Hamworthy Share Discussion Threads

[wjccghcc] 25/11/2008 14:52

Each to their own - their's no right way of valuing a company. You prefer net assets whereas I view a stock as a bond and measure the cashflows. Using your approach, I'd assign a higher value to a company whose book value is 100% cash than one whose book value is tied up in Plant and Equipment. The 100% cash one isn't going to go bust whereas the other could.

[thepsychic] 25/11/2008 13:46

I have taken a closer look at the balance sheet. It appears that Cash aside, the Assets minus liabilities equals zero. Therefore, the cash value is the book value. In this market I would not buy into any stock that is more than 2/3rd's it's book value which would equate to around 73p in the case of Hamworthy. Generally speaking, 2/3rd's is the most i would pay for a company generating profits and paying dividends. If a company were loss making, i would tend to have a peak at a maximum book value of 1/4. In my opinion these pre-requisites would be sensible these days. Hamworthy is well established and one of the better run companies out there, even though the fall in value may appear dramatic, the decline towards book value is slow in comparison with others due to it's strong market position.
I think that bargain hunters/institutions will wait until the value of this company falls in line with general market sentiment.

[stegrego] 25/11/2008 13:12

Bought back in here early doors - wish i had held off now!
Unreal that stuff just keeps dropping and dropping no matter what.

[wjccghcc] 25/11/2008 11:45

thanks jrxx, will take a look.

[johnrxx99] 25/11/2008 11:22

I'm not saying it's a bad company just that at the moment there's plenty to choose from.

[johnrxx99] 25/11/2008 11:14

WJC - CKN,DGO,GFM. Only went to the G's and that's from my current folio.

Based on 31/03/08 figures (sharescope) HMY cv above both tangible and BV.

[clogue] 25/11/2008 10:59

This could be one of the more liquid AIM stocks and funds are certainly being hit with redemptions so we should take this into account.
If it falls further I know I will buy more (two small buys today and I now average 165p) so, as the weather is rather splendid, I'm off on a great walk through a local estate and back along the beach (8 miles but easy going).
WJCCGHCC,
You beat me to it.

[piedro] 25/11/2008 10:50

johnrxx99 - don't forget the dividend ... yield for 2008 will be 5%'ish

[wjccghcc] 25/11/2008 10:42

johnrxx, can you name three with positive free cash flow and net current assets bigger than their net cash balance?

[bletherer] 25/11/2008 10:38

noshy - re. when: I'm afraid it's pretty bleak from a technical perspective. 300 and 200 both coulda/shoulda been strong support areas, yet the sellers easily drove it down through both those levels. With such strong selling pressure it's got to be likely that it will hit the all-time low at around 125p at some point. But I didn't want to wait that long in case the market decided to stop before then - even in this atmosphere I'm more afraid of missing the boat on this one than of getting in too early. I think the company's already absurdly undervalued at 160 - it would be even more absurdly undervalued at 125, but markets do sometimes do absurd things. The shares are paid for; I'll just wait until sanity returns.

[johnrxx99] 25/11/2008 10:37

clogue - there are a number of good companies out there with sp's less than cash. They may be miners or oil co's or service industries but the fact is HMY's situation is far from unique.

[wjccghcc] 25/11/2008 10:37

I suspect it's an AIM fund facing redemptions/liquidations.

I'm happy to keep adding at these levels. The business is one of the world leaders in pump systems and currently valued at 14mm. Even if free cashflow reduces by 75% in 2010, they're still likely to be trading at FCF/EV of 1.

In the meantime, I'm happy to collect a secure yield of over 5%.

[alter ego] 25/11/2008 10:09

all the real damage has been done by 3 very large sell trades of 350k shares at a time. Is this a fudn seeking cash on a day when it felt the market would absorb such volume? Who knows but I agree that the cash on the books underpins this stock.

[noshy] 25/11/2008 10:03

Well I for one never thought I could buy HMY at 2004 prices. Like clogue I am sitting on my hands at present and am ready to pile in again as and when. Trouble is when!

[clogue] 25/11/2008 09:33

It's a common mistake in investing that, if you manage to catch a share at a very low price, and you consider it to be great value,you assume it will suddenly rise just because you've bought in.
The most disappointing and indeed baffling aspect here is that I assumed that I was against the clock and as soon as the results were out any lingering doubts would be removed and there would be large scale buying.
The results are out and they show that this company is in great shape and a I now find myself comparing it with my other holdings and wondering why I don't sell them and greatly increase my holing here.
Looking through my portfolio I can't find any other company with the fundamentals to match HMY.
PS If anyone can offer me a better alternative please let me know.
Edit:Just seen previous post.
The cash is now c.116p/share and by year end will be 130p+ so I doubt if any successful, profitable,dividend paying company would trade below cash, even in these markets.
I can't believe the sellers are selling their own shares, or if they are, they are either under a great deal of pressure or selling up to leave the market for good.

[thepsychic] 25/11/2008 09:33

The results were excellent, long term prospects look promising. I am still looking to add to my position, but feel that judging by the general market conditions, the technicals, and lack of near term transparency, I can pick these up closer to the 100p mark. At this time any rise is met with a flood of sellers preventing any sustained upward momentum.

[bletherer] 25/11/2008 09:09

Obviously the medium-term outlook will depend on how deep this recession bites - but then that's true for most businesses except a few consumer staples. Meanwhile this is a company with a very strong balance sheet, a guarantee of continued good earnings through to the end of next year, a good niche position, and trading on a very low P/E. There's always some risk with any investment but I like my odds with this one - it's a long-term hold for me and I expect it to be one of those which rebound strongly once the general panic subsides.

[alter ego] 25/11/2008 08:12

clogue, yes, the market seems to have misjudged this. I particularly like the increase in margins - worth a lot more than a few extra percentage on the revenue line. Managed to top up first thing. AE

[clogue] 25/11/2008 08:00

Well I didn't miss anything yesterday.
If you take the cash out this company trades on a PE of less than 1, pays a good and rising dividend and has an order book of 18 months(and rising).

[alter ego] 24/11/2008 13:36

clogue, don't think you've missed anything - share price looks mad even if new orders dry up for a while. Will be watching the outlook statement tomorrow and hoping for no surprises.

[clogue] 24/11/2008 10:13

This came to my notice when it was tipped last week. After looking at the company results, forecasts and order announcements I couldn't resist buying a few K on Friday. With the results due tomorrow I expected the price to rise strongly but to my complete surprise I was able to buy a few K more today at 160p !!?
Have I missed something ?
This company will have over £50m in cash, forward orders of over £300m and should make a healthy profit.
I notice that orders have been added since the trading statement and if you take out the cash (100p/share) you could have a very profitable company, with secure orders looking two years ahead, trading on a PE of 3.
I know that this is a mad market but this is taking things a bit far.
Unless all of the above is nonsense I can only think that individual distressed selling pushed the market cap. below the level that some funds would hold at and their selling forced the price down further.

[bletherer] 21/11/2008 14:36

Ok I looked this over again and bought back in with the last of my earmarked equity funds. Since I sold out at £5.50 earlier in the year I can always console myself if the price keeps dropping that it could have been a lot worse.

[wjccghcc] 21/11/2008 13:46

Well I've added at 159p and am happy to catch the falling knife if it falls further. I'd estimate net cash of 60mm by year end and so unless you think they'll be lossmaking, you're looking at the business being valued at 15 million.

[bletherer] 21/11/2008 13:30

As HMY is one of the few I took a profit on this year I could be congratulating myself at this point, if it weren't for the fact that most of the stocks I held onto have similar looking charts.

Damn it looks good value at this point - but the "falling knife" chart is a bit offputting, and more broadly I think it could be quite a while before a bull market returns for small and middling cap companies. A lot of good companies are being sold off to daft levels at present simply because their relatively small scale makes people worry about their vulnerability to recession.