Mears Share Discussion Threads

[geovest] 24/9/2008 08:17

Bergster,
If you check the Annual Report (or RNS announcements) you will note that MER made a large strategic investment by buying Careforce for around £22m effective +- June 2007. Details of the reasons for acquisition, strategy etc were set out in the AR and RNS. This is the primary reason for the variances in your Q1,2,4. Q3: MER always manages their working capital very tightly, look at the cashflow statements.

[crickley] 23/9/2008 15:00

Usually the price will tell the story first since the market is a discounting mechanism.

The big fund guys with all the research capabilities at their disposal will find out miles before private investors if there are fundamental problems with a company. And in response to this information they sell. And so the price falls. Usually the PIs are the last to find out, and by this time the price has already fallen back substantially.

Fundamentals are certainly useful in telling you how the company has done to date. But unfortunately they can't tell the future since there is so much that could change to alter the situation e.g. economic conditions, sectoral conditions, legislation etc.

So personally I tend to use fundamentals as a guide to how well things seem to be going with the company, but use price action to dictate where the market is headed based on what investors are actually doing.

With MER then in my view the best we can say is that the company is doing well and that investment concensus is bullish as manifested in an upwards trending share price, which is especially notable since the overall market trend is down.

If at any stage the big guns discover problems with growth etc. then a falling share price will alert us PIs to the fact that something is amiss.

Until then, let the trend be your friend.

[bergster56] 23/9/2008 13:18

Thanks. I was wondering however, if there were any fundamental issues within the company responsible for some of the number issues above. Of course I apreciate that numbers only tell part of the story.

[crickley] 23/9/2008 12:44

If you have so many concerns, then you'd be better looking for another investment which meets your criteria.

As it stands the company is showing excellent relative strength moving upwards in a bear market which shows that the overall concensus of the investment community is bullish.

If the sum total of investors in MER shared the same concerns that you mention then the price would be going down. However since demand seems to be pushing the price upwards you can reasonably deduce that these concerns are not stopping investors from buying.

[bergster56] 23/9/2008 11:46

Hi, I'm thinking of investing in this one, but after a financial analysis have a few queries:

1. Why has the return on capital employed dropped from 30%+ in 2004 to 18ish percent in 2008?
2. Why has asset turnover dropped from over £7 in 2004 to £3.8 in 2008?
3. Regarding working capital, the current ratio has remained around 1 for the past 4 years. Any concerns there? The latest value is something like 1.22. When you calculate the Acid ratio, it actually falls to 1 exactly. Any concern?
4. Why has return on sareholder funds dropped from 27% in 04 to 11.5% in 08?

On the face of it, the company seems great. I was however expecting better numbers on closer inspection. The sales margin is also around 4% which isn't great.

Any views?

[protean] 19/9/2008 16:50

more volume at the finish, crickley. 2 huge trades at the end at 330 and well over the offer as well as a decent rise on a big volume day bodes well for Monday.

[crickley] 19/9/2008 15:51

Naked Trader has topped up again.

"Mears (MER) continues to be a great stock - not only proving defensive but going up on up days too. Nicely in profit and topped up with some more, 1,500 at 317.28. Target 350 stop 300. There appears to be some bigger buyers hoving in the background which is interesting."

[crickley] 19/9/2008 14:21

Plenty of volume going through today with a couple of large institutional trades helping things along.

Once we move a couple of pence more upwards there should be a revisit of the 340 level fairly quickly imo.

[hosede] 17/9/2008 21:44

Josh
I think it is the UK's business model which is going to be called to account not MER's!

[joshalexander] 17/9/2008 13:10

The share price has been solid as a rock as is their business model IMO.

[hosede] 15/9/2008 14:58

Whizzy1 I think the spending will continue for the moment as Labour keep borrowing irresponsibly to try to save their skins. The big hit will come in 2010-2011 when the Tories have to try and clear up the mess - unless the IMF get called in first of course

[hosede] 15/9/2008 14:54

Well at least we should soon get Merril Lynch posters off our patch!!!!!!!

[tpaulbeaumont] 11/9/2008 19:22

last one out turn off the lights :) $5.5 flag = $18 target perhaps

[whizzy1] 11/9/2008 01:31

Hmmm, I think the local councils cash will dry up even further in 09, impacting on social housing stock, repairs rather than upgrades, think i'll sit on the fence for a few months before coming back to this one.
(sold @315 15/5/08)

[tpaulbeaumont] 10/9/2008 05:07

looking very flaggy, poised to breakdown perhaps

[hosede] 04/9/2008 09:56

Simon
Sorry perhaps I should have said CHFs or chuffs as expats call them over there.
Further to post 879 RCG just announced H1 profits of 9.15p (up 70%). The price has shot up from 56 to 83p, but is still on a likely PE of 4 for this year

[simon gordon] 29/8/2008 16:01

hosede - I thought you meant the stock SFR. I now realise you mean the Swiss Franc.

[hosede] 29/8/2008 15:13

Yes Simon I read the Moneyweek crew who until recently were looking for an inflationary crash and recommending gold and silver but are now moving more towards the Stagflation option. Also Bob Prechter and the EW crowd who are totally committed to deflation - I think that's simplistic as no two crashes are exactly the same - but it's hard to argue with someone who's read it right for 25 years - nobody else as far as I know predicted gold's heavy fall this Summer.
The Yanks I think unlike the Japs will spend today and forget about tomorrow - they have absolute faith in the FED to bail them out - recent US data seems to confirm this. They will be sorely disappointed, but they do have an extraordinary capacity to recover
I like the SFR because the government tries to keep the money supply under control - it is a surprisingly poor country - the individual people may be rich but they don't pay much tax so there's never enough money to build roads etc. I also spend a lot of my time there
For MER holders apologies for getting a bit off topic

[simon gordon] 29/8/2008 13:03

I have found that Nouriel Roubini, Ken Murray, Moneyweek Posse, Alphaville Crew, Ambrose Evans Pritchard, John Authers and Matthew Lynn, have been nailing it. The vibe from the people above is that the UK economy is heading for a big bust. I think Government spending will be hit and companies like Mears could see earnings for 2010/11 being impacted - the market would then de-rate in advance. I don't like SFR as I read that many building projects are being put into the deep freeze, which could impact 2010/11, as SFR is a long cycle play. I am looking at SEPU as they are exposed to Global growth and their product is almost essential.



Japan printed like hell but they continued to slump. The boom in the US and UK was bigger than the one in Japan. If property and equities slump and the savings rate is near zero then consumers will have to re-build their balance sheets. Its a vicious circle. At least a business can sell off units, cut spending, be taken over, or go bust. Jack and Jill in their semi have very few options to raise fresh capital or escape their debts. A second job maybe if they can find it. It is going to be horrible for all those folks who got into buy-to-let - it reminds me of when many middle class people got slaughtered by the Lloyds fiasco..

[hosede] 29/8/2008 12:20

Simon I'm in SFR - Yen and maybe Yuan would be nice but much more complicated to invest in I think - Gold/ precious metals protect one against inflation but are only moderately successful in a deflationary slump.
I read a mass of financial commentary - the writers mostly disagree or don't know about how it will pan out, but they are almost universally agreed that it will be long and bad - You can safely ignore the main newspaper commentators (like Anatole Kaletsky)who are paid to soothe not to alarm!
I don't see a totally deflationary slump - Bernanke and others of his ilk will pump cash into the economy quite ruthlessly. If they can't persuade the banks to lend and punters to borrow then they'll give away more tax rebate cheques etc. He's not called Helicopter Bernanke for nothing. The result will likely be a fall in the value of assets but a rise in the value of consumables (food oil etc).