Psion Share Discussion Threads

[simon gordon] 08/4/2010 13:10

Good post John, cheers.

As a bonus, there is always the chance PON get taken over, KBC reckon 185p would be the price if it happened.

[johnroger] 08/4/2010 13:02

Buy Psion at 81p

A tip from SmallCapShares.co.uk

THE BUSINESS

The economic crisis dealt a double blow to trading at mobile computing specialist Psion. Discounting activity and weak demand triggered a downward trend in gross margins while a high proportion of fixed costs meant it was difficult for the firm to scale back operating expenses.

In order to return to profitability, the company launched a wide-ranging restructuring programme in the 2008 financial year that has massively reduced its cost base. New management have realigned the business's operations and while the firm remains loss-making, new product launches, its strong balance sheet and an incipient recovery in its markets make the shares worthy of a closer look.

Psion specialises in the production of mobile hardware for businesses with employees who are constantly on the move and require realtime access to data. Besides the production of portable computers (including hand-held devices) the company also designs wireless data collection networks to enable the prompt flow of information between employees. In addition, the firm also provides support and maintenance programs to clients.

Psion's products are designed to help improve the productivity of mobile workers and also deliver efficiency gains for the operation as a whole through improved communication and coordination. Products are sold via an array of channels such as a third party network of system integrators, value added resellers, distributors and its own direct sales force. In addition, the company has strategic relationships with technology partners such as Microsoft, Cisco Systems and SAP that help it provide the latest mobile applications to its own clients.

CURRENT TRADING

The key event of the 2009 financial year was the implementation of the 'Change Programme' which was designed to substantially reduce the firm's cost base in order to improve operating margins. Initiatives implemented under the scheme enabled the organisation to reduced operating expenses by GBP35 million and cost of sales by GBP11 million. Besides redundancies and a revision to remuneration policies, the company also put in place 70 supply chain improvement projects to reduce inventory levels, speed up product development and improve its sales strategy.

These cost measures outweighed the 14.7% fall in revenues to GBP170 million and helped reduce pre-tax losses by 61% to GBP3 million. However, a deferred tax charge of GBP4.8 million coupled with a substantial noncash GBP20 million goodwill write-down on the value of its foreign offices (caused by the significant weakening of sterling against its trading currencies) meant losses per share declined by 25% to 5.52p. Despite the trading losses the firm declared a second interim dividend of 2.6p taking the full-year payout 2.7% higher to 3.8p.

During the year the company generated GBP18.3 million in cash from operating activities compared with an outflow of GBP3.8 million in the previous year. This came as a result of a GBP16.7 million reduction in inventories in light of the overhaul of manufacturing processes. Thus despite paying GBP5.2 million in dividends and investing GBP2.4 million in capital equipment the business finished the year with net cash balances up by 10% to GBP45.3 million. However, a decline in receivables and inventory meant that net current assets stood at GBP59.6 million down from GBP81 million at the 2008 year-end.

During the year Psion bagged an agreement with the world's largest technology distributor, Ingram Micro, significantly increasing the reach of its products. This is particularly important as the firm closed down a number of loss-making sales offices during the year. Post period end the business also secured a deal with BT Global Services under which the networking services arm of the telecoms firm will provide Psion's mobile computers to its own clients providing a potential "significant boost to future orders". BT will initially sell the company's devices in the UK, Germany and France but there is potential for the agreement to be extended into other markets.

OPPORTUNITIES & RISKS

Through its cost cutting programme Psion has created ample room for operational leverage. With trading conditions showing signs of stability and in light of improving operating margins we would expect year-on-year bottom line growth to match, if not outstrip, an improvement in revenues. Encouragingly, technology industry specialists VDC Research Group expect the mobile computing market as a whole to grow at a compounded annual growth rate of 4% to 5% between 2010 and 2013. Bearing in mind the group's diversified geographical operations, new product launches and its recent distribution deals we believe the firm is well-positioned to benefit from this forecast growth.

Furthermore, the firm is implementing a new growth strategy known as Open Source Mobility. This system will enable tailored applications to be delivered to clients and for feedback to be more readily incorporated into upgrades. More customised packages remove the need for redundant components thus cutting Psion's design and procurement costs. The company has also launched an online community where its customers, resellers and development partners can discuss product improvements which should ensure customer retention. A "very positive" response has been reported to the offering so far.

VALUATION

An investment in Psion is essentially a play on two factors: management's ability to boost operating margins, which will accelerate the impact of operational gearing, and the commercial success of its upcoming products. The board has significant experience in turning around businesses and has both the funds and the ambition to drive future growth.

For the 2010 financial year broker Charles Stanley forecasts underlying earnings of 7.25p, putting the firm on a current year multiple of 11.2, which falls to 9.4 the following year. Stripping out the net cash of 32p on the balance sheet sees the multiple fall to 6.7 and 5.5 respectively. Healthy income prospects are on offer too as if the 3.7p dividend is maintained the shares yield a healthy 4.6%. As an income and growth play Psion shares are a BUY.

Key Data

EPIC: PON
Market: FULL
Spread: 80.25p - 81.75p (1.83%)

[simon gordon] 08/4/2010 08:06

Fingers - 8/4/10:

[simon gordon] 07/4/2010 20:16

I had been wondering why the share cratered last November, found this:

Seymour Pierce - 25/2/10

Psion reports its full year December 2009 results on 4 March. The trading update on 19 January had the merest hint of optimism but this came after the IMS on 19 November that caused a nudging down of revenues estimates and a reevaluation of the costs estimates, due to the appreciation of the Euro and Canadian dollar and the management's revised development strategy. The figures themselves should have little to excite.

======

The Finals did not set the share on fire, they're having the AGM and an Investor Day during May, could one of these be a catalyst or will it be the Interims in September?

[thorpematt] 07/4/2010 08:33

Everyone has read the financial report I trust?



only 88 pages...

[maximus57] 05/4/2010 15:38

Two good entries rathkum, pretty new to this but have been watching this closely myself over last couple of weeks. Thanks for research, believe now primed for good upward price movement.

[philjeans] 02/4/2010 11:12

Good spot rathkum; got back into PON yesterday so that was nice timing!

Very attractive stock at this price and point in time - growing business; no debt; big cash pile and a take-over candidate if ever I saw one!

Easy bagger.

[rathkum] 02/4/2010 11:06

US defense orders

[eryalen2] 24/3/2010 16:37

I thought Binladin's comments were an inept attempt to drive the price down so he could buy cheap. Sort of a reverse "Pump and Dump".

[mikey34] 23/3/2010 17:16

hamish,

Binladin is a total moron....probably never bought a share in his life...just filter him.

[eryalen2] 19/3/2010 14:25

Looks good from the inside, too.

[thorpematt] 19/3/2010 09:15

RBS have put in a buy recommendation on this one.

Saying:-
....has 'an increasingly coherent product strategy...'Given the prospects for an improving sales backdrop, we return to Buy and raise our price target from 114p to 124p,' Royal Bank of Scotland (RBS) said.

(this is what's drawn my attention)


I have to research MORE first BUT I will say this:
1. I like the story (restructuring, cost etc.)
2. Yield is very good and fundamentally it looks v. cheap
3. Market sector has promise
4. I don't really see myself as a chartist but this one looks like a perfect for a breakout to me (see recent movements @HNT for a VERY similar example).
5. Timing – if it's gonna move it'll happen any time within the next few days...

[she-ra] 04/3/2010 20:49

eryalen2 - Thats quite funny.I see you have noticed the cash in the bank.

Heres something else for you:-

[eryalen2] 04/3/2010 17:52

"how long can the company keep on making loses.........." At this rate, somewhere over 14 years.

[she-ra] 04/3/2010 13:20

binladin - Should I have sold at 32p like you told me to.You missed out on a double bagger.They're aiming for 10% operating profits.They have £45 million in cash-no debt.Finncap and Charles Stanley have them as a buy.CS has set a price target of 135p.They are cutting costs dramatically which will accelerate with the open source model-all helping the bottom line.

Psion is definitely a target in this consolidating market.Cash rich Intermec will surely be running the slide rule over Psion as it battles to keep up with Metrologic and Motorolla.

Projections are for 3-4% annual growth rates for rugged handheld devices for the next 10 years.

You know you made a mistake BL.Their market has normalised and they are recovering.Funny you also told people to sell Wolfson at 70p.Another one of your great tips!

[binladin] 04/3/2010 12:22

how long can the company keep on making loses..........
The share price will fall...........

[noon] 26/1/2010 18:55

that reminds me, which i forgot all about it, i still hold 1200 shares in psion, dated year 2001.

all i know is there was two splits
split 5:1 on 8 may 2000 and
split 1:3 on 12 sep 2005

writing a letter to them today to find out more.

[ukinvestor220] 26/1/2010 14:10

does any PON enthusiast here have a link to the share price history i.e. splits; cash back; subsequent change in value of holding due to those since 1999 ??

[she-ra] 25/1/2010 20:08

farmsted - Considering that they have realigned their cost base through greater efficiencies and that their markets are recovering I cant see Psion remaining independent for very long in this consolidating sector.They are about to enjoy higher margins.

I could see how Psion's particular offer complements Panasonic's Toughbook business. Infact there are some larger companies out there who are missing a link or have not entered this soon-to-resume double digit growth industry and who could achieve greater economies of scale or have a more even spread of risk with their consumer focussed businesses.Im thinking of companies such as Nokia,Dell,HP,Motorolla (its doubtful this one but you never know),Honeywell,Samsung,LG,HTC... to name but a few.

[farmsted] 25/1/2010 15:49

I think the answer is NO so will we be testing sub 90 this week ?

[she-ra] 20/1/2010 11:17

Johnroger - Are the Independent aware that Psion also has £45 million in the bank?

[johnroger] 20/1/2010 10:06

Independent

Psion

Our view: Buy

Share price: 96p (+1p)

The last time Psion popped up on our radar the world economy was mired in recession and leading indicators remained uninspiring. Much has changed since then, and recovery appears in sight. This bodes well for the company, which makes rugged mobile devices for blue-collar workers, helping their employers increase productivity in a range of areas.

The management team has been working hard to strengthen Psion's position in its target markets, and regular updates, including the one posted yesterday, continue to show progress. Cost cuts have make Psion a leaner and meaner beast as well.

The recovery means that we can now turn positive, as the efficiency gains coincide with improving market conditions, opening the door to higher sales and revenues. The shares are not that cheap – trading on 15.4 times Singer Capital Markets' current estimates. But this a turnaround story that looks sets to enter its most exciting phase. So buy.