Mears Share Discussion Threads

[cwa1] 20/8/2009 12:36

Your last paragraph rings very true for me too-and certainly massively improves the portfolio's chances overall rivaldo. Still the odd duffer, it's very hard to get them all right all the time, but they are fewer and further between than they used to be. Although I'm still quite heavily in cash I added a few Carillion(CLLN) a couple of days ago FWIW.

[rivaldo] 20/8/2009 09:49

Good to see MER continuing to move up slowly and surely.

Hi nellie. Most of my stocks are safe ones due to (for example) high recurring income, like GNG, ALN, CAR, MER etc, but all with the potential for a step-change in market perceptions for one reason or another. Or they might be on ridiculously low P/E's of 3 or 4 with high tangible NAV and superb prospects like CHNS and RCG. Or they might have high tangible NAV, but combined with a turnaround going on unrecognised by the market, like VLE, C21 or WKP.

Even my oilies - SMDR, GKP, EEN, DGO, AST, HOIL - had a degree of safety built in when I bought them due to existing reserves, or an imminent drilling programme etc.

I've made losses on stocks in the past of course, but they're getting less and less as I realise that blue sky stocks without asset backing or recurring income are usually a recipe for disaster - better to get solid gains with the potential for more.

[chrisfoster] 19/8/2009 16:59

Nellie - I started at the same time as you and have had a similar experience. I'm not sure whether these are the best or worst times to be learning! Like you, I've made a few mistakes but the most frustrating thing has been picking good stocks but over-trading or being impatient and ending up losing money on winning shares! :-/ Overall I'm up about 10% thanks chiefly to trading Mears 3 or 4 times now. Along with MER I've also held GSK for a while as a classic defensive (gains from flu just a bonus), and I've found Aviva (AV.) to be a good share too that has probably under-performed.

[nellie1973] 19/8/2009 14:25

Riv,

How the hell do you decide what to pick in these turbulent times? I started trading in Jan 09 with a few £500 blocks of shares. I am up slightly but have made some stupid mistakes, mainly overtrading.

I currently hold CHL,OFF,MER,HOIL,DGO,TRP(oops)and HDY. All in varying degrees of profit apart from TRP (suckered in like a thousand others!)

Mears I have had twice now the first time at 211 and sold at 250.

[rivaldo] 19/8/2009 13:39

Good stuff from today's FT:



"Mears in move to lengthen contracts
By David Fickling

Published: August 19 2009 03:00 | Last updated: August 19 2009 03:00

Mears is to focus on consolidating existing relationships with councils and social landlords as the recession starts to affect the maintenance market.

Bob Holt, chief executive, said the social housing repairs group was looking to extend the length and breadth of its contracts.

He said Mears had moved into more renovation work as well as essential repairs, while the average contract length has extended from three to seven years and as long as 10 years.

"Our opportunities are coming in the main from existing customers," Mr Holt said. "There's an increasing consolidation, and people are trying to get value-for-money contracts from fewer providers."

Although maintenance is proving one of the most resilient parts of the construction market, analysts expect conditions to get tougher.

The Construction Products Association sees overall public housing maintenance spending down 5.5 per cent this year at £6.1bn, with declines continuing to a low of £5.2bn in 2012.

Mr Holt said that clients were showing particular interest in squeezing extra money out of tight budgets by striking joint venture deals to avoid VAT on outsourced services.

Mears saw turnover rise from £203m to £233m in the six months to June 30. Pre-tax profits fell from £7.7m to £7.3m, largely due to a £2m amortisation charge on the acquisition of 3C, a lossmaking arm of the collapsed Erinaceous group.

Diluted earnings per share rose from 8.15p to 8.55p and the interim dividend is increased from 1.35p to 1.6p.

The shares closed down 6p at 265p.

* FT Comment

Like its rival Connaught, Mears has a tried-and-tested business model that has so far breezed through the recession. Both leverage their size and professionalism to win long-term housing maintenance contracts with local authorities and social landlords. The complexity and longevity of the tenders creates a high barrier for entry: excluding the acquisition of 3C in January, Mears' profit margin has held solid this year at 4 per cent. The dividend yield is an anaemic 2.25 per cent and the stock trades at 15.7 times expected full-year earnings, behind Connaught but still well ahead of the 11.25 times construction and maintenance sector average. That looks pricey, but earnings per share have increased at a comparable 16 per cent over the past 12 months. If this rate is maintained, the premium should be justified."

[nellie1973] 19/8/2009 11:05

Riv are you a fan of the naked trader? .You seem to be in a lot of stocks on his lists. I know he ditched mears a while ago but I bought in on weakness. This is my first year of trading and I have held Mears twice.

Oh good posts on all boards by the way!!

[rivaldo] 19/8/2009 10:55

From today's Mail, Investec say 332p:



"Another day and another excellent set of figures from social housing and geriatric care group Mears, 6p lower on profit-taking at 266.25p. Operating profits for the half-year rose 18% to £120.8m and the dividend is up 19% to 1.60p. The order book stands at £1.8bn and the company is currently pursuing contracts worth £2.9bn.

Mears' mechanical and engineering division has won a contract to provide infrastructure and fit out works on the Athletes Village for the 2012 London Olympic Games. It comprises the first phase of the village with approximately 300 apartments valued at £9m. Follow up contracts on the site are expected. Investec's target price is 332p."

[nellie1973] 18/8/2009 17:32

Bit of profit taking on the results. I am still holding after buying in at 225.

[rivaldo] 18/8/2009 14:58

Confirmation from Collins Stewart:



"Collins Stewart has a buy and 335p target for Mears Group"

[rivaldo] 18/8/2009 14:12

Pbracken, ta for the Charles Stanley update - great to hear the results were ahead of their expectations!

MER have certainty over this and future years' revenues, and I'm looking forward to further contract news soon, as they've hinted at in the results.

We seem now to have several brokers recommending to their clients target prices for MER of betwen 300p and 340p (the 340p being Charles Stanley's).

[hosede] 18/8/2009 13:18

Rivaldo
I agree, But there is mounting evidence that the so-called recovery is a sham and that markets will be anything but stable! In which case you need a huge risk premium to be in equities in general

[pbracken] 18/8/2009 10:31

From Charles Stanley today:


Mears (Buy, 270p: PT 340p)

Interims ahead of expectations

Interims are ahead of our expectations. Revenue rose by 14% during H1 2009 compared to our forecast for a 7% rise, driven by a stronger than expected performance in the Social Housing segment where revenues rose by 30% (23% organic) and a better than expected outturn in M&E where revenue fell by 25% compared to our forecast for a 30% decline. Domiciliary Care revenue was broadly in line with our forecast, rising by 11% (10% organic).

Margins were in line with expectations in the Social Housing and Domiciliary Care business, while there was some modest improvement in M&E. Pre-tax profit (excluding the restructuring and losses of the 3C acquisition) rose to £8.5m (forecast £8m).

The group's order book has strengthened from £1.6bn in December, to £1.8bn, supporting excellent visibility of revenue with 98% and 70% of consensus forecast revenue for 2009 and 2010.

Mears trades at a PER of 12.8x 2009E and 11.2x 2010E and offers a prospective CAGR in earnings of 11% for the period 2009-11. This compares to the wider support services sector which trades on 11.2x 2009 and 11x 2010 consensus earnings and offers a median CAGR in earnings of c2% during the same period. In our view, Mears should trade at a stronger premium when considering its strong growth potential and defensive qualities.

[rivaldo] 18/8/2009 09:41

Altium go for 24p EPS, but as they say, with any new contracts as hinted at the certainty of future revenues should mean upgrades. Not ridiculously cheap, but then that certainty means a premium rating against other companies. I can see upside to 300p-330p in stable markets.

[lucky_lady] 18/8/2009 09:37

I agree with you hosede, I think the good news is already in the price, hence not much movement today. I am out today, but will be back.

[hosede] 18/8/2009 09:33

Looks like EPS for the year should approach 20p. Fine but a PE of 10-12 looks about right to me - think these will drift back to the 230-240 range - I'm out but back in at that sort of price.

[wjccghcc] 18/8/2009 08:54

Cash generation is the only bugbear with these. Earnings up 16% but operating cash flow only up 8% so conversion stays near 70%.

[rivaldo] 18/8/2009 08:54

Altium go for 300p - I assume Collins Stewart will at least retain their 335p target:



"INSTANT ANALYSIS Mears remains buy at Altium after interims
18 August, 2009 08:35:03 AM

Broker remains buyers of Mears, with a target price of 300p after its interim results came in broadly in line with broker\'s expectations.

\"The strong results underpin our buy recommendation and we continue to believe that Mear represents an attractively valued defensive growth story. Our top of the range forecasts are likely to moderate slightly, although small consensus upgrades are possible, given the better M&E performance.\""

[nellie1973] 18/8/2009 08:06

Nice results!! Obviously more bids in the pipeline so more income for the future.

[5dally] 18/8/2009 08:05

Great results :-)

[rivaldo] 18/8/2009 07:20

Excellent interim results - and "exciting" news on the way....

Almost 10p EPS for H1, and the divi up 19%. In particular, the 3C acquisition which made a £0.95m loss in H1 is expected to be profitable in H2 - this should have an interesting effect on profits:



"Bob Holt, Chief Executive of Mears Group, said:

'These results demonstrate our commitment to continued growth as well as underlining the defensive qualities of the business. Our order book stands at £1.8 billion and the demand for our services continues to be strong. Importantly, our two growth markets Social Housing and Domiciliary Care, which account for approaching 90% of Group revenues, reflect quality partnership relationships with first class public sector customers. These are defensive markets where spend is largely non-discretionary.

We have close to full visibility as to consensus forecast revenue for the current year. In addition, we have already secured in excess of 70% of our forecast revenue for 2010. With a number of particularly exciting opportunities within the bid pipeline, I have significant confidence for the future. This confidence is underpinned by our high revenue visibility and our ability to lead both of our core markets by a quality of service delivery and by innovating to ensure that we exceed our customers' expectations.'"

[nellie1973] 17/8/2009 16:19

Looks good for tommorrow, I hope something rides above this tide of red I'm seeing today!!

[rivaldo] 17/8/2009 07:35

A preview of tomorrow's results in today's Independent:



"TOMORROW: Arbuthnot expects news of strong trading when Mears, the social housing repairs and maintenance provider, posts interim results, with its social housing and domiciliary care divisions likely to be boosted by recent contract wins. Moreover, the management is expected to reiterate that the pipeline remains strong, with further contract wins expected in the months ahead. "Mears remains well placed in the current environment," Arbuthnot said. "The group has a strong balance sheet and operates in robust end-markets, providing recurrent services that are near non-discretionary in nature."

[chrisfoster] 14/8/2009 16:49

Shame we couldn't hold the day's gains. Results next week though should see us well up.

[rivaldo] 14/8/2009 13:45

Still a long way to go to the 335p broker target price, with those results next Tuesday.