUR 34.05 Upside/(Downside): 3%
2016 – The Great Irish Share Valuation Project (Part I): Company: Kingspan Group (KSP:ID) Last TGISVP Post: Here Market Cap: EUR 3,910 M Price: EUR 22.05 https://wexboy.wordpress.com/2016/04/26/2016-the-great-irish-share-valuation-project-part-i/ Price Target: EUR 23.50 Upside/(Downside): 7%
2016 – The Great Irish Share Valuation Project (Part I): Company: Formation Group (FRM:LN) Last TGISVP Post: Here Market Cap: GBP 14.3 M Price: GBP 6.5p At 2.05p per share, I tagged FRM as a ‘penny stock, which…could rally very nicely if it catches investors’ attention’. Little did I see it trading sideways for a year…only to transform, in a mere eight months, into a bloody six-bagger (hitting a 12.7p high). A typical case of small PIs losing their friggin’ minds! Formation is: i) a governance nightmare, with the Kennedy family owning a 60% stake & activities devoted primarily to related-party deals/JVs, and ii) essentially, a construction management company (a perpetually unattractive business for most investors) that still can’t turn a profit, despite the ramp-up in revenue…and risks. Granted, the Kennedy Show works both ways, as FRM earned a quick £2 million on this related-party deal & the construction business arguably covers an otherwise substantial overhead burn for such a small company. [Though if we exclude the sweetheart profit, FRM’s actually made zero progress vs. my £6.9 million adjusted equity estimate from two years ago]. But overall, considering the improved investor sentiment & likely near-term news/profits from its Iverson Road development, a 1.0 Price/Book ratio now seems appropriate (based on adjusted equity, to reflect the post year-end write-back of non-recourse Dunbar Assets loans): (GBP 7.6 M Equity + 1.0 M Neg Equity Reversal) * 1.0 P/B / 221 M Shares = GBP 3.9p PIs got well ahead of themselves here…despite being sliced in half since the Jan high, FRM remains substantially over-valued. And if 6.25-7.25p support breaks, we’ll probably see another nasty shake-out. But the elevated share price may still be good news for management, as a substantial fundraising might be possible, which would help close the value gap here (as NAV would increase) – and with two well-known Irish politicians appointed since as directors, a new focus on Irish investors/projects wouldn’t be surprising, though Greater London residential also remains attractive. Price Target: GBP 3.9p Upside/(Downside): (40)% For related links/graphs/files, and more TGISVP analyses/price targets, see: https://wexboy.wordpress.com/2016/04/26/2016-the-great-irish-share-valuation-project-part-i/
Zamano Shareholders – Time For A Dividend & Your Support… https://wexboy.wordpress.com/2016/03/02/zamano-time-for-a-dividend-your-support/ Cheers, Wexboy
Recommendation: Vote AGAINST the Argo Group Share Buyback Proposal https://wexboy.wordpress.com/2016/02/22/recommendation-vote-against-the-argo-group-share-buyback-proposal/ Cheers, Wexboy
Zamano (ZMNO:LN) (ZMNO:ID) A fresh look at the company's strategic alternatives, an updated fair value per share, and a dividend proposal: https://wexboy.wordpress.com/2015/11/29/zamano-so-what-now/ Cheers!
New Investment Write-Up: Newmark Security...A Real Steal! http://wexboy.wordpress.com/2014/10/04/newmark-security-a-real-steal/
2014 – The Great Irish Share Valuation Project (Part X) I take a look at Irish Residential Properties REIT, plus a batch of other Irish stocks: http://wexboy.wordpress.com/2014/05/30/2014-the-great-irish-share-valuation-project-final-part-x/ Cheers, Wexboy
2014 – The Great Irish Share Valuation Project (Part X) I take a look at Dalata Hotel Group, plus a batch of other Irish stocks: http://wexboy.wordpress.com/2014/05/30/2014-the-great-irish-share-valuation-project-final-part-x/ Cheers, Wexboy
2014 – The Great Irish Share Valuation Project (Part X) I take a look at TVC Holdings, plus a batch of other Irish stocks: http://wexboy.wordpress.com/2014/05/30/2014-the-great-irish-share-valuation-project-final-part-x/ Cheers, Wexboy
2014 – The Great Irish Share Valuation Project (Part X) I take a look at Aer Lingus Group, plus a batch of other Irish stocks: http://wexboy.wordpress.com/2014/05/30/2014-the-great-irish-share-valuation-project-final-part-x/ Cheers, Wexboy
2014 – The Great Irish Share Valuation Project (Part X) I take a look at Escher Group Holdings, plus a batch of other Irish stocks: http://wexboy.wordpress.com/2014/05/30/2014-the-great-irish-share-valuation-project-final-part-x/ Cheers, Wexboy
2014 – The Great Irish Share Valuation Project (Part IX) I take a look at Hibernia REIT, plus a batch of other Irish stocks: http://wexboy.wordpress.com/2014/05/05/2014-the-great-irish-share-valuation-project-part-ix/ Cheers, Wexboy