This week’s shares: Holidaybreak, Numis and Dawson
Posted on January 15, 2009 by Richard Beddard
Filed Under Companies, Share of the week |
The good, the bad, and the ugly
The flow of new annual reports for cheap companies with good profit records all but dried up this week. The nation’s board directors obviously had better things to do over Christmas. Nevertheless, the three companies that did produce reports also produced plenty to talk about.
Holidaybreak (HBR)
I’m predisposed to like Holidaybreak because of what it sells, and I know plenty of happy Eurocampers. Although, reputedly, the business is fairly resilient to recession, the share price is plumbing depths it reached only briefly in the 1990’s. At a long-term price earnings ratio of less than five (an earnings yield of 20%) it’s certainly cheap, and although profits were down last year, it’s F_Score of six suggests financial strength.
But it’s grown since its Eurocamp days, and camping is now the smallest of four divisions with the biggest, Hotel breaks, most likely to suffer in a recession and the latest, school trips and tours, responsible for the debt that’s dragging at the company’s profits and share price.
Maybe I’m being naïve but the fact that Holidaybreak managed to refinance in November, albeit paying more interest, is a good sign. Chairman Robert Ayling would like us to think so. He says the company has enough financial headroom for adverse trading in 2009 “and beyond”.
Numis (NUM)
The credit crunch seems to have wiped out the investment banks, so finding one that is still standing seems like a contrarian investor’s dream, particularly a smaller, nimbler one that’s not poisoned by toxic debt but conducting good old-fashioned advising, broking and dealing.
Most of its diminished profit, though, didn’t come from investment banking but the sale of part of its stake in a company called Abbey Protection and interest on the cash in its bank accounts. The strategy is use its £60m bank balance to nick good talent from bad investment banks and weather the financial storm, coming out stronger.
Maybe, but the state of the market and a long term PE of 10 (above average) put the company and its share price firmly in speculative territory, I think.
Dawson Holdings (DWN)
Dawson Holdings is a newspaper, magazine and textbook wholesaler. Given the state of the newspaper industry going into an advertising recession and battered by competition from the Internet, it might seem an odd, and certainly contrarian, pick of the week.
Dawson announced good results in December, though. With flat sales, it’s becoming more efficient, and diversifying so it relies less on distributing newspapers.
Dawson’s F_Score is eight out of nine, the highest I’ve measured so far, and by maintaining its dividend at 7.5p, it seems to have, temporarily at least, won over investors fearful about the future of newspapers.
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