Cello Health Share Discussion Threads

[diku] 16/3/2010 10:39

g2...I think this will appear on bidder radar screens...

[grahamite2] 16/3/2010 09:47

Remarkably so. You'd expect this sort of company to be leading the way out of recession, but perhaps we've had such a very violent shock to the system that the large caps must come back first.

[someuwin] 16/3/2010 09:35

Looks very cheap to me.

[diku] 16/3/2010 07:54

Good results under the circumstances..Net debt down..funding in place till 2013..and a divi increase...this is well over looked..

[alistair4444] 23/1/2010 11:14

Could Cello be in tune for profit?

Edmond Jackson
22.01.10 11:31

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser

Marketing services shares are a contrast, currently. Big companies such as WPP (WPP) in the FTSE 100 index (UKX) have progressively doubled from the March 2009 bear market low, although smaller ones seem trapped in a low range. Is this rational pricing or small caps lagging the stockmarket recovery mainly on grounds of liquidity - until there is a better sense for their prospects in 2010 onwards?

AIM-listed Cello (CLL) is a good example, having de-rated from over 150p a share in 2007 to a 30p range, seemingly un-moved by a 19 January trading update that cited "a marked pick up in market research activity from a wide range of domestic and international clients" since September. The statement was mixed, however, with such progress being offset by "a challenging time for financial services and certain charity related work". Management says it is "realistically cautious about the current outlook...too early to give detailed guidance for 2010".

The market is indifferent, with Cello shares mired at about 38p, although on 20 January it was announced that Octopus Investments had just increased its stake from 7.9% above 9%. This is interesting in a long-term context, with Octopus implicitly taking a view that given time there is worthwhile upside, to add to an already significant holding in an illiquid share.

Recalling the early 1990s UK recession, there were smaller marketing services shares such as Shandwick that proved among the market's top performers when the economy improved. It is probably going to take Cello some months to be reporting firmer progress, and prelims due Wednesday 17 March will reflect exceptionals and write-downs, as is quite typical after a boom period. Yet at some point the market will twig that the future is what counts and likely re-rate Cello to price-earnings (P/E) multiple somewhere in a median range between about six times (prospectively) now and 15-20 times in 2006-07.

Last September's 2009 interim statement was a bit messy, which may be deterring some investors: headline operating profit fell from £4.4 million to £2.5 million as costs did not reduce quite in line with revenue over the six-month period; there were also various exceptional costs and impairment charges such that interim operating profit reversed from £2.9 million to a £3.4 million loss - and the overall loss for the period was £4.2 million. With the latest update, management has projected a headline 2009 pre-tax profit of about £50 million although that could well be eliminated in terms of the bottom line, by one-off charges.

It does however show that management has taken swift action on costs (jobs and property-related), which are anticipated over £4 million lower overall for 2009 than 2008. Net debt at end-December also reduced, to £11.5 million from £14.8 million at end-June 2009, amid strong cash conversion from operating profit. Management says there are "refreshed levels of spend across major research clients with pharmaceutical and health related research showing particular strength. The pipeline of research work is significantly stronger than last year. Following the substantial reduction in low margin and non-profitable activities, the group is in a strong position to push for organic growth in 2010".

So there is a case for at least putting Cello on the watch list, to see how this evolves, or taking Octopus's implied view: that now is the times to be buying while the shares are out of favour.

Company REFS shows brokers have penciled in £5.75 million pre-tax profit for 2010 implying about 14% growth in normalised earnings per share (EPS) to 6.6p with a dividend of 1.27p a share being held, which represents a prospective yield of just over 3%.

You can currently rationalise the gap in P/E rating say from WPP, which trades on a prospective P/E of about 11 times, on grounds of WPP's global reach whereas Cello's revenue is about 80% oriented to the UK, then continental Europe and the US. If the UK is slow to emerge from recession then WPP will likely be preferred in this sector; but on a one- to two-year view there looks to be more upside potential in Cello, especially for private investors for whom smaller dealing sizes are not an obstacle.

[bardfield1] 19/1/2010 21:04

Just checking on some of my old trades, originally bought CLL in early 06 at 114p and then sold them mid 07 at 146p.

Amazed to see these languishing at 38p. The company was continued to grow, has reduced both debt and costs, decent profit and pays a dividend. Unlike most other shares it has shown hardly any recovery.

I think it may be time to invest again.

[coopstock] 12/1/2010 09:05

Any idea when the next trading statement is? Could be make or break for these shares.

[welsheagle] 18/11/2009 12:24

From November's 'Company Refs', when price was 37.3p:-
a/ Prospective PE ratio of 4.89 (based on three broker forecasts, two recommending 'buy' and one with no recommendation).
b/ Forecast growth in eps of 12.4%.
c/ Positive cash flow per share of 16.1p.
d/ Net cash per share of 8.85p.
e/ Positive gearing of 17.4%.
f/ Price to sales ratio of 0.11.
g/ Turnover up from £14.7m to £139m in four years.
h/ Net asset value per share of 128p.
i/ Three directors buying recently.
j/ Dividend yield of 3.49%

[geordie boy2] 13/9/2009 22:40

THIS LOOKS LIKE A SOLID COMPANY WITH GOOD FUNDEMENTALS. ONLY IS PUBLIC SECTOR CONCTRACTS AND HOW THIS REVENUE STREM COULD BE EFFECTED WITH TIGHTENED OF PUBLIC PURSE 2010 ONWARDS.

[markktm] 08/8/2009 00:19

What's the prblem here with these???

[diku] 13/5/2009 11:48

Is the herd still to come here!...

[coopstock] 13/5/2009 10:46

It should never have gone under 75p in the first place - given how little debt they have.

[diku] 13/5/2009 09:47

Is this heading to 60p?...

[welsheagle] 12/5/2009 18:45

From May's 'Company Refs', when price was 33p:-
a/ Prospective PE ratio of 3.43 (based on one broker forecast recommending 'buy').
b/ Forecast growth in eps of 23.4%.
c/ Positive cash flow per share of 16.1p.
d/ Net cash per share of 8.85p.
e/ Positive gearing of 17.4%.
f/ Price to sales ratio of 0.10.
g/ Turnover up from £14.7m to £139m in four years.
h/ Net asset value per share of 128p.
i/ Three directors buying in last month.
j/ Dividend yield of 4.04%

[diku] 07/5/2009 19:51

Edmond Jackson likes Cello..

[diku] 07/5/2009 14:45

buyers coming here..

[diku] 05/5/2009 23:07

This has lagged behind...

[coopstock] 06/4/2009 17:07

Hearing some rumours that Mark Scott is looking for a buyer. Hence his appearance on CNBC a week or so back.

[grahamite2] 06/4/2009 07:12

Not sure what to make of these director purchases. 3 on the same day, not exactly massive.

[westcoastrich] 17/3/2009 07:19

yes looks about as solid as blancmange

[grahamite2] 17/3/2009 07:18

Very sound results again.

Amongst all the dross on AIM, this must be one of the half dozen decent buy and holds. Once the market recovers Cello will more than double.

[lpf] 19/1/2009 11:00

Seemed like a reasonably good announcement given what's going on in the wider economy: decent cash position, credit secured, so business viability shouldn't be an issue.

Happy to continue holding, and will consider adding over the next 3 months.

[grahamite2] 19/1/2009 07:12

Very positive news overall today. No surprise that earnings will be at the low end of expectations but at least there isn't a warning. Meanwhile the cash position is being well managed by a cautious board. May buy today for the first time in a long while.