Judges Scientific Share Discussion Threads

[saucepan] 07/5/2013 12:11

Nicely back through £12 and looking good.

[gymfit] 02/5/2013 11:29

on the move

[droid] 01/5/2013 11:28

Bounced nicely off long term trend line.

[cornishman33] 19/4/2013 11:50

Thanks CantEatValue, Particularly good to hear that David has no plans to retire at the moment, as he is clearly responsible for such a successful strategy. It's disappointing that most of March's share price increase has retraced, but if 20% annual growth can be maintained I will not be selling anytime soon.

[tatie] 18/4/2013 22:09

CantEatValue,
Thank you for that summary. More detailed than I had hoped for and every reason to continue to hold.
Many thanks again.

[canteatvalue] 18/4/2013 17:12

tatie,

I was there at the Mello event and the Blackthorn focus event. Essentially the story for Judges is unchanged and David still seemed confident with his acquisition strategy for the future, with the caveat that he'd need to pay higher EBIT multiples in future (Although he implied that 7x EBIT was the maximum he'd pay for any investment, regardless of circumstance. ~5x was his target for most. He'll need to pay higher multiples at >£1m EBIT as more competition for acquisitions). Organic growth expected to be in the region of ~7% ongoing.

Other interesting tidbits I picked up: Acquisition frequency not really driven by market dynamics but individual circumstance i.e. when owners want to retire. David still has zero intention to retire in the near future (clearly still loves what he does).

Still highly confident in my investment here and whilst the bulk of the re-rating has likely happened (although we're still on a P/E of approx that of the FTSE100, with significantly higher quality & growth prospects, so I wouldn't rule out a further re-rating) I think intrinsic value per share can compound at >20% rates here for a good while yet.

[tatie] 18/4/2013 16:43

Reference has been made to David Cicurel attending the Beckenham Mello event on 15th April.
Did any poster attend? Any feedback of interest? Many thanks.

[alter ego] 08/4/2013 09:00

I think it's quite common for quoted prices to be different to actual trade prices

[janeann] 08/4/2013 08:33

Interesting that at least one of the only 2 trades this am at £12.55 is a buy, yet marked as a sell and below mid price. Do they have lots of stock to spare or do they want folk to think people are selling to encourage more sellers?

[referencepoint] 02/4/2013 11:22

To add to my previous post:
Judge's are using their 'assets' i.e. profits from existing companies in the group to buy additional companies which in turn create additional profits and so on. The key is patience, only buying companies in their field which meet their criteria. Consequently if they go for a longish period without additional aquisitions, it doesn't necessarily mean they are deviating from their strategy.

[referencepoint] 02/4/2013 10:36

deucetoace, your comparison to Buffett and Berkshire Hathaway I personally think is well founded. I believe management here have boned up on that most sucessful strategy and are trying to replicate it here. The style of the Chairman's and CEO statements in the Annual Accounts are open and frank. Also I'm not aware of Judge's putting their 'own people' in to run the companies they have acquired. Rather allow successful businesses to run themselves. The key to Buffett's success is his 'asset allocation' Make your profits work for you. Invest the highest proportion of profits back into those companies which generate the highest returns. (I think Judges are going down this line, but it is not always easy to see)
If this is the case, than shareholders should take the same approach as those who hold BH shares and continue holding indefinitely (or at least until there are signs that something has changed.) I fully understand the rationale of top slicing and what you do with your money is for you to decide. However, the real money made with BH is to hold until the death.

[deucetoace] 01/4/2013 16:09

Pugugly

I agree with you that without an acquisition this is fairly priced (at best)

People talk about synergies. As far as I can see there are a number of disparate business with little possibility of synergies. More like a mim-Berkshire Hathaway type of arrangement.

I am intending to top slice here. The management are very good which is why I am not selling the lot but with the recent price rise selling some makes sense to me

[pugugly] 31/3/2013 17:09

Electronica:> Thanks for your input - Your analysis of the potential upside is why I am musing the position rather than taking a profit. Timing a sell decision is I find usually harder than a buy, especially when the potential upside is as clear as it is with Judges. The key component is, as you identify, another 1 - 2 bolt-ons p/a. DC has ensured that they have the fire-power but if no acquisitions within say the next 6-9 months then the position will need to be re-visited.

[westcountryboy] 30/3/2013 15:46

Thanks, everyone, for the clarification about the EPS - makes sense now.

[nfs] 30/3/2013 14:10

And please also consider the management.they are strong and will find ways to effectively use the resources available to them.... I hope

[electronica] 30/3/2013 12:41

pugugly

A couple of points in answer to your well thought out post .........

- production efficiency is an important factor, but marketing & management synergies are quite another thing & benefits here will far surpass this production efficiency;

- JDG have been the acquirer of choice in their target sectors. I can't see an instrumentation company proprietor opting for private equity when he looks at the benefits to his employees & also to his potential future if he chose to partner with JDG.

With underlying revenue growth in the historic 8-13% area synergies & efficiencies should allow a 12-16% CAGR in eps. Add in a continuation of the historic 1 to 2 bolt-on non-dilutive acquisitions a year and a 20% eps CAGR looks readily achievable. A 20% eps CAGR deserves a P/E well over 15 & could justify a 20x rating.

[pugugly] 30/3/2013 11:42

While Judges has been a supurb performer over the last 4 years and the team have beaten (I supect) all the investors targets I feel share price growth could well slow very significantly over the next few years, or even decline, for a number or reasons.

* The current share price and p/e are predicated on continuing the historic levels of growth in eps.

* While I suspect DC and team will still be able to generate further production efficiences out of the existing busines this will not come anywhere near the historic rates of eps growth which will only be achieved by acquiring businesses in similar fields.

* Private Equity is recovering after the cash flow problems of 2010 & 2011 and are prepared to increase the EBITDA multipes they are prepared to pay.

* Many major corporates are flush with cash and again activly seeking acqusitions - in my experience they usually overpay - which could make it harder for DC to acquire at historic multiples. As, given his track record of cautious buying, I suspect this could slow down the rate of growth by acquisition.

* If earnings are static, or only increase in line with the underlying growth of the existing business going forward the historic fully diluted p/e is say in the region of 15.5-16.5. This (imo) is too high if growth stalls as share price would not be supported by a dividend yield of some 1.25%

Declaration - I hold - but am musing on whether the share price can hold the current level and continue to grow.

[marben100] 29/3/2013 23:23

'Basic earnings per share, before exceptional items, rose by one third, from 61.0p to 81.3p despite the dilution caused by the placing and the conversion of most of the Convertible Redeemable shares.'

------------

Note that "Basic EPS" is based on the weighted average number of shares in issue over the year (an IFRS requirement) - so does NOT take full account of dilutive effects (consider that conversion took place towards the end of the year). That WA number is 4,780,562 (see Note 1 to the accounts in the prelims). Per the announcement of 17th December ( ), there were 5,312,499 shares in issue at year end.

Cheers,

Mark

[kalkanite] 29/3/2013 21:09

That sounds like very modest EPS forecasts for 2013. 2012 saw organic growth of 7.5% and 15% in 2011. Also GDS contribution was for less than 10 months of 2012 they also achieved a compounded annual growth rate of 23% prior to the acquisition so I would expect GDS to improve profits alone by some margin.

I would agree that a PE of 20 would be a fair multiple for JDG, I would be surprised if we were not at £16 + come this time next year. There is still a long way to run with this share.

I am in for the long haul, good quality CEO's like DC in niche businesses like JDG are in, are rare.

[canteatvalue] 29/3/2013 18:53

Indeed, I'd ignore the non-diluted figures and use 73.5p as the real underlying EPS. That being said the new forecasts seem far too low IMO - even if they didn't make a single acquisition (and the debt is largely paid down now, so they have plenty of room to) their underlying businesses appear to still be showing decent high single digit growth.

Not as cheap as they used to be anymore but given the historic compounding ability I wouldn't say the Judge's ride is anywhere near over yet.

[cockerhoop] 29/3/2013 17:50

Hi WCB,

'Basic earnings per share, before exceptional items, rose by one third, from 61.0p to 81.3p despite the dilution caused by the placing and the conversion of most of the Convertible Redeemable shares.'

My understanding is that the statement quoted above is correct but does not take account of outstanding share options (209,000) or the 4.2% CR shares (299,000) which reduces the diluted EPS to 77.9p and 73.5p respectively.

You're also correct that we need to see the Ireland note to know which figures they are using but I suspect they may be using the fully diluted figure (i.e. 73.5 for 2012 and forecasting 74.5 on the same basis for 2013)

[westcountryboy] 29/3/2013 16:58

Hi Electronica

My understanding was that the great majority of the consequences of the conversion, and all the effect of the placing, had already been factored into eps for 2012. That's what the results say:

'Basic earnings per share, before exceptional items, rose by one third, from 61.0p to 81.3p despite the dilution caused by the placing and the conversion of most of the Convertible Redeemable shares.'

Only 4.2% of the CR shares were not converted by year-end.

Two eps figures were given, one omitting exceptionals (to do with amortisation but also the shifts in valuation of the CR shares) and one including them. But presumably the point of taking out the exceptionals is that the removal of the remaining CR shares will not affect comparatives next year.

So I'm still puzzled, but I agree that the estimates look conservative. Has anyone seen the Ireland note, which may explain their assumptions?

[electronica] 29/3/2013 11:25

westcountryboy

You are missing the dilutive effects of the conversion of the Convertible Redeemables into ordinary shares plus the extra shares issued to pay for GDS & future acquisitions.

The conversion of the redeemables was absolutely essential & has been one of the drives behind the share price rise. The existence of two classes of shares was distorting the statutory eps & pre-tax lines. This "problem" is now behind us & I (& the market) welcome it.

WH Ireland forecast of eps of a 74.5p eps for FY13 is very conservative - I fully expect JDG to outperform again & deliver well past 80p. Put that a a forward P/E of 20 (& that's not too high) & 1600p looks on the cards in the not too distant future,