Judges Scientific Share Discussion Threads

[kalkanite] 14/10/2014 18:19

Hi Pug

My comment is arguably misplaced enthusiasm but I don't think so. I'm taking a 2 year view when I say that I am buying £1 coins for 50p and my views are based on the following....

First - Since holding JDG from 2011 they have always outperformed market consensus and I see no reason why this year will be different, JDG just seem to underplay their potential.

Second - WHI's projection are based on a snapshot in time, a time where factors such as the strength of the pound and continued reduction in public spending are impacting turnover and profits. I cannot see this continuing forever.

Third - It has been 16 months since a value enhancing acquisition. With 2000 private companies operating in this sector I would be very surprised if DC did not produce another couple of these acquisitions over the next 2 years. The longer it takes, the more likely that it will be such that we will have the cash to cover the costs and thus not require a dilution in the form of a placing.

To give an idea of the scale and quality of the acquisitions made by DC to date, another Scientifica type acquisition would lead to a 36.7p increase in pre tax profit per share and I believe that we are now in a position to do this without raising a great deal of debt.

The last 2 acquisitions were made on companies that were growing at an excellent compounded rate over the past 5 years so I can't see that the present situation is the "new norm".

Judges is a quality company in a great sector with an outstanding CEO, I simply don't believe that we have seen the last of the JDG growth story.

All my own opinion, I am not trying to pump up the shares if that was at all possible, as I said before, I would be happy to see these at £10 a share where I can drip feed more resources in to them.

Damn..... I've said it now ..... odds on this gets delisted within the next 12 months :-)

[pugugly] 14/10/2014 17:35

kalkanite - You may get your "happy hope" if the WHI analyst is right

According to Refs their profit estimates for 2014 were eps of 86.4p -v- Shore [House Broker] of 80p Reversed for 2015 with 89.3 & 91p

So you pays your money and takes your choice.

Judges Scientific Broker Views
Date Broker Recommendation Price Old target price New target price Notes
26 Sep WH Ireland Securities Buy 1,120.00 950.00 950.00 Reiterates

e&oe.

[kalkanite] 14/10/2014 13:32

I feel like I'm buying £1 coins for 50p here. Doubled up on my long term holding first buying at £13.25 and yesterday at £11,50.

This is what Ben Graham was talking about when he said price is what you pay and value is what you get.

AIMHO of course but I will be happy to see JDG sell off to £10 so that I can make another top up.

[pugugly] 24/9/2014 10:35

Anyone following paul scott - Small Cap Value report - A fair and balanced article today . well worth having a read.

" He must have been reading my previous posts " As he seems to agree with me in part !!!!

[shanklin] 24/9/2014 08:58

IMHO, the only difference between this and the TS is that JDG advise that Q3 order intake has been as bad as Q2.

[cockerhoop] 24/9/2014 08:29

Regarding organic growth - poor performance in China & USA (-15%) has skewed decent performance everywhere else (+10).

Market spooked by cautious outlook statement rather than numbers imo.

[pugugly] 24/9/2014 08:10

Mr Market seems to have crunched the numbers for me - DOWN 14% > £2.28 - As such an illiqud stock could still have further to fall if potential investors holding off buying as could now be seen as ex organic growth.

[pugugly] 24/9/2014 07:37

Highlights:



· Revenues up 43% to a record £21.9 million (H1-2013: £15.4 million) including 3.2% organic growth

· Adjusted* pre-tax profit up 30% to a record £4.1 million (H1-2013: £3.1 million)

· Adjusted* basic earnings per share up 22% to a record 50.3p (H1-2013: 41.1p)

· Interim dividend of 7.3p, an increase of 10.6% (H1-2013: 6.6p); covered seven times by adjusted earnings

· Adjusted* net debt of £3.3 million at 30 June 2014 (30 June 2013: £15 million and 31 December 2013: £5.7 million)

· Cash balances of £10.1 million at 30 June 2014

. Organic order intake down 4.8% compared with H1-2013

HOWEVER THE KICKER IS IN THE CHAIRMAN'S STATEMENT



"I am able to announce a record set of interim results for the ninth consecutive year. As indicated in our trading statement in July, progress at the mid-year has been driven by Scientifica's contribution, with only modest organic growth. The business climate within the instrumentation sector remains challenging but your Group's ability to pursue its strategic objectives is undiminished.

A cracking good company BUT need to crunch numbers further tocheck valuation - Possibly still on the high side based on organic growth - Asking prices for bolt on's still at too high valuations (imo)

David C - If you are reading please be your usual cautious self.

[skyracer] 22/7/2014 11:07

Shore Capital

[pugugly] 22/7/2014 09:39

(IMO) Until there is evidence of real organic growth (or at least 1 excellent purchase - and they are becoming as scarce as hens' teeth - asking EBITDA's are too high) then I would suggest a forward p/e of 10 to 12 for this excellently run company is high enough. Suggest a share price (assuming WHI are reasonably correct) of £8:50 to £10:50.

[napoleon 14th] 21/7/2014 18:41

Yes, defo exgrowth for now.

Footnote: I remember David Cicurel (CEO) when he ran Alpine Drinks - my then girl friend was his secretary. He got a good price for that once he'd done his work on it. Maybe again here, some time later? Why not?

[cockerhoop] 21/7/2014 16:43

If I recall correctly the last profit warning in December 2009 when the share price dropped from approx £1.50 to just over £1 proved to be a decent entry point. The weakness in order book had corrected itself by Jan 2010 and the shareprice enjoyed a excellent run until recently.

To suggest the company is ex-growth when most recent increases in profitability have come from acquisitions is IMO premature.

[imperial3] 21/7/2014 16:31

These have had a superb run over the last few years.Those who got in early should have no complaints.Now however,ex growth the market has delivered its verdict.These still have further to fall imo.

[shanklin] 21/7/2014 16:06

Hi Mark

I do not blame JDG management for the situation... ...albeit I do wonder how long it has been obvious internally to the company that they would miss forecasts... ...but it seems self evident from Friday's RNS that the strong growth that was being exhibited by the recent acquisitions has dried up, at least for the moment.

I do not know how long you need the growth to disappear for you to believe its reasonable to describe them as ex-growth, but two years of EPS, which are lower than last year's as per the WHI forecasts, seems sufficient to me. Indeed, I do wonder if WHI are being unduly optimistic in their numbers but having not seen the report I do not know how realistic the underlying assumptions might be.

Very disappointed not to have sold more nearer the top and very surprised that until this afternoon the share price has held up so well. Given the kickings smaller cap shares have been receiving on any form of disappointment, I'm quite surprised we have not yet seen an share price below £10.

If I had visibility of the WHI report, that level might look very tempting.

Cheers, Martin

[marben100] 21/7/2014 10:59

Broadly speaking, I agree with Kalkanite. I don't think Judges has gone "ex growth", rather it is going through a tough time, being hit by two factors:

1. Sterling strength (as discussed)
2. A global squeeze on public spending, affecting many purchasers of Judges' equipment

Are either of those factors likely to persist forever? I doubt it. When they resolve, I expect organic growth will resume.

In the meantime, however, there is a risk of further profit warnings/downgrades. Therefore, having topsliced heavily in the past (much too soon, with hindsight) and banked more profits than my original investment, I will consider topping up, when I'm more comfortable with the short/medium-term downside risk.

Cheers,

Mark
Twitter @marben100

[kalkanite] 21/7/2014 09:43

Hi Martin

My term "growth" is expected due to acquisitions. The last 2 companies in particular were very high quality with strong growth CAGRs of 23% and 31% repectively and bought at multiples of around 6. The pool of private companies operating in this field in the UK is around 2000 (iirc)so plenty more opportunities.

The strength of the pound will clearly be a factor going forward either for better or worse but in the meantime I expect DCs acquisitions to be business as usual.

[shanklin] 21/7/2014 09:19

kalkanite

I agree with much of what you have written above.

Prior to the update, I would have thought £1.10 - £1.15 EPS was likely. However, if one views WHI's forecasts as credible then why would one be paying a growth rating for an ex-growth company whose margins and sales are under serious pressure both in the UK and abroad.

When I wrote 12x earnings would be a reasonable valuation, I believe I was being quite generous, building in something for future acquisitions.

Cheers, Martin

[kalkanite] 21/7/2014 09:12

Martin

The company has not changed at all. The only thing that has changed imo is the pound has got stronger which means that sales are flatter/reduced as a result.

The price got ahead of itself when it went to £23 but for me it was difficult to sell the shares when my view was that they would be £40 in around 3 years time if business carried on as usual, so I, like many missed that opportunity.

My own forecast was for around £1.10 - £1.15 EPS this year with any acquisitions being on top of that. Clearly with the strength of the pound JDG needs to either reduce its margins by cutting prices accordingly or keep margins and accept a reduced order, what this translate into EPS we can only go by the recent forecast.

Going forward I expect acquisitions to be as good as in the past as other UK companies will be feeling the same selling pressures so this is still going to be an excellent growth company(imo),it will just be growing from a now reduced level of EPS.

IN CONCLUSION

Still a great growth company now selling at an attractive price.

I've topped up this morning and will continue to do so if the price falls further.

K

[skyracer] 21/7/2014 08:56

Is this the same WH Ireland that showed such shrewd judgement with NOP ?

[shanklin] 21/7/2014 08:41

I don't see how JDG have a price target of £15.50 given their revised EPS forecasts of 86p and 90p for this year and next. If they think JDG have gone ex-growth then, as a small-cap, I would have thought 12x earnings would have been more reasonable.

Of course there is always the likelihood that JDG will find a decent acquisition but how much of that should be built into the valuation?

[cornishman33] 19/7/2014 12:56

Schroders must see some value at this price as they appear to have purchased about 70,000 shares on the update, about a million quids worth. Having said that, although I reduced slightly at £22 I now wish I had been more ruthless!