Lpa Share Discussion Threads

[vfast] 13/2/2013 17:37

I hope so Tiger, 50% sounds good to me.

[bigbigdave] 13/2/2013 09:30

More signs of life this morning, encouraging.

[castleford tiger] 12/2/2013 18:43

I see a good 50% upside in 12/18 months.

This looks cheap

tiger

[vfast] 11/2/2013 16:02

This could be the start of the next move forward for the share price Fingers crossed!

[bigbigdave] 11/2/2013 15:08

Yep, good news. He got a good deal too at mid price.

[vfast] 11/2/2013 15:02

A good sign that a director is buying at this level.

"The Company was notified on 11 February 2013 that Per Staehr, Non-Executive Director, has today purchased 10,000 ordinary shares of 10p each in the Company at a price of 68.0 pence per share. Further to the purchase, Per Staehr is beneficially interested in 165,500 ordinary shares, being 1.40% of the Company's issued share capital".

[jamielein] 11/2/2013 12:49

You mean 1 buy?!

[bigbigdave] 11/2/2013 12:30

Blimey, a bit of action.......

[pj 1] 07/2/2013 12:43

FWIW-Still holding. Keep thinking about adding as looks as if Macd may cross?

Also, there was a trading update 1/3/2012. Wonder if we will get one this year, otherwise its a long wait until June for definate news (although I expect some news before that)

Sat on the fence like many I suspect?

[gleach23] 07/2/2013 11:49

yes it is quiet - i'd be interested to know, from those who were recently saying they bought the dips here, whether they are currently buying this dip?

i know it's illiquid, hence the volatility but i can only sell £53 worth (150 shares) online at the moment.

plenty on offer to buy this dip but the sell quantity puts me off

[vfast] 07/2/2013 10:03

Very quiet regarding the SP, however I believe the first good announcement we will see these heading back to the 90p mark but we may just see the share price drift back and forward for now.

[castleford tiger] 30/1/2013 18:02

Cardiff???

[castleford tiger] 30/1/2013 14:41

As requested (sorry it is without formatting):-
COMMENTS AT EACH POINT.

I was also a little surprised by the selloff but that can happen when the market cap is only £9 million. There seemed to be the expectation that LPA would significantly surpass forecasts. With forecast EPS at 5.9 pence and actual EPS for this year at 6.3 pence, THERE HAD BEEN A VERY BIG UPGRADE AND WE STILL BEAT TARGET BY 12% there doesn't seem to be a huge amount of difference, so it might be LPA need to manage expectations a bit better.
I THINK THATS A BIT HARSH

It was a strange RNS and I re-read it several times to see if it clarified things. I have picked out 4 main points that could be seen as negative.

Potential Negatives
1. Company feel last year was a one off.THEY CERTAINLY FEEL IT WAS A VERY GOOD YEAR.
2. Rail re-franchising process causing uncertainty over future contract wins.AGREE
3. Increased debt and no cash on the balance sheet NOT IN AGREEMENT AS WHILST WE HAVE SPENT 1.3 MILLION WE SHOULD GET BACK ANYTHING FROM 2 TO 3 MILLION FOR THE OLD SITE.
4. Loss of contract NOT SURE WHICH ONE?


1) They seem to be saying that last year was a one off bumper year due, in part, to the Olympics:-

The year to 30 September 2012 surpassed expectations, both internal and external, due to the happy coincidence of a balanced order book and a number of significant contracts, some Olympics driven, won on short delivery schedules

followed by:-

The exceptional level of activity enjoyed during 2012 continued at the start of the current financial year but has now eased off.

So if last year was exceptional, what will it be this year? I don't have any forecasts or brokers notes so it would be interesting to see what the forecasts are. Are they saying that growth will be flat this year?
YES THIS YEAR I EXPECT IT TO BE FLAT WITH EPS ABOUT 6.00P PENDING UPGRADES

In all honesty, it seems a little odd to put that in an RNS that also announces two new contact wins totalling £ 1.3 million-

2) As you mention the rail refranchising process seems to have caused them some disruption to the business. This however also seems to be a temporary disruption with a deadline to resolve the issues by the end of Feb:-

We welcome the advice to the UK Department for Transport, contained in Richard Brown's report on Rail Franchising, to resolve the current hiatus, which is delaying investment decisions, by February 2013.

So again, I don't see this as a major issue if there is a resolution deadline for the end of next month.

3) Looking at the balance sheet, they only have £7000 cash and have increased net debt to £2.37 million to pay for the new factory in Saffron Waldon (Shire Hill). Again, this shouldn't be too much of an issue because they are going to sell the old Tudor Works site for between £1.8 and £3 million so there will be cash coming in. Nowhere in the RNS do they mention they have finance issues this year, so again this shouldn't be a problem.

4) In the RNS they mention :-

we are disappointed not to have been selected as lighting supplier for Thameslink trains

To mention this contract loss, it must have been a big one. Again, disappointing, but you have to look at that in the context of the increase of sales from the LED lighting products department.

Reasons to be cheerful

There was lots of good stuff mixed in with this RNS. As you mention profit before tax more than doubled to £877,000 on the back of only a 5.9% increase in sales. That is the kind of operational gearing that should see a real boost in profit in the coming years.AGREE

- The reason I bought LPA was for the LED lighting products division. Here sales increased 61.9% to £3.87m (2011: £2.39m). Did this provide the increase in profit? Does the lighting products division have a higher profit margin? I'm not sure. My expectation (hope) is that the lighting products division becomes the premier revenue stream for LPA in the coming years. If it keeps growing at that rate, I see no reason why this should not be the case. There is no mention, however, if they can maintain that level of growth.
NOW THIS IS THE BIT THAT GETS ME GOING.
RECENT STUDYS SHOW THE MARKET WILL INCREASE FROM 7BN TO 40 BN BY 2016 (SOURCE McKINSEY STUDY)
THATS A COMPOUND RATE OF GROUTH OF 33%
IF LPA GROWS AT THE MARKET RATE SALES WILL BE 12 M PLUS BY 2016.
ON CURRENT MARGINS THATS 3.6 LESS TAX GIVING NET 2.5.
GIVE IT P/E OF 12 AND YOU GET A MARKET VALUE OF 30 MILLION FOR THE LED SECTION!!
THIS ILLUSTRATES THE POTENTIAL WITH A VERY HEAVY RISK DISCOUNT FACTORED IN.
LPA IS SCRATCHING THE SURFACE OF A COLOSSAL MARKET.

- We already mentioned the sale of the Tudor works site which should provide a boost to the balance sheet.

- Looking forward, they seem to have the same on there order books as last year:-

The order book at the end of the year amounted to £10.4m (2011: £12.9m), but this does not include at least three major long term projects for which we have been selected, but for which values are as yet undefined and therefore not included in the order book.

So the outlook doesn't really look that bad for a growing company on a PE ratio of just under 12.WE ARE ABOUT 11 NOW WITH THE FALL BACK.

Only a couple of other things to mention

The year is likely to be back end loaded but, as a whole, is expected to be in line with our expected growth plan and current expectations. We have a good base load and many near term opportunities in prospect, in all our activities, but particularly for LED lighting and LPA Transport+.

So I wouldn't be expecting anything special when the interims are released. However, that could easily be offset by contract wins between now and July.AGREE

Not really related to this RNS, but there has been some discussion about Peter Pollock (CEO of LPA) during his time at Lionheart. It was a bit before my investment lifetime but you can read about it here:-READ IT



Conclusion

I think this is a cracking little company that could really do well over the next 3-5 years.
I THINK YOU HAVE HIT THE TIMESCALES PERFECTLY If you look at Dialight (another LED solution provider), that has a market cap of £326 million vs LPA's £9 million so the potential is there. I think things will start to look a lot better when the move Shire Hill and the extension for the LED factory in Normanton is complete, hopefully by the end of this year. However, it looks like it will be a bumpy ride.
I AM HAPPY TO BUY THE DIPS SHOULD THEY COME ALONG.


Disclaimer

I hold and continue to do so.INDEED SO DO I

Any comments welcome

Regards

Stuart

THANKS STUART.
I have the two latest notes by the way

tiger

[ukinvestor220] 26/1/2013 11:00

the link in stewy's piece is:

[vfast] 25/1/2013 16:41

Rampmeister

All I'm waiting for is the dust to settle before I pick up a few more.

V

[rampmeister] 25/1/2013 15:45

Most companies operate with a level of gearing but few companies of this size get windfalls like Saffron Walden

I agree that there is an element of caution in the statement but with many near term opportunities in prospect.

All depends how you look at it.

Vfast - that TP looks very interesting:-)

RM

[vfast] 25/1/2013 15:23

Yesterday XCAP Securities UK Equity Research place a buy on LPA and a short term price target of 105p, it's interesting read.

[oregano] 25/1/2013 15:17

RM - you are ignoring debt in your calculations aren't you?

they are almost 2/3rds of the way through H1. they would not say the year will be back end loaded without knowing how H1 is panning out.

they have been very transparent about this being a year of transition and are stressing the exceptional nature of last year. I think you have to read between the lines.

Stewy, i apprecaiate your detailed work. disagree slightly on valuation, but time will tell. Happy to keep on the watchlist and buyback if they fall far enough.

[rampmeister] 25/1/2013 14:21

After the sell off these are looking very cheap. If we deduct proceeds of Saffron Walden sale say 3m. this becomes a 5.5m. cap with P/E of around 7. Dialight, a market leader in similar business, has P/E of 37. Being a small company LPA could grow very quickly. I found it odd that with only marginally higher revenue LPA profits have more than doubled. Correct me if I'm wrong but feel likely explanation for this, at least in part, is that their fast growing LED segment is a much higher margin business. This would explain why the company is making a big bet on it's LED side with world markets still relatively immature. For those of us who still hold we are making the same bet.

Going back to the Mark Slater DIA interview (see post 505) with the foxy Alanna Petroff of Morning Star (I can probably paste in video link if anyone is interested), Mark said that Dialight product was an attractive proposition for the customer with a one year payback and 5 -10 year life guarantee. Interestingly he reckons that there is a direct correlation between gross sales and the size of the sales force that's why DIA are still busy hiring after doubling sales staff last year. LPA take note!

I don't buy all the talk of LPA being moribund until 2nd half backload kicks in.
There are several large valued contracts recently won but not included in current backlog to be announced along with sale proceeds of Saffron Walden to keep the share price bubbling along.
All imho

RM

[jamielein] 24/1/2013 22:45

Thanks Stuart, really good summary.

A slightly mixed statement but with more positives than negatives imo (though the market doesn't agree)

[glasshalfull] 24/1/2013 22:18

stewy - An excellent unbiased write-up. Absolutely first class!

Kind regards,
GHF

[stewy_18] 24/1/2013 20:09

As requested (sorry it is without formatting):-

I was also a little surprised by the selloff but that can happen when the market cap is only £9 million. There seemed to be the expectation that LPA would significantly surpass forecasts. With forecast EPS at 5.9 pence and actual EPS for this year at 6.3 pence, there doesn't seem to be a huge amount of difference, so it might be LPA need to manage expectations a bit better.

It was a strange RNS and I re-read it several times to see if it clarified things. I have picked out 4 main points that could be seen as negative.

Potential Negatives
1. Company feel last year was a one off.
2. Rail re-franchising process causing uncertainty over future contract wins.
3. Increased debt and no cash on the balance sheet
4. Loss of contract


1) They seem to be saying that last year was a one off bumper year due, in part, to the Olympics:-

The year to 30 September 2012 surpassed expectations, both internal and external, due to the happy coincidence of a balanced order book and a number of significant contracts, some Olympics driven, won on short delivery schedules

followed by:-

The exceptional level of activity enjoyed during 2012 continued at the start of the current financial year but has now eased off.

So if last year was exceptional, what will it be this year? I don't have any forecasts or brokers notes so it would be interesting to see what the forecasts are. Are they saying that growth will be flat this year?

In all honesty, it seems a little odd to put that in an RNS that also announces two new contact wins totalling £ 1.3 million-

2) As you mention the rail refranchising process seems to have caused them some disruption to the business. This however also seems to be a temporary disruption with a deadline to resolve the issues by the end of Feb:-

We welcome the advice to the UK Department for Transport, contained in Richard Brown's report on Rail Franchising, to resolve the current hiatus, which is delaying investment decisions, by February 2013.

So again, I don't see this as a major issue if there is a resolution deadline for the end of next month.

3) Looking at the balance sheet, they only have £7000 cash and have increased net debt to £2.37 million to pay for the new factory in Saffron Waldon (Shire Hill). Again, this shouldn't be too much of an issue because they are going to sell the old Tudor Works site for between £1.8 and £3 million so there will be cash coming in. Nowhere in the RNS do they mention they have finance issues this year, so again this shouldn't be a problem.

4) In the RNS they mention :-

we are disappointed not to have been selected as lighting supplier for Thameslink trains

To mention this contract loss, it must have been a big one. Again, disappointing, but you have to look at that in the context of the increase of sales from the LED lighting products department.

Reasons to be cheerful

There was lots of good stuff mixed in with this RNS. As you mention profit before tax more than doubled to £877,000 on the back of only a 5.9% increase in sales. That is the kind of operational gearing that should see a real boost in profit in the coming years.

- The reason I bought LPA was for the LED lighting products division. Here sales increased 61.9% to £3.87m (2011: £2.39m). Did this provide the increase in profit? Does the lighting products division have a higher profit margin? I'm not sure. My expectation (hope) is that the lighting products division becomes the premier revenue stream for LPA in the coming years. If it keeps growing at that rate, I see no reason why this should not be the case. There is no mention, however, if they can maintain that level of growth.

- We already mentioned the sale of the Tudor works site which should provide a boost to the balance sheet.

- Looking forward, they seem to have the same on there order books as last year:-

The order book at the end of the year amounted to £10.4m (2011: £12.9m), but this does not include at least three major long term projects for which we have been selected, but for which values are as yet undefined and therefore not included in the order book.

So the outlook doesn't really look that bad for a growing company on a PE ratio of just under 12.

Only a couple of other things to mention

The year is likely to be back end loaded but, as a whole, is expected to be in line with our expected growth plan and current expectations. We have a good base load and many near term opportunities in prospect, in all our activities, but particularly for LED lighting and LPA Transport+.

So I wouldn't be expecting anything special when the interims are released. However, that could easily be offset by contract wins between now and July.

Not really related to this RNS, but there has been some discussion about Peter Pollock (CEO of LPA) during his time at Lionheart. It was a bit before my investment lifetime but you can read about it here:-



Conclusion

I think this is a cracking little company that could really do well over the next 3-5 years. If you look at Dialight (another LED solution provider), that has a market cap of £326 million vs LPA's £9 million so the potential is there. I think things will start to look a lot better when the move Shire Hill and the extension for the LED factory in Normanton is complete, hopefully by the end of this year. However, it looks like it will be a bumpy ride.


Disclaimer

I hold and continue to do so.

Any comments welcome

Regards

Stuart

[castleford tiger] 24/1/2013 18:34

stewy

cOULD YOU BRING YOUR POST OVER HERE for discussion.

I as i reported a few weeks ago sold a few at 97p. I have today started buying more and will buy the dips.
EPS 2nd half were 4.15p.
I expect us to earn about 9p this year and 12/14p next year.
Does debt worry me? No because we have bought assets.
The normanton site is being expanded and the year after this one it all looks very good.
There may be the matter of options to sort in february before we talk this higher.
This has risen from 30p to 100p and back to 60`s.............its still cheap.
Use the bad days to buy shares........today 15k blocks were available.
Use the strong days to sell them.
I intend to build my stake back to 2% plus.

Should have the latests numbers tomorrow.

Tiger