Event Review James Halstead Recent share price underperformance at flooring manufacturer James Halstead is something of a myster, given that only 35% of James Halstead revenues are UK based and that sterling has weakened significantly against the dollar and euro. Moreover, one should have expected that a company that manufactures a commodity product (and through discipline has managed continually to increase margins over the past decades) would benefit massively from the currency bonus — yet this is not reflected in the share price. Perhaps it has not helped the share price that the company valuation would already seem to be at a premium relative to its sector peers — in recognition of its good management. It may also be possible that investors are not yet fully aware that James Halstead is a major beneficiary of sterling weakness. The company has stated its intention to use its unexpected currency advantage to gain market share overseas, especially in Asia. Increased sales volume will drive up capacity utilisation in UK plants (new machines have been working James Halstead (LON:JHD) at 60% capacity) leading to margin gains. Higher sales Market cap £943m volumes overseas, rising margins and favourable currency Bid: offer 454.75p:448.75p translation comprise a substantial tailwind. P/E (forecast) 25.6 James Halstead is a high quality company that perhaps Yield (forecast) 2.8% deserves to be priced at an even greater premium.
Volvere Volvere is essentially a 2-man (brothers Jonathan and Nick Lander) operation that specialises in turning around either loss-making or marginally profitable companies. The Landers implement their management skill set and sell rehabilitated companies at a profit. Volvere has typically worked on two to three turnarounds at any one time, selling them after three to five years. Since 2002, IRRs of between 40% and 160% have been achieved upon sale of acquired companies. Accumulated cash accounts for nearly 75% of the NAV. Dividend policy is “no dividend” but Volvere does have a history of share buybacks. The company does not feel any pressure to distribute the cash pile because such liquidity is required to maintain Volvere’s standing as a capable acquirer with turnaround project vendors. The operational track record has been rewarded with a share price that has grown at a CAGR of 13% (vs. FTSEAll Share 5.2%) since the 2002 IPO, notwithstanding the intrinsically high-risk policy of taking on such Volvere (LON:VLE) concentrated investments. Can they keep up this amazing Market cap £21m track record? The shares are valued in the market like a Bid: offer 500p:515p holding company — which Volvere is not — and provides P/E (forecast) 576p a comfortable (and potentially very rewarding) entry price Yield (forecast) 0 for disciples of the Lander brothers.
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Published on Nov 15, 2016
Published on Nov 15, 2016
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