Northamber Share Discussion Threads

[cwa1] 11/11/2010 08:14

About as bullish as NAR are ever going to get?

[cwa1] 11/11/2010 08:13

7.59 announcement....caught me on the hop!

Interim Management Statement

After the challenging trading conditions of very recent years, it is pleasant to
be able to report positive progress and support my cautiously optimistic
statement in the recent annual report.

Together with the added benefit of some newer areas of activity, turnover in the
first fiscal quarter showed improvement over the first quarter of last year and
also the last quarter of the year to 30 June 2010.

Although the additional sales were achieved on lower gross margins, the sales do
contribute to a further dilution of our transactional overheads. The net result
was increased pre-tax profitability but at a slightly lower overall gross
margin.

The reductions made to the cost base last year, together with our continued
vigilance in controlling operating costs is reflected in a further reduction in
operating costs, compared with the same period last year.

The combined effect of greater turnover and our reduced operating cost base was
an operating profit compared with the operating loss reported in the comparative
period last year.

Total Net Assets per share at the 30 September 2010 increased to 89.1p compared
with 88.5p at the year end. The Company has no structured debt and had cash in
hand of GBP11.6 million at 30 September 2010 compared with GBP9.1 million at 30
September 2009, which represented approximately 40p per share.

We therefore continued to meet one of our core objectives which is to have a
substantial, sound and liquid funding position, which not only gives us security
but a strong negotiating position with both our customers and our suppliers.

Whilst seemingly always to be sounding a note of caution with regards to the
future, the fluidity of the economy, the unknown effects of the "cuts" which
have yet to manifest themselves and the scheduled change to the rate of VAT, are
all significant.

In such conditions it is impossible to be anything other than cautious, which is
another reason why we will continue to place importance in the strength of our
balance sheet and the control of our working capital as well as optimising our
net revenues.

[rainmaker] 06/11/2010 11:48

Many thanks Davius, that's a fascinating insight and perspective from a Customer's viewpoint.

regards

[davius] 05/11/2010 23:12

Just put my first order Northambers way in about six months. Only for 8 notebooks, but they were prepared to sell them at cost (according to my contact at the manufacturer anyway) which means one of two things. Either they are desperate to sell at any price, or the vendors are so keen to pick up sales they are offering incentives to the disties. I think it's the latter, my vendor contact more or less confirmed this. Margins remain ridiculously tight at present and with no money for IT buying in the majority of the public sector for the next five plus years they will not improve. Fortunately I sell into education, which along with health has been relatively unscathed. The trouble is with a great deal of IT spending being curtailed the resellers and distributors are chasing a shrinking market and everyone is looking to diversify. I suspect more than one will go to the wall, or at least be absorbed by larger rivals (as happened to Maverick, bought out by Computer 2000). Northamber have a reasonably well diversified range, though the loss of HP a couple of years ago will have hurt. But it remains one of the distributors I prefer to do business with, which can't be a bad thing.

[rainmaker] 05/11/2010 14:44

I stand corrected. IMHO it won't go any lower than current levels and why should it?We're trading at net cash and this is a profitable business even at an operating level(ie before interest earned is added). If you're waiting for lower prices, can they go lower?Is it really worth waiting?However if the recovery has been sustained we could easily be 10/15p higher.Ben, it has to be your call but I know what I would do in your shoes.

regards

[ben value] 05/11/2010 13:17

Hi Rainmaker - that was not my 2,500 at 52p. I was hoping to buy more at a lower price. Would you buy at the current level?

regards

[rainmaker] 05/11/2010 12:42

Ben-you're dipping in for a further 2,500?Went back over the last 4 years and calculated that NAR have paid 19p in dividends, that includes a 10p return of surplus capital around March 2008.From memory I believe the total cost was £2.8mln?If the recovery in NAR's performance continues it's quite conceivable they may do the same again with net cash currently around the market cap. LSE rules dictate that listed Companies have a minimum free float so that may be stopping the Company buying back further shares for cancellation at the moment.

regards

[rainmaker] 03/11/2010 22:26

Northamber's trading update happened on 17 November last year so watch out for that in the near future.The 1.4p final dividend goes ex on 1 December(so if you believe the current share price is underpinned by Company's the large cash balance, that's approx 2.8% return in just over 2 months or nearly 17% on an annualised basis). Dividend is paid on 10 January 2011.

regards

[rainmaker] 31/10/2010 14:35

Well that reduces risk somewhat

regards

[sleepy] 31/10/2010 09:12

I mention Abbey due to its similarity with Northamber in terms of its net cash in relation to its share price.

You may not like the market it is operating in but the downside risk must be low

[rainmaker] 31/10/2010 00:20

Hi Sleepy,good to hear from you. I'm sure that one of these days Northamber will shoot up.I think the key is the Company's extremely small margins and massive turnover.Furthermore it's a very well managed business where costs and working capital has been vigorously controlled. In the aftermath of a recession,I'm very hopeful that profits can balloon from current levels to the extent that, in a low interest rate environment, Northamber can earn a return in excess of it's cost of capital which means we'll be trading over 88p a share. However although I don't think that this strength, if it comes, will last, nevertheless I firmly believe it's worth waiting for. Looking at the risk to reward ratio, where is the downside from current levels when the business is profitable and we're trading at the level of net cash? Very minimal, surely.


Re UK Housebuilders,I'm very pessimistic about the housing market not just in terms of falling house prices but demand for new properties. My research is ongoing but I don't believe UK Housebuilders are a buy at current levels. In fact I believe the opposite to be true. I'm sure there will be a tremendous opportunity in this sector but at nothing like current levels. Looking to future, frustratingly the largest and cheapest are also seemingly the riskiest whereas the ones that will survive aren't a screamingly cheap bargains, at least not at the moment. Maybe there has to be "blood on the streets" ie bankruptcies for this to happen.

regards

[sleepy] 30/10/2010 23:08

I am a holder of Northamber. I am also a holder of Abbey, the housebuilder, where net cash per share is around the current share price.

[rainmaker] 30/10/2010 22:55

For anyone wanting to check Northamber's net working capital and bargain ratio.Go to the last set of results, check the balance sheet, so

Current Assets(sum of all stocks, debtors and cash)=£40.014mln less Total Liabilities of £17.058mln = £22.956mln

divided by 28.93mln shares=79p per share Net Working Capital

Bargain Ratio= 79p Net Working Capital divided by current share price of 50.5p=
79/50.5=1.56


According to Ben Graham an Investor did not need to know what a Company did before buying the shares if a Company's shares could be purchased at two thirds of net working capital ie 2/3 of NWC equates to a bargain ratio of 1.50

regards

[rainmaker] 30/10/2010 21:58

In case you haven't read it Northamber(NAR) got a mention in yesterdays Investors Chronicle in an article entitled "What would Benjamin Graham think? Shares that might tempt the legendary value investor"-

"IT hardware distribution company Northamber has recently returned to profit at an operating level and, trading has been improving. It boasts a net asset value per share of 88.5p and has net cash of £14mln,which compares with a £15mln market capitalisation."

"It is a high volume, low margin business which means if conditions worsen it will hurt, However, high levels of stock, bills outstanding and cash means the shares tick Graham's boxes for obvious value and they also pay a dividend"

Shame that the Investors Chronicle screwed up the table giving details of each Companies "Bargain" ratio. Just to confirm that Northamber's bargain ratio(ie net working capital/market cap) is NOT 0.50 but actually in excess of 1 since NWC exceeded the current share price.

regards

[rainmaker] 29/10/2010 11:21

Thanks Ben,what did Ben Graham say about a good investment being a good speculation, that if there was litte downside potential(NAR is profitable at the operating level and net cash is 50p a share) then by the same token there must be good upside potential. Not sure I should post my conclusion on Barratt but avoid.

regards

[ben value] 29/10/2010 10:29

Hi Rainmaker - I won't be buying Barratt. I may buy some more NAR on weakness. It is good to be back in NAR. I feel like a bit of a "day trader" in NAR as I have made 17 trades since Nov 08. I am pleased to say I am up by over £2,500 on the trades despite the spread and small market size.

regards

[rainmaker] 29/10/2010 09:57

I know the market is desperately thin.Avoid Barratt Dev at all cost.

regards

[ben value] 29/10/2010 09:35

Someone managed to buy 2500 for 50p. He tried to buy another 2500 a few minutes later but the price had increased to 52p

regards

[rainmaker] 28/10/2010 16:47

Last year's trading update was on 17/11/10 and IMHO the share price is too low for a Company that last reported an upturn in business and trades at around net cash.There's no way in a million years I would sell my holdings at the current price, with nav at 88p it would like exchanging my one pound coin for a bit of loose change.


regards

[rainmaker] 25/10/2010 13:46

C, yep, a positive trading statement could easily send the shares up 10/15p from current levels. I think the market makers are just trying to encourage a few sellers to balance their books.

regards

[cwa1] 25/10/2010 13:31

R, couldn't agree more. Just one little whiff that things are back on an even or, perhaps improving, keel, should see this one going sharply higher. With recent, modest, share price weakness I had wondered if there was any stock available but no, there isn't sadly.

I doubt the company are being too aggressive in the market picking up shares which is sensible enough but I doubt they will get much of the free float at this rate!

[rainmaker] 25/10/2010 12:56

Some Investors just need to be a little more patient. A trading update next month and Northamber COULD go sharply higher IF the recovery in it's markets has been sustained. IMHO if you are a holder it makes absolutely no sense to sell at current levels with net cash around 50p.

regards

[rainmaker] 05/10/2010 23:59

Well Sleepy,enjoy the ride!This is never going to multi bag but we could all be pleasantly surprised on the upside. A slight improvement in operating margins on that massive £136mln turnover.

regards

[sleepy] 05/10/2010 17:36

Yes Rainmaker I am a holder.

[rainmaker] 04/10/2010 11:19

Marvellous, a purchase of just 8716 shares at 57p-they had to pay outside the 50/55p spread.More of the same please. Don't know if it's the Company again but this is such a thin market the share price could really fly from current levels-we're just a small premium from net cash.

regards