This week’s shares: United Drug, Sage and Europa Oil & Gas
Posted on January 28, 2009 by Richard Beddard
Filed Under Companies, Editor's choice |
Prospecting for oil in Reigate
Europa Oil & Gas (EOG)
We’re getting used to companies divining oil in the deepest, furthest and most inaccessible of places so it’s with a chuckle I turn to Europa and its wells or prospective wells in Lincolnshire and near Reigate (among others).
Europa’s auditor is not the first I’ve seen to sign off a company’s accounts while seeking to draw people’s attention to potential funding problems1. Europa needs to refinance in 2009, which, as we know is unlikely to be a good year to raise debt, and that plus falling oil prices make the company a little too speculative for my taste.
United Drug (UDG)
UDG reminds me of DCC (DCC), another Irish wholesaler. The former distributes pharmaceuticals and medical devices. The latter distributes information technology, energy and healthcare too. Both have grown strongly in stockmarket terms and geographically (into the UK primarily). I suppose the go-go Irish economy helped, at least up until the credit crunch.
Look at this, up until the start of the crunch, the two companies’ charts were almost indistinguishable:
…Although DCC has suffered more since, probably because customers are more likely to cut IT budgets than healthcare. They also share a strategy: buying and ‘bolting on’ smaller companies in related business, perhaps demonstrating that growth by acquisition can give investors lasting returns.
UDG’s long-term price earnings ratio of 14 is more than I’d like to pay for company where growth was slowing even before the recession, but its finances look reasonably strong. DCC reports in the summer. Its long-term price earnings ratio is just nine and the annual report could make very interesting reading for value investors.
Sage (SGE)
There’s a blue chip in the house. Well, almost. With a long-term PE of 19, it’s a bit too pricey, but it wouldn’t take much for Sage’s share price to drop into my buy-zone, and I wouldn’t want to miss the chance to pick up FTSE 100 royalty.
Its annual report is a fortress of financial strength and it’s doubled profits in nine years. Value investors can but hope that jittery investors sell and drive the price down to levels we can afford. After all, Sage sells its business software and services mainly to small and medium sized businesses, those most at risk, we’re told, in a recession.
That’s it, I don’t want to make any of these pick of the week, though United Drug comes close, but I have one more company up my sleeve, which I’ll blog tomorrow.
Footnotes:
- For more on this trend see: ‘Funding plans a key matter in annual reports’, FT, 25 Jan.
Comments
Leave a Reply
