Epwin Share Discussion Threads

[arf dysg] 16/8/2017 16:44

Buy when there's blood on the streets, sell when the violins are playing. - Nathan Mayer Rothschild (might be the financier 1777-1836 or his grandson the banker and politician 1840-1915)

[thorpematt] 16/8/2017 16:23

The trouble here really moving forward is the stark uncertainties.

Not only is the a sector risk but there are inherrent customer issues as detailed today.

I think valuation models based upon profits are very useful for companies in this type of business model BUT past performance vs future performance is sometimes not a directly comparaable item. In EPWNs case that is never more relevnt than it is today.

I am fairly certain that in the mid to long term the business model does stack up but right now it's evident that recent past performance is going to far exceed the foreseeable future performance - hence most (if not all) of the valuation models based upon recent accounts are not really relevant.

Whether the divi gets cut depends largely on what impact those losts sales and marketplace issues plus economic backdrop / currency cause. And I think therin lies anpther example of un-certainty - no-ne really knows.

All of this leads me to 2 conclusions:-
1. This is an imposible sotck to value (right now)
2. The price will drift lower until such time as there is more clarity.

It's not that this is necessarily a BAD investment, it's just that it is not invest-able at this juncture. (all IMO etc.)

[lord gnome] 16/8/2017 12:10

Take a look at the charts of three recent (ish) Zeus Capital flotations. ENTU, EPWIN and SFE. Similar or not? Would I buy KETL, their latest offering? Check out their balance sheet and come to your own conclusion.

[lord gnome] 16/8/2017 12:07

Arf - reading the link from Stevie, it would appear that your interpretation is correct. The buyer of the business is indeed a manufacturer and therefore a competitor of Epwin. They will therefore wish to sell their own products through their own distributors. Vertical integration.

[57andrewjh] 16/8/2017 11:56

Not necessarily. It depends whether you think this is a good management team. I express no opinion on that. I think they need to clear up some of the confusion PDQ. If you believe the management's good and the dividend is safe then its a buy.I bought (averaged down) at 95p recently and if I can satisfy myself that there are no more hidden surprises then I will happily buy again. That's how you make money. I have been on a tear with Tristel and my holding in Epwin is about 2% of my portfolio so I'm not losing sleep. I bought 3 smaller caps and view them as a portfolio, the third being Tarsus.

[arf dysg] 16/8/2017 11:47

Price per earnings is down to 5-ish. Surely even if the earnings halved (ergo P/E=11), this would still be a good buy?

[arf dysg] 16/8/2017 11:44

Lord Gnome, I read this as:

"since the AGM the Group has noted [...] two of its customers [...] whilst the other has sold its plastic distribution business which is principally supplied by Epwin, to a competitor of the Group."


I thought "the Group" was Epwin referring to themselves so I thought that last phrase meant a competitor of Epwin. What do you make of it?


As an aside, I wish they'd simply say "Epwin" rather than using the phrase "the Group" which is a bit indirect and may be misinterpreted.

Overall, I think the fall in share price is much larger than is warranted by the news. It's an overreaction.

[ed 123] 16/8/2017 11:22

On 2nd August 2017 Entu said,

"If one of the currently preferred proposals is successful, the Board expects the Group to see a further increase in its level of indebtedness as creditors are brought back into line with normal payment terms."

No certainty, hence today's announcement, but it's possible that Epwin will dodge the Entu bullet?

[57andrewjh] 16/8/2017 11:11

They ought to have some form of credit insurance but the provider may have limits on each debtor. And there is probably a first loss piece. They should have had some warning maybe through lengthening payment dates, maybe payments on installment etc. If the problem company is behind on its tax it won't last long and the tax man will have priority along with employees wages and any bank collateral. Trade creditors usually get shafted.

[lord gnome] 16/8/2017 10:44

Thanks Stevie. I'd missed that. Looks like that customer has gone. Mind the GAP!

[steviebaby] 16/8/2017 10:31

If you follow the link in 501 you'll see that GAP has its own manufacturing unit, so you can expect some of the work to go that way.

IMO that may give Epwin the chance to approach potential new Customers who are competing with SIG. (I'm sure SIG would have placed some restrictions on supplying geographically similar competitors)

[lord gnome] 16/8/2017 10:22

Arf - I read it slightly differently. One of Epwin's customers has sold its distribution business to one of its competitors (i.e. the customer's competitor). Epwin might just continue to sell through the distributor under the new owner, although I would like to know where the new owner is currently buying the same line that Epwin supplies.
Of more concern is the customer in trading difficulties. I just hope Epwin's credit control is up to scratch. That could be a lot of debt down the tubes. I sincerely hope not.

[arf dysg] 16/8/2017 10:04

57AndrewJH, that's a very good question.

Normally it's little AIM companies which have this kind of warning: insiders have had a chance to sell if they wish, and the market finds out much later that there's a problem.

One thing which does bother me is difficulties with the two customers accounting for 10% of revenue in total. One of them has sold their plastics distribution business to a competitor of Epwin. That sounds as if 5% of Epwin's revenue is going to disappear at some point. A loss of 5% of revenue implies a loss of a lot more than 5% of profit. The other 5% is from a customer which appears to be in difficulties. This all sounds as if Epwin's sales team had better start looking for more customers.

[steviebaby] 16/8/2017 10:00

Some of the info has been public knowledge, hence the price drop prior to today.
Eg. the GAP purchase of SIG was announced by them on Aug 1st.

hxxps://www.gap.uk.com/about-gap/latest-news/gap-company-statement

[57andrewjh] 16/8/2017 09:52

It would be interesting to know how long since these adverse developments emerged and why a statement is being made only now. How long has the stock been traded in ignorance of these issues?

[steviebaby] 16/8/2017 09:27

The CEO is certainly suggesting the dividend is secure .....

"We are confident in continuing our record of strong cash generation and our ability to offer an attractive dividend to shareholders."

[57andrewjh] 16/8/2017 08:41

Will the dividend be maintained? Acid test of management confidence.

[lord gnome] 16/8/2017 08:23

I'm out. I don't like profit warning of any colour. Plenty more fish in the sea. Nasty loss, but take the hit and move on.

[57andrewjh] 16/8/2017 08:13

Down 18% as I look. After recent weakness his seems harsh. Need to digest this before deciding what to do.

[thorpematt] 16/8/2017 08:00

Marginally would be perhaps 5% under so normalised EPS still circa 13p.

Its very cheap but the outlook of uncertainty is the drag on the price.

[steviebaby] 16/8/2017 07:35

I wouldn't be too concerned about the "marginal" statement if it wasn't that we are below expectation aside from the potential loss of 10% of revenue with the 2 Customer issues.
How much more below expectation would we be then ?

[lord gnome] 16/8/2017 07:34

The share price is indeed pricing in Armageddon, but I wouldn't bank on any favourable treatment by the market.

[value hound] 16/8/2017 07:30

No doubt the shares will be down a little this morning - but they were already pricing in a far more serious profit warning as opposed to "marginally below market expectations" IMO.