Buy LPA Group #LPA says VectorVest. This relatively anonymous co might just be one of the big stock market successes in 2018
Suffolk-based LPA Group Plc (LPA.L) specialises in the design and assembly of LED based lighting and electronic systems and is one of the leading electromechanical systems manufacturers across the globe. The Company has a strong reputation for innovation winning several awards including the Rail Business Award for Environmental Innovation for its LED based LumiPanel® lighting product. LPA employs around 200 people at four locations in the UK and exports to nearly fifty countries.
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On January 23rd 2018, LPA announced record results for the year ended 30 Sept 2017 and a strong start to the new financial year. Sales rose by 4.9% to £22.48m, generating a 26.3% hike in PBT to £1.91m. Basic EPS rose by 17.1% to 14.40p, gearing fell to 25.7% (2016: 29.2%) while the order book rose by 20% to £21.6m. The final dividend increased 10% to 1.65p, totaling 2.70p for the year (2016: 2.50p). CEO Peter Pollock said the 2016 financial year “marked a step change in the performance of the Group, and these record results for the 2017 financial year are confirmation that we are now established at this substantially increased level of activity. “ He added; “We look forward to continuing progress this year and for the future.”
The record numbers revealed in the FY results triggered alerts across VectorVest metrics as far back as November 2017. Today, the VST (VST-Vector) indicator, (the master indicator for ranking every stock in the VectorVest database), rates LPA at 1.26, which is very good on a scale of 0.00 to 2.00. Added to this, the GRT (forecasted Earnings Growth Rate) for LPA logs at 16.00%, which again is considered a very good rating on the VectorVest stock analysis and portfolio management system. GRT reflects a company’s one to three year forecasted earnings growth rate in percent per year. VectorVest logs a current value of 219p per share for LPA, so at the current 171p the stock can be considered as undervalued.
The chart of LPA.L is shown above in my usual format. Earnings per share (EPS is growing strongly and the share is on a BUY recommendation on VectorVest. Technicians will have noted the cup and handle formation. This is a highly reliable bullish pattern which gave a buying signal above a price of 165p.
Summary: The never-ending VectorVest quest to identify ‘under the radar’ quality growth companies may just have come up trumps again with LPA. Trifast (TRI.L) was identified as a highly cash generative, albeit relatively anonymous growth play as far back as mid 2016. LPA exhibits many of the same qualities, in terms of earnings and dividend growth, but somewhat surprisingly the current market cap is less than the turnover for the last financial year. This relatively anonymous lighting and electrical group sells to an enviable blue chip client list, has won many prestigious awards and might just be one of the big stock market successes in 2018. Buy.
Dr David Paul
January 24 2018
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Staffline STAF remains on target for its Burst The Billion plan. A strong set of results for for the year to 31st December produced a 27.5% rise in statutory profit before tax. The final dividend is to be increaed by 2.6%. Market share has increased more than ever and net debt has more than halved from from 36.7m to 16.5m.
Wetherspoon JD plc JDWY Strong growth in the second quarter matched that of the first quarter, with like for like sales to the 21st January and for the year to date, both rising by 6%.Underlying profit before tax was slightly ahead of expectations, helped by better than expected sales. Chairman,Tim Martin repeats his accusations that the CBI, Whitbread, Sainsbury, the FT, The Times and The Gaurdian are trying to fool the public by issuing misleading information as to the costs of Brexit. Despite ample opportunity to rebuff Martins attack, every one of these august bodies has remained silent, apparently now accepting that Brexit will lead to a fall in food prices which the Customs Union keeps artificially high
Crest Nicholson Holdings CRST saw sales by volume grow by only 2% in the year to 31st October as against a 7% rise in value and a 33% rise in total dividends for the year. Forward sales as at mid January were up by 8% in value but the volume figure is not disclosed.. Statutory revenue rose 5%, profit before tax by 6% and basic earnings per share by 7%. The new build housing market continues to be robust thanks to government policies and strong demand.
Sage Group SGE Group organic revenue for the first quarter to the 31st December grew by 6.3%.with North America putting in a strong performance and France under performing. The second quarter is is expected to be stronger and full year organic growth is expected to be in the region of 8%.
Plant Healthcare PHC made strong progress in the year to 31st December, in implementing its key strategic objectives.Revenue rose by 22%, helped by particularly strong sales growth of 100% in Europe Africa.
Brand CEO Alan Green talks URA Holdings #URA, Tertiary Minerals #TYM & LPA Group #LPA on VOX Markets podcast.
Brand CEO Alan Green discusses URA Holdings #URA, Tertiary Minerals #TYM and LPA Group #LPA with Justin Waite on the VOX Markets podcast. The interview is 21 minutes in.
Advanced Oncotherapy plc (AIM: AVO), the developer of next-generation proton therapy systems for cancer treatment, announces that at the General Meeting held earlier today, all resolutions were duly passed.
For further information contact:
About Advanced Oncotherapy Plc www.avoplc.com
Advanced Oncotherapy is a provider of particle therapy with protons that harnesses the best in modern technology. Advanced Oncotherapy’s team “ADAM”, based in Geneva, focuses on the development of a proprietary proton accelerator called Linac Image Guided Hadron Technology (LIGHT). LIGHT’s compact configuration delivers proton beams in a way that facilitates greater precision and electronic control which is not achievable with older technologies.
Advanced Oncotherapy will offer healthcare providers affordable systems that will enable them to treat cancer with an innovative technology as well as lower treatment related side effects.
Advanced Oncotherapy continually monitors the market for any emerging improvements in delivering proton therapy and actively seeks working relationships with providers of these innovative technologies. Through these relationships, the Company will remain the prime provider of an innovative and cost-effective system for particle therapy with protons.
easyJet plc EZJ produced a strong first quarter performance thanks in part at least to the collapse of a number its competitors such as Al Italia, Monarch and Air Berlin, which it has now bought and the disruption suffered by its main competitor Ryanair. On time performance rose by 2 percentage points to 81% despite increased disruption. Total revenue for the quarter rose by 14% and passenger numbers by 8%. Constant currency revenue is expected to rise by mid to high single digits in the first half of 2018. Passenger numbers are expected to rise from 80 million to 90 million, again helped by the lack of competition.
IG Group Holdings IGG produced new records in revenue and profit before tax in the half year to the 30th November. Profit before tax rose by 29%, diluted earnings per share by 30% and operating expenses fell by 7%. Own funds generated by operations rose by 38%.The interim dividend is being increased a tad to 9.69p per share compared to 9.42 pence in 2017
Pets at Home Group PETS The third quarter to the 4th January produced group revenue growth of 9.6% or 7.2% on a like for like basis after a strong customer response following the launch of a low price initiative.
Marstons MARS suffered disruption from ice and snow both at the beginning of December and between Christmas and the New Year which cost it nearly £1m in lost profits. Despite that Santa looked kindly on the brewer on Xmas day itself which produced record retail sales of nearly £4m., 5.4% up on last year. Market conditions are tough but 2018 will still see the opening of 15 new restaurants and pubs and 6 lodges.
Elecosoft ELCO Profit before tax and revenue for the year to 31st December are expected to be significantly higher than in 2016. Following strong conversion of operating profits into cash, net borowings were eliminated at the 30th June. Staff are praised for the development of a number of significant award winning technical innovations which have pleased customers.
Ideagen IDEA saw revenue rise by 43% and adjusted profit before tax by 56% after a strong performance during the half year to the 31st October. Sales momentum was strong in the USA, Europe and in the Asia Pacific region. Current trading is described as robust and the interim dividend is to be increased by 15%.
When is a trust not a trust?
Many of my regular readers will know of my preference for investment trusts (closed end funds) over OEIC’s (unit trusts, to those of a certain era!). I come clean on the fact that my formative City years in the late 70’s and most of the 80’s were spent with one predominantly investment trust institution!
However, that bias aside, and, even though the abolition of trail commission has levelled the playing field somewhat between open and closed end funds, there are still many other current reasons why I think investors should always include analysis of investment trusts, certain ETF’s and unit trusts before making their final choice of pooled investment vehicle. There can be nothing worse than correctly identifying the asset class, but then picking the “inappropriate” vehicle within that class!
Numis have recently conducted their annual analysis showing that equity focussed investment trusts have outperformed open ended funds, whether in NAV total return terms (thus eliminating the effect of fluctuating discounts), or price total return terms (i.e. in the investor pocket) in at least 75% of the cases over the last five and ten years. In fact, over the last ten years, in price total return terms, investment trusts have outperformed unit trusts in 15 out of 16 sectors…. The one exception being Japanese small companies. I reproduce their statistics below (Appendix 1) …thanks to Morningstar and Numis Securities Research!
Performance is clearly a major positive issue. There are however seven or eight other reasons why investors should consider investment trusts as part of their due diligence process when considering pooled investment vehicles.
- Investment trusts allow managers to take a longer-term view; they do not have to sell assets when investors sell their units, unlike unit trusts. Investment trusts are well suited for assets that are hard to sell quickly, like property and infrastructure. As a recent example, property investment trusts very substantially outperformed property unit trusts after the Brexit vote. In fact, some of the unit trusts placed time restrictions or financial penalties on selling investors, and still hold excessive amounts of cash, which dilute any recovery in the underlying asset.
- Unit trusts distribute their income on an annual basis, while investment trust managers can accrue revenue reserves for a rainy day! Despite the widespread dividend cuts around 2008-2009, many investment trusts were still able to maintain their records of paying out and growing dividends. There are two or three investment trusts that have actually racked up about 50 years of consecutive dividend increases, spanning at least the four major market “crashes” since my time in the City!
- Investment trusts are also subject to market discipline. If performance dips, the board of the investment trust can hold the manager to account and, in extreme cases, replace him. This has happened, and there have been more cases of investor activism e.g. Alliance Trust which have prompted personnel moves….and usually, improved investor return.
- A related issue is the possibility of outside corporate action. A one stop approach in acquiring a chunk of assets, sometimes at a large discount either to merge into another financial group or for other reasons may make sound commercial sense. For example, the British Coal Board Pension fund took over one of my old stable TR Industrial and General in 1988, and more recently, one of my recommendations in the specialist area of Japanese real estate,Japanese Residential Investment Company was taken over at a substantial premium (approx30%) late 2015 by one of the Blackstone Funds.
- Many, but not all, investment trusts use gearing, which can provide a boost to returns when markets rise and with current borrowing rates so relatively low compared with income returns from many stock market sectors. However, the opposite can be true….so an advantage or disadvantage! Extra homework and diligence required!
- Unit trusts tend to be priced just once a day so that investors do not have perfect visibility over the price they pay. This can be especially true when unstable market conditions are prevailing. Investment trusts tend to be traded live so investors have a better feel for what they are paying and can finesse their entry/exit points.
- The subject of a fluctuating DISCOUNT is of course, a two-way argument and can produce an element of complexity and unpredictability into investment trusts, especially for inexperienced investors. As with gearing, price performance and final cash return to the investor can be enhanced/weakened by inappropriate gearing relative to the overall market background. As a sweeping generality, out of favour markets, tend to be accompanied by wider discounts, and it is often in these periods, that longer term value investors can benefit. As an example, over the last five years, Europe and Japan have received new investor attention and this can be seen by the superior price performance over NAV performance in the table below (i.e. discount narrowing), while in the case of the defensive UK Equity Income sector, discounts have widened over the same period.
- Finally, the subject of relative pricing is as long as a piece of proverbial string with AMC’s, performance fees, initial charges, platform fees and dealing fees being thrown into the comparison pot, but in general, especially if the one off initial charge can be heavily discounted or eliminated, the differences have narrowed over recent years and unit trust are no longer significantly more expensive than investment trusts from a dealing perspective.
In summary, do not ignore investment trusts!
I can provide a service of stock selection or even construction of an entire investment trust portfolio if desired. Feel free to contact with your requirement.
by Ken Baksh
Ken has over 35 years of investment management experience, working for two major City institutions between 1976 and 2002.
Since then he has been engaged as a self-employed investment consultant. He has worked with investment trusts, unit trusts, pension funds, charities, Life Fund,hedge fund and private clients. Individual asset managed have included direct equities and bonds pooled vehicles currencies, derivatives and commodities.
Projects undertaken in a number of areas including asset allocation, risk control, performance measurement, marketing, individual company research, legacy portfolios and portfolio construction. He has a BSc(Mathematics/Statistics) and is a Fellow Member of the UK Society of Investment Professionals.
All stock recommendations and comments are the opinion of writer.
Investors should be cautious about all stock recommendations and should consider the source of any advice on stock selection. Various factors, including personal ownership, may influence or factor into a stock analysis or opinion.
All investors are advised to conduct their own independent research into individual stocks before making a purchase decision. In addition, investors are advised that past stock performance is not indicative of future price action.
You should be aware of the risks involved in stock investing, and you use the material contained herein at your own risk
The author may have historic or prospective positions in securities mentioned in the report.
The material on this website are provided for information purpose only.
Please contact Ken, (firstname.lastname@example.org) for further information
Dixons Carphone plc DC claims that its international businesses had a “terrific” Xmas but as is so often the sad story of late, the UK lagged far behind. In the 10 weeks to the 6th January, the star of the show was Greece with a like for like sales rise of 23%, followed by the Nordics with 11%. The UK and Ireland came last with a 3% rise compared to 6% for the company as whole. Looking forward management asserts that it is keeping its antenna twitching.
Computacenter CCC describes 2017 as a year of great progress and it is now anticipated that adjusted pre tax results will be ahead of the Boards expectations, which have already been upgraded on a number of occasions during the year.Group revenue rose by 12% on a constant currency basis but the UK produced the best quarter 4 growth seen for a number of years, with a rise of 16% just ahead of the Germans with 15% and France with 13%.
Aveva AVV is ahead of revenue expectations for the time of the year, having put in a strong performance for the nine months to the 31st December. Improving growth trends seen in the first half of the year have continued into the third quarter with Asia putting in a particularly strong performance and similar improvements have through into January.
AnimalCare Group ANCR Revenue for the year to 31st December was slightly ahead of expectations with a revenue rise of 9.5%, 10.9% on a like for like basis. The integration with Ecuphar which was acquired in July is going well.
Strix Group KETL maintained its clear market leading position during 2017 with a global volume share of some 39%. Results for the year to 31st December are expected to be in line but particularly strong cash flow should produce a significantly improved net debt performance.
Tertiary Minerals #TYM MD Richard Clemmey discusses recent developments and Possehl deal on Vox Markets podcast
Tertiary Minerals #TYM MD Richard Clemmey discusses recent developments and the Possehl deal with Justin Waite on the Vox Markets podcast. Richard covers the following points requested by listeners.
– Fluorspar – classed as a critical mineral in the USA, Europe and China – what is it used for.
– Global fluorspar market growth over the next 5 years
– The company’s three flagship fluorspar projects – Storuman (Sweden), Lassedalen (Norway and MB Project (Nevada, USA).
– Possehl deal, testament of confidence in Tertiary Minerals, a long standing relationship between the two companies.
– Acqusitions, mine development, and near term revenues
Whitbread WTB is forced to delve deep into the excuses and jargon drawer to try and explain away its weak UK performance during quarter 3. It concentrates on total sales growth figures which look quite reasonable until one looks at how it fared on a like for like basis.Thus group sales growth came in at 5.6% with the UK performance lagging far behind with a like for like rise at a miserable 0.3%, market conditions being blamed, for continuing to get tougher. Hotels were flat and worst of all at Costa they actually fell by 0.1%. Here blame is allocated to “weak retail market footfall negatively impacting high street stores.” The role of management in all this does not even get a mention. Gone are the days, it would seem when management accepted responsibility for a company’s affairs, provided they have gone well.
Associated British Foods plc ABF For the 16 weeks to the 6th January all businesses delivered revenue sales growth of 4% on a continuing basis although at actual exchange rates this dropped to 3%. Primark sales grew by 7% at constant currency rates, as selling space was increased and Christmas week broke previous records. In grocery, progress has been made in reducing the loss and in sugar the UK crop will be significantly larger but prices will be lower. No views are expressed about the future in 2018.
Halfords HFD expects retail sales for 2018 wil be subdued as the retail environment continues to be difficult but for the 15 weeks to 12th January it enjoyed good trading especially over what it calls “peak including Xmas”. Third quarter sales revenue rose by 2.7% compared to 1.9% for the 41 weeks of the year to date. Car maitenance led the way with with rises of 2.1% whilst he quarter 3 laggard was travel solutions with a drop of 4.1% as against a rise of 4.2% for the year so far. Cycling took a clear lead with a rise of 7.8% for the quarter compared to 3.9% for the year.
Royal Mail RMG delivered a good performance over Xmas and over the 9 months to the 24th December parcel volumes rose by 6% producing a reveue increase of 4%. Addressed letter volume fell by only 5% which was better than expected and overall group revenue was up by 2%.
Eddie Stobart ESL Revenue for the year to 30th November rose by 12% with E commerce sales more than doubling to £103m. Operating margins were strong and improved across all sectors and for the current year growth is ahead of the prior year, again, across all sectors