Sibo Value Shares

Weekly round-up of news for my value share portfolio, for the week ending 3rd of September

noreply@blogger.com (Sibo) — Sat, 04 Sep 2010 22:33:00 +0000

Monday 30th of August

No news from portfolio companies.

Tuesday 31st of August

Emblaze (BLZ) announced half year results which were generally good due to the good performance of Formula Systems, however the discontinuation of the Else mobile impacted on results.

Goldenport (GPRT) announced results which were lower than the previous year. However the management expect things to pick up and revenues to increase as newly built ships are brought into service.

Capital Group

Luba Freeport potentially the jewel in Lonrho’s crown

noreply@blogger.com (Sibo) — Sat, 04 Sep 2010 18:45:00 +0000

Lonrho today announced that TENARIS, a world leader in tubular products and related services for the world's energy industry has agreed to establish a logistics facility at Luba Freeport. Initially they will occupy a temporary facility with a permanent 10,000m2 storage and wash bay facility should be operational by December. The design of the facility has been engineered so that it could easily be expanded up to 60,000m2 as new contract are won.

With the opening of this logistics facility

Emblaze group interim results and potential sale of stake in Formula Systems

noreply@blogger.com (Sibo) — Sat, 04 Sep 2010 18:36:00 +0000

Update 03/09/10 just a day after posting the below it has now been confirmed that a sale has been agreed for just under $140million. This equates to about 81p a share and it needs to be ratified by the shareholders. I'm hoping we see a large chunk of this cash via a special dividend.

It’s been a strange few days for Emblaze, on Tuesday they announced their interim results in which they mentioned that they were evaluating several strategic options for the group. The very next day they

Blog has moved

noreply@blogger.com (Sibo) — Tue, 10 Aug 2010 08:19:00 +0000

this blog has now moved to http://www.valueshare.co.uk/

Fiberweb bought at 54p

noreply@blogger.com (Sibo) — Sun, 08 Aug 2010 09:39:00 +0000

The name Fiberweb came up various times when doing my research, but I never really looked past the name. I assumed it was a company involved in fibre optic solutions for the internet and that was not a sector I am interested in. Then one day after seeing it show up on my screener so many times I decided to have a look at the company. Much to my surprise it wasn’t a technology company at all, but an industrial company which manufactures non-woven fibres, whatever they were.

Having done more research I realised that the company was in the final stages of a turnaround and could therefore be an interesting proposition as it is high yielding, roughly 7%. And there was potential for growth over the longer term. The net asset value without intangibles was also about £140million. The current market cap is around £77 million so there is a significant discount to the asset value.

The business itself is split into 2 divisions, which are the hygiene division and the industrial division.

The hygiene division is a relatively defensive division it is mainly focussed on the sale of fabric to the nappy and feminine hygiene market as well as some sales in fabric softeners and some medical application such as face masks. This division generally grows with the market and its main customer is Proctor and Gamble. The problem with having one main customer is obviously the uncertainty and risk to the business if you lose that customer. However Fiberweb have had a long term relationship with Proctor and Gamble so hopefully that will continue. There is also an advantage with working with one of the biggest consumer product groups in the world. They are going to want to grow and have the marketing budget to make that happen. So hopefully this means that Fiberweb will grow with it. Generally however this is a division of the company where sales are relatively stable.

The Industrial division has division related to automotive, construction, graphic art, filtration, industrial wipes and landscape and gardening. At the moment the biggest divisions are the construction division, which mainly sells underlay for roofing and insulation wrapping. And the filtration markets, which include filters for swimming pools and air filters as well. These markets are highly cyclical and suffered during the downturn. However hopefully they have turned the corner and the sales and profits will increase as the market picks up again. In the latest interim reports, it seems to suggest that the worst could be over. Total sales increased 9% with an especially high increase in North America at 17%, they also saw margins increase by 4.2% which resulted in a operating profit for this division of £10.4 million.

The operating profit for the hygiene division was £4.7 million, this was partially impacted by higher raw material cost, which they can pass on to the customers, but only with a 3 month time lag, so we should see some benefits of this in the next set of results. The underlying profit before tax is £6.9 million which equates to 3.8p per share, although they also have a deferred tax benefit, built up from previous losses in their US business. If you include these then the EPS are 5.6p. They are also paying a 1.7p interim dividend.

I believe the discount to net asset value, the relatively low price earnings ratio, especially considering the cyclical growth potential of the industrial side of the business and the high dividend yield of just over 7% make this a very attractive buy.

Rationale for buying Nighthawk Energy (HAWK) bought at 36.5p

noreply@blogger.com (Sibo) — Sat, 07 Aug 2010 20:40:00 +0000

Nighthawk is an AIM listed Oil exploration and production company, with all their projects in the USA. It’s main asset and the reason why I bought into it is their Jolly Ranch project. This is a 370,000 acre shale oil project in Colorado, in which Jolly Ranch hold a 50% interest. According to a recent Schlumberger report undertaken over 246,000 acres of the project, there is an estimated 1.426billion barrels of gross oil. Schlumberger have also said that they expect that similar resources are expected to be in place across the rest of the acreage. If this were the case then this would equate to roughly 2.19billion barrels of oil. At the moment they are in the process of trying to sell a 75% working interest in this project and they say they have had numerous parties who are showing an interest.

A rough estimate of recent oil shale sales suggests that the company should expect something between $5000 and $12,000 an acre. If we conservatively take the lower estimate then the Jolly stake could be valued at $925million, which is roughly £560million. This compares to the current market capitalisation of approximately £85million. As the company is debt free the potential for a big rise in the share price is therefore enormous although somewhat speculative as Nighthawk do not have the funds to fully develop Jolly Ranch themselves and are therefore depending on a sale.

Nighthawk is not all about Jolly though as they also have other assets which are producing cash flow.

These are;

The Revere project in Kansas is a 40,000 acre project in which Nighthawk hold a 50% stake. The estimated oil in place is 210.51 million barrels. Which the company expect will prove to be bigger once all the outlying acreage is assessed. Revere currently has a gross production of approximately 150 barrels of oil a day, which is set to increase in the future.

Cisco Springs in Utah is mainly a gas play in which Nighthawk have a 50% stake on 24,000 acres. This project contains roughly 121 billion cubic feet of gas and 3.8 million barrels of oil. Due to current low gas prices in the area and the potential of Jolly Ranch and Revere not many resources are being pt into Cisco Springs at this specific time.

Cliffs in Illinois is a shale gas play Nighthawk own 80% of the 15,591 acres and the estimated gas in place is 150 billion cubic feet. I believe the company now see this as a non core asset.

I would conservatively say Revere, Cisco Springs and Cliffs would cover the current market capitalisation of £85million. This would mean that the Jolly Ranch project is thrown in for free. Seeing as a large stake of this has now formally been put up for sale it will hopefully not take too long for the true value in this company to show itself.

Rationale for buying Speedy Hire (SDY) bought at 28p

noreply@blogger.com (Sibo) — Sat, 07 Aug 2010 11:44:00 +0000

Speedy Hire (SDY) is the UK’s largest provider of hire equipment to the construction and infrastructure market. They have 10% of the highly fragmented UK market and have also recently moved into the Middle-East market and into training and advisory services in the UK. Both of these businesses are fledgling businesses and have growth potential. However the vast majority of the business is still made up by their UK hire business.

This business has had some major problems with the economic crisis and the subsequent downturn in the construction industry. The company has however responded to this by having a rights issue to restore the balance sheet as well as streamlining the business with the closure of some overlapping branches. The result is that the current market cap(at 23p) is £117.2 million whilst the current tangible assets are £180.9 million. So there is a significant discount to the asset value of around 35%. It has to be said that the company was loss making last year due to the restructuring costs and the drop in construction industry. However I do feel they have made the steps necessary to profit from the upturn in the industry. Whilst there will be significant public sector cuts the private construction industry is expected to take over some of this demand. There needs to be significant investment in infrastructure spending especially in the power segment as current nuclear stations are closed down and green alternatives are sought for coal fired stations. The railway sector is also expected to pick up with Crossrail and new high speed lines being planned. Speedy have an exclusive deal with Network Rail for the provision of hire equipment.

In 2008 the company made over £30 in profits and if they can get back to those figures then that would be a price earnings ratio of less than 4. It is expected however that it will take a few years to get back to anywhere near this level. However I think the worst is behind the company and this is definitely a share that should come good over the long term.

If this post has wetted your appetite for doing more research then I recommend reading the following investor presentation from the Speedy Website http://www.speedyhire.plc.uk/download/Analyst_Investor_Presentation_2009_tcm6-1970.pdf

New additions to the Portfolio; Speedy Hire and Fiberweb

noreply@blogger.com (Sibo) — Sat, 07 Aug 2010 10:52:00 +0000

It’s been a while since I last posted, but it is my intention to, at least write a weekly update and more often if something interesting gets announced to one of the portfolio companies. During my leave of absence I have invested in a further 3 companies. These are Speedy Hire (SDY), Nighthawk Energy (HAWK) and Fiberweb (FWEB)

I am going to write and post my detailed reasoning for each of these purchases shortly.

Emblazes interim management statement leaves questions unanswered

noreply@blogger.com (Sibo) — Thu, 19 Nov 2009 11:56:00 +0000

Just days after taking a stake in Emblaze the company today came out with an interim management statement. It broadly stated that the group is performing to management expectations. They mentioned that the growth arm of the company has seen improving profits even in the current market conditions. I won’t provide detailed information of the growth arm business as this is as I mentioned in my post of a few days ago (http://sibovalue.blogspot.com/2009/11/emblaze-value-play-with-smartphone.html) the backbone of the company and on which it can lay a steady foundation.

The innovation arm is where the potential upside resides and in particular in Emblaze Mobile. The company confirmed that the official launch of the first phone using the companies Else intuition mobile platform will be on the 24th of November. However it did not go into detail on any contracts with operators or manufacturers. All they said was that “Management believes that the Group's mobile activity will make a contribution to revenues and profits for the Group in 2010 and beyond”. I would have hoped for a stronger endorsement than that. The word “significant” added to that sentence would have been nice to see as this is I am hoping for a significant contribution from Emblaze Mobile in the future.

I managed to find a link to the launch website of the first ELSE phone http://www.else.bz/#/news
The thing that slightly worries me is that under their mission statement they say “We hope to convince at least one major handset vendor to market them under their brand”. I would have hoped that at this stage, just 5 days before the launch they would already have had a launch customer for the phone. I’m hoping that the website, like so many, is slightly out of date and at least one customer will be unveiled at the launch. One thing is for sure next week is going to be very interesting.

Waterman Group lacklustre interim statement provides a buying opportunity

noreply@blogger.com (Sibo) — Thu, 19 Nov 2009 10:02:00 +0000

Waterman Group, the engineering and environmental consultant, today issued a brief interim management statement, which sent the shares sharply south. Early morning trading saw the shares down 12%. So what was so bad about this management statement? Was it a lack of new orders? Were customers not paying bills? Well all in all it wasn’t anything merely as drastic. Trading has been in line with management expectations.
According to Waterman the UK and European property markets are still depressed, but the Australian business has seen signs of recovery. The Middle-East is still challenging for the group, but they have recently started receiving new enquires for their services.
On the public sector side Waterman is seeing good opportunities and workload and they also expect the energy sector to provide an improving workload as there needs to be a lot of future investment in infrastructure.
The environmental side of the business is seeing an in increase in enquiries. However margins are expected to be lower than in previous years due to the economic downturn.
The group concluded its statement by saying that although there were still challenges the long term prospects remain good.

So was this management statement worthy of a 12% drop in the share price? The message was mixed and maybe overall slightly downbeat, although there were glimpses of a recovery in some of the statements; “recent sign of recovery” in relation to the Australian business. “New enquires for service” from both the middle-east property sector and the energy sector“and “an improving workload” in relation to the energy market. I personally believe that the drop is due to the fact that investors were hoping for more signs of a recovery and a more upbeat statement.

However the fact remains, that Waterman has continued to trade profitably throughout the recession. It is trading at a P/E ratio of just 5 on last year’s numbers. These numbers include one of charges relating to provisions for bad debts and restructuring charges. Without the one off charges the P/E ratio would have been just over 2. The shares are also trading at as big discount to the net asset value of 126p per share and only carry a modest debt. I believe the long term prospects for Waterman remain very good and I would suggest that the current share price provides a buying opportunity.

The author holds shares in Waterman.

Emblaze a value play with smartphone potential

noreply@blogger.com (Sibo) — Tue, 17 Nov 2009 12:06:00 +0000

After receiving a payout from the ENRC takeover of CAMEC last week, I have used some of the money to take a position in Emblaze Group (BLZ). Emblaze is a Technology company which has 2 main areas of business Growth and Innovation. The growth side consists of a 50.1% holding in NASDAQ listed Formula Systems (FORTY). Formula Systems holds majority stakes in 3 NASDAQ listed technology companies, all of which are trading profitably. The Innovation side of the business consists of a majority stake in Zone-IP Ltd, a video conferencing software supplier, a 95% stake in Emoze, which has developed a software solution which allows any phone to accept email.
The most exciting part of the innovation side of the business though is Emblaze Mobile, which together with well renowned partners has developed a smart phone, which they will believe will revolutionise the business. This Mobile entitled the Else Intuition, the statistics of the phone are very impressive and I am hopeful that they will announce contracts with some major telecommunications companies. Should this phone be even moderately successful then there is tremendous scope for the share price to rise.
Should the Else Intuition fail to take-off then I imagine the shares will see a sharp drop, but will then quickly recover as the rest of the business is taken into account. Emblazes stake in Formula Systems is valued at today’s market capitalisation and exchange rate at just over £47million, which is a big chunk of the £57million market capitalisation of Emblaze. I also believe that Formula Systems is currently significantly undervalued. It is trading at a P/E ratio of 13.5, which is low for a growth company; it is also yielding an impressive 20% dividend. It has current assets which cover both the short term and long term debt and it has total net asset value of $279million. This means that if Formula Systems were to sell at their net asset value Emblazes stake would be worth over £83million. Which is actually an increase of 45% to today’s market capitalisation. You could argue that Formula Systems should trade at a discount to their net asset value, however if they were trading at their net asset value the shares would be trading at a P/E of 23.6 which is not that inconceivable for a growth company, the yield would also still be an impressive 8.7%.
So in conclusion I believe the downside is capped and the potential upside is significant. The Else Intuition which is scheduled for launch on the 24th of November could be the company changing product that will transform this company into a major player in the important smart phone market. I’ll be keeping my fingers crossed, but should it not live up to the hype I am happy in the knowledge that the other components of the company still make this a value play.

Interserve trading in line with expectations, shares flat

noreply@blogger.com (Sibo) — Mon, 16 Nov 2009 21:06:00 +0000

Interserve issued an interim management statement, in which the company said that trading was in line with expectations. The facilities management arm was one of the better performers as companies look to outsource services to save costs. They did however confirm that they will have to include an £11.6 million fine by the office of fair trading in the 2009 results. The shares were generally flat on the news, starting slightly down, but ending the day up as the general stock market sentiment was in an upward direction. I'm still very happy to hold Interserve I think it has excellent potential and it is currently available at a P/E ratio of five, although they will have to take an impairment charge on the oft fine, so next year’s P/E might be slightly higher. It is also yielding over 7% and in my view is therefore worth buying for the dividend alone.

An interesting week.

noreply@blogger.com (Sibo) — Sat, 14 Nov 2009 09:57:00 +0000

This week has been quite exciting for my portfolio. During the week the ENRC takeover of Camec completed and I got the cash in my account. This resulted in a very nice profit of 557.28% since I bought the shares at the end of february, so that's a very good return over 9 months. That's my first real profit of this portfolio. The total portfolio is up 207.21%, but I guess the majority of this is a paper profit as I have no plans to sell any holdings unless they become severely overvalued. In a way it was good to see the first actual profit roll in, but I do feel ENRC got a bargain as my price target for CAMEC was 30p. However I do retain some exposure to the CAMEC assets as Kazachkmys hold a 26% stake in ENRC. The CAMEC completion in a way was the highlight of the week, but I have known it's been coming for a while. So I guess the actual news of the week was, in a way, more exciting.

On monday Lonrho had a positive trading update, which it took the market a while to digest as the share price didn't start moving up till the end of the week, but it did see a 20% rise in the week.

On tuesday Vodafone had their 1st half results, which didn't really suprise, their profits were slightly up, mostly on cost saving efforts. They also announced they are going to double the cost savings to £2billion. I like Vodafone as it's basically a cash machine, it's yielding 6% at the weeks closing price, and I'm getting closer to 7% on my initial buy in price. It's difficult to get anywhere close to that return in a bank and you do gain exposure to some emerging market's which should see the dividends increase year on year. The market seemed indifferent to the results as Vodafone was flat on the week.

Wednesday was a quiet day and there was no news fom any of my portfolio stocks.

Thursday saw Stobart announce a new 3 year £60million deal with Unilever, suprisingly the market didn't really react, I find this strange as it's another major blue chip customer and it adds significant revenue and also fills in a few gaps and hopefully will increase the percentage of journeys that are full. for example a truck will pick up at a Unilever factory it will go to the Unilever distribution center, then pick-up unilever goods to deliver to the Tesco distribution center, then pick-up goods to deliver to a Tesco store. It they can combine these routes then it could be a good cost-saver.

on friday there were no news announcements, but there was a decent 3.5% rise in Lonrho and a dramatic 17.9% rise in Waterman Group. i think the Waterman rise is due to the fact that an interim management statement is due soon and on fundamentals this stock looks very undervalued.

During the week I've also been researching new shares to invest in as the money from CAMEC has come through. I have some decent ideas, for shares that I aminteresyted in and are close to an entry point that I can live with, but unless there is a margin of safety I will not take the plunge. If anyone has any ideas please feel free to share them with me.

noreply@blogger.com (Sibo) — Sat, 07 Nov 2009 21:51:00 +0000

Just a quick post to recommend two books. One is the Buffett: The Biography (Duckworth) By Roger Lowenstein. This biography gives an account of Buffett's life from when he was a child till he decides to give most of his wealth away after his death(to the Melinda and Bill Gates foundation). The second is The Intelligent Investor which is written by Buffett's mentor Benjamin Graham. Buffett himself recommends this book and it is in fact the foundation of his investment strategy. I think that if you read both of these books you will get a good insight of the man. The intelligent investor is more technical and explains investing strategies. Whilst his biography gives an insight as to how he implements these strategies and then evolves them further.

Sibo Value Fund

noreply@blogger.com (Sibo) — Sat, 07 Nov 2009 14:18:00 +0000

Hi,

My name's Serko and I have a big interest in share dealing, or I should say investing as I try and keep my trades to a minimum. I subscribe to the Warren Buffett school of investing, which is typically a buy and hold startegy. It's all about buying the right businesses at the right price though. You should note that I said businesses instead of shares, that is another one of Buffett's philosophies, you invest in a share of a business, not just in a ticker symbol. Therefore the underlying business must be sound and well managed. I currently have the following shares in my portfolio; Camec(CFM), Eros(EROS), Goldenport(GPRT), Interserve(IRV), Kazackmys(KAZ), Lonrho(LONR), Stobart(STOB), Vodafone(VOD), White Young(WHY), Waterman Group(WTM). I will go through this portfolio and explain for each share my rationale for buying, please be aware though that I am not tipping these shares as in some cases the value that I initially saw isn't there anymore. Either due to new information or the fact that the shares have already risen significantly and there is now no margin of safety anymore in buying them.

Camec (CFM) bought at 3.15p per share. This company is a Mining company with operations in Africa, their main production facilities are in the Democratic republic of Congo, where they produce Copper and Cobalt. They also have various exploration assets all over Africa. However I won't delve too much into this company as they are about to be taken over by ENRC at 20p per share. This share has gone up over 500%

Eros (EROS) bought at 77.85p per share. This company is an indian media company with it's main focus on bollywood films. They have a catalogue of over 1200 films, which in my opinion is the backbone of this company. Less than 1/3 of their revenue comes from Cinema releases. The rest comes from digital(DVD, VOD, music downloads, etc) and their most important segment is TV syndication. Furthermore they have a 51% stake in Ayngaran which is a similar business, but in the Tamil langauge section instead of Bollywood. They also have a 51% stake in Eyeqube a visual effects company and a 24% stake in B4U a company that runs a bollywood movie channel and a bollywood music channel. The Indian market is one that I really like and the fact over 66% of the revenue comes from their catalogue means there is a strong margin of safety in this stock especially as the stock is only on a p/e of less than 7 and it has strong growth prospects.

Goldenport (GPRT) bought at 106.11p per share. This share is a play on the world economy it is in the shipping sector which saw big drops due to the economic crisis. In my view this share was oversold and there is significant scope for future rises as the economy improves. They operate with little debt in releationship to their assets and a lot of their ships are contracted on long term deals. They're trading at 2.5x the 2008 price earnings ratio and although the results this year are expected to be a lot worse they are still profitbale. Should they be able to get back to the same profitability in the next few years as in 2008 then this will be a real bargain share.

Interserve(IRV) bought at 188.57p per share. This share is in the construction and facilities management services market. They have significant presence in the Middle East as well as the UK. I bought these as they have a high yield over 7% and a low pe ratio of just over 5. They have long term contracts in the facilities management side of the business, which gives a certain degree of visibility over future revenue. Although the construction industry is expected to suffer a downturn I beleive Interserve will be able to pick up more facilities management business as customers look to outsource. They also have a strong equipment rental business, which is operating at high margins and is very active in the Middle-East and the Middle-East is expected to invest heavilly in infrastructure over the coming years so there is a big scope to increase revenue over the medium term.

Kazachkmys (KAZ) bought at 270.17p per share. Kazachkmys is a miner based in kazahkstan with it's main emphasis on Copper. The reason I like this share is that it has a large stake in ENRC, which is also a kazach based miner, but it gives exposure to different commodities. Apart from Copper Kazachkmys also have operations in Gold, power generation and they are involved in petroleum exploration. The p/e for 2010 are expected to be around 7, which I believe offers great value.

Lonrho(LONR) bought at 8.09p per share. Lonrho is a diversified African conglomerate which operates in 5 main sectors Infrastructure, agribusiness, Support Services, Transportation and Hotels. It has operations that include a large port, an airline, a fruit and veg supplier, bottled water plants, hotels, etc and in countries as diverse as Angola, South Africa, Mozambique, Kenya, Equitorial Guinea. The reason I've invested in this share is that I see a lot of potential and I believe Africa, will become an increasingly important part of the world economy.

Stobart (STOB) bought at 114p per share. Stobart is a multi-modal logistics group, most famously known for it's Eddie Stobart truck business. However it is much more than this, it has a warehousing division, a ports division, a rail division and an air division. The warehousing division has a diverse client base, it's biggest client is probably Nestle, for who they hold 75% of their stock. The ports division is basically a muit-modal inland port, with connections to the M6 and the west coast mainline as well as a waterway port on the manchester ship canal. The rail division does enginerring work for the Stobart group as well as for external clients. Stobart has various rail operations in the UK, with Tesco being the main customer. They also recently started a 48 hour Valencia to UK chilled rail service, which supplies 30 truck loads of fresh food directly from Spain to the UK. It is expected that this will become a dialy service within the year. The air division comprises of ownership of Carlisle airport and Southend airport. Carlisle airport will become the head office and large hub for the Eddie Stobart operation. At Southend airport a new railway station is being built, that will mean there will be a 46min connection to Central London.

Vodafone (VOD) bought at 117.99p per share. I guess Vodafone doesn't need much introduction. The reason I've invested in this is that it is paying a solid dividend of approximately 6% and it is generating significant amounts of free cash flow. It also has some exposure to emerging markets in Africa and India, so there is still potential to grow the business.

White Young (WHY) bought at 11.54p. I bought this consultancy business as it was in trouble and the share price had collapsed. I felt there it had been undervalued, although a restructuring was needed. The restructuring is now taking place and existing shareholders will be left with 15% of the company. I was expecting a little less dilution, but still see an upside in the future.

Waterman (WTM) bought at 43.42p per share. This company is in a similar field to White Young, but it has managed it's debt a lot better. It is currently trading at a p/e of around 4.