Maxima Holdings Share Discussion Threads

[powwow] 24/3/2009 12:43

yes saw it thanks.. saw it after I posted.

[marben100] 22/3/2009 16:57

See my post 473 if you don't understand the estimate presentation

[marben100] 22/3/2009 12:30

Market expectations were as per my post above. Edison have now updated their forecasts to reflect the trading update. See

Latest f/c is

19/03/2009 56.0 19.1 4.4 55.0 19.0 4.4


Edison comment:

"This week's trading update shows further evidence of the economic slowdown hitting Maxima's markets. Entering Q4, deferral of orders now begins to have an immediate impact. The scale of the impact remains modest against a core of recurring revenues and does not cause us to question the business model. Maxima is a good cash generator and financially sound, though it will have to wait out the economic storm."

Very much in line with my own views. However, we still don't know how bad things are going to get, so I'll hold off adding to my holding until there is some sign of the real UK economy bottoming out - I suspect we're not even close. My thinking is also partly driven by the fact that I'm pretty fully invested now (mostly in businesses with overseas earnings, less vulnerable to the UK) and am being very careful with any spare cash. I shan't be selling any Maxima either, though. That yield of 7.6% looks rather tasty while we wait for the turnaround. If the share price is at or below this level when the economy turns (& revenue hasn't been decimated), this stock will be a real bargain, likely to offer excellent returns.

I await the next update with interest.

[powwow] 18/3/2009 16:43

what were the market expectations and how much does it differ ?

[marben100] 04/2/2009 14:00

Another new note out from Edison, following yesterday's interims:

They have reduced 08/09 and 09/10 EPS f/cs a bit to 25.0p & 26.1p respectively. That leaves Maxima on a P/E of 4 (pre-amortisation of intangibles).

The general message, which I also read into yesterday's interims is "steady as she goes". Of course, we're yet to see how bad things are going to get but I am pretty confident that MXM can survive, given prudent management, concentration on cash and decent recurring revenues.

Must admit I can't see much likely to drive the share price higher in the short-term but it remains a "hold" for me, with a possible "add on weakness". At least holders are getting decent divvies whilst waiting for the economic supertanker to turn around. The low rating allows for quite a bit of downside risk - but that doesn't mean that the share price mightn't go lower.

Here's an analysis of the trend in Edison's forecasts:

08/09 09/10
Date Revenue EPS DPS Revenue EPS DPS
(£m) (p) (p) (£m) (p) (p)



01/07/2008 64.0 27.5 6.1 N/A N/A N/A
12/08/2008 63.0 27.4 6.1 65.5 30.0 6.6
15/12/2008 62.0 26.3 6.0 62.5 27.5 6.5
03/02/2009 58.5 25.0 5.6 58.5 26.1 5.8

Cheers,

Mark

[marben100] 16/12/2008 20:33

Thanks for prompting me JR...

Fundamentally, no there's nothing I'd change in my above statement & my comments re prudence seem borne out by the statement. Edison have issued a new note: EPS forecast for 08/09 down slightly to 26.3p. That's slightly my own forecast of 25p.

We'll have to see how the results actually turn out & FTM, how the economy does!

Unless Maxima's business suffers a considerably worse impact than is currently predicted, Maxima will be well positioned to benefit when the economy stablises and starts to move ahead again - though that may be some way off. We will have to wait and see what actually comes out in the interims.

[johnroger] 15/12/2008 14:24

Trading statement today
Are you still of the opinion above Mark?


RNS Number : 0945K
Maxima Holdings PLC
15 December 2008


Embargoed until 0700 15 December 2008

Maxima Holdings plc ("Maxima" or the "Company")

Half Year Trading Update

Maxima Holdings plc (AIM:MXM), the integrated IT solutions and managed services provider,
today announces a trading update for the six
months ended 30 November 2008. Maxima intends to announce its interim results for the period
on 3 February 2009.

The Board is pleased to confirm that trading across the group remains steady and expects
operating profits* for the first half to be
slightly higher than last year. Cash collection was good in the period; net debt was in line
with plans at 30 November 2008 and is expected
to fall in the second half. Maxima has a stable financial position and the Company continues
to have the full support of its bankers,
Barclays.

Maxima continues to derive more than half its revenues from recurring managed service and
support contracts and has achieved high levels
of contract renewals. The Company also continues to win and bid for significant new business
with a total of 40 new clients having been won
during the first half (H1 2008: 35). Macro-economic conditions are leading to some delays in
decision making on some of the larger
opportunities and we are therefore cautious about the future impact of this.

The business of DXI Networks Ltd acquired 2 July 2008 has been integrated with Maxima's
existing infrastructure managed service
business. Cost efficiencies have been achieved and it is performing well.

*pre amortisation of intangibles, share-based payments and exceptional charges

Kelvin Harrison, Maxima's Chief Executive said:

"Macro-economic conditions are challenging. However, Maxima has had a steady first half
and has a resilient business model and stable
financial position.

"We continue to place a strong emphasis on cost control and will only pursue further
acquisition opportunities where there is a
substantial opportunity to create shareholder value with low levels of risk."

[marben100] 03/11/2008 13:50

Buy Maxima at 182.50p

...OK, so I've topped up today @ 118p :0)

Maxima's net debt of around £8m seems manageable, against an operating cashflow of +£6.9m last year. Knowing that Maxima's management are prudent, I have little doubt that they will hunker down and focus on the cashflow, should their markets get sticky.

Edison's 08/09 EPS forecast made in August was 27.4p. That puts the shares on a rather lowly rating.

Obviously there is a risk of this forecast being missed with a slowing economy in the UK but Maxima's strong recurring revenue stream should provide some degree of insulation. If those revenues are sufficient to pay down debt, MXM will have opportunities to acquire more businesses at good prices over the coming year, setting the scene for strong growth when the UK eventually recovers.

Seems like a decent investment for the long term at this price.

Cheers,

Mark

[powwow] 22/10/2008 16:42

They seem to be doing ok at the mo, but its falling... on low volume.

[johnroger] 13/9/2008 17:48

Buy Maxima at 182.50p

An exclusive tip from Scarlett Moore of Sharecrazy's Supermarket

Consolidation plays are always risky investments, but when they have such a good track record as Maxima they can be very attractive. Since the IT and managed services provider joined AIM in November 2004 it has bought and integrated eleven companies into the group and is currently on the lookout for more.



Maxima recently showed the benefits of its acquisition driven strategy in its results for the year to 31st May 2008. Over the period revenues grew by 47% to £46.7 million on the back of mostly acquisitive growth. Operating profits adjusted for exceptional items, amortisation and share based payments increased by 54% to £9.7 million with pre-tax profits rising by 24% to £5.2 million. Adjusted earnings were up marginally, by 0.4p to 26.3p, growing at a slower rate than profits due to a rise in the number of shares in issue over the period and a higher tax charge. The earnings funded an 8% hike in the dividend to 5.6p per share.

The net cash inflow from operations amounted to £6.9 million over the year. Net debt grew from £6.6 million at the end of May 2007 to £8.5 million after the company spent £6.1 million on acquisitions over the year. Adjusted operating profits covered net interest payments by 13.4 times.

The results were in line with expectations which were revised downwards in January this year on the back of the premature termination of several contracts from a major client. In the face of that loss and the gloomy economic outlook these results were impressive and have gone some way to increasing investor confidence in the company, the shares rising by over 10% since the release.

Although debt increased over the year it was kept at a comfortable level due to the strong levels of cash generation. Following an additional acquisition made after the year end net debt should now stand at around £16/£17 million but given Maxima's cash generative nature that could plausibly be cut to around £10 million by the end of the current financial year if no further acquisitions are made.

Although market conditions toughened during the year independent analysts Ovum are predicting reasonable growth of 5.9% in the UK Software and IT Services market in 2008. Even if the market does take a turn for the worse Maxima has a good spread of customers across various sectors giving it some resilience if difficulties are experienced in any one area. The company also has a wide spread of customers, around 1,500, with the top ten accounting for 30% of sales.


With the three recent acquisitions expected to be earnings enhancing in the current year Maxima is set to continue growing, albeit modestly at the earnings level. Consensus forecasts see the company posting revenues of around £64 million, adjusted pre-tax profits of around £10 million and adjusted earnings of near 28p for the current year to 31st May 2009. On a current year rating of just 6.5 times the shares look cheap and at this price I wouldn't be surprised if the company received attention from a larger industry player. BUY.

[marben100] 01/7/2008 12:07

New Edison update now out following DXI acquisition. See

Updated forecasts: '08 EPS 25.6p, DPS 5.6p; '09 EPS 27.5p, DPS 6.1p

[powwow] 25/6/2008 16:17

I used to hold seymour pierce only to see their share go down from 80p to 8p.. They are then and still are now a bunch of crooks. They took the company private on the cheap when the the stock market had tanked leaving shareholders behind with losses. All I'd say it SYP cannot say anything, because they have never looked after their shareholders when they were on the aim market.. if they cared they would have stayed on AIM and allowed the shareholders to benefit from the upturn which was going to come in the stock market sooner or later..

[fgump] 22/6/2008 22:10

On 4 x earnings this looks extremely good value to me. Surely sector average must be closer to 7 or 8?

[marben100] 19/6/2008 21:31

Still watching, still holding.

I don't blame GHF though: I think there's worse to come, economically. However, I think MXM, with their emphasis on recurring revenue streams and a strong and experienced leader in Kelvin are better placed than most to ride out the storm. The share price is already discounting a pretty grim future.

I believe Seymour Pierce's notes are sour grapes (used to be MXM's broker). Why do MXM have to do ALL the things they say to justify a P/E ratio > 4? All they have to do is show that earnings aren't collapsing (which is what that sort of ratio implies). However, these are tough times and lots of stocks are marked down.

[glasshalfull] 19/6/2008 16:44

Hi Johnroger,

Not been a holder since late 2007.
Decent trading update but I'm not inclined to invest at the moment as I can only see economic conditions deteriorating further in Western economies in the next 12 months or so and believe this will have a knock on effect on the likes of MXM and TSE.
Seymour Pierce also note that the company is undervalued but the profits warning at the turn of the year and net debt on the balance sheet again steers me away from the company in the current environment.

O/T

You may be interested in China Eastsea (CESG) which is a Chinese IT outsourcing company. Results due out in a week or so and at the current 28p they are forecast to have achieved 4.5p EPS in yr ended 28/2/08 with 7.3p EPS pencilled in this year. Strong cash generator (£1.5m-£3m per year) in next few years with net cash of £3.4m on the B/S as at the interims (Aug 2007).
The following thread contains links to 2 broker notes, and as you will see the Seymour Pierce note issued on 16/6/08 contains a price target of 60p.




Regards,
GHF

[johnroger] 19/6/2008 16:25

Has everybody abandoned this co?

IT group Maxima (MXM) said its trading remains robust and it expects its full-year pretax profit before exceptional items to be in line with market expectations, bolstering the shares by 0.5p to 126p. It added that it expects operating margins to show a further improvement on the previous year. "Maxima continues to be highly profitable with strong operating margins, despite a more challenging trading environment," said chief executive Kelvin Harrison. Net debt as at 31 May 31 was 8.5 million pounds. Seymour Pierce was unconvinced: "Trading on just 4x earnings the company looks undervalued, but the dent to investor confidence in the roll up strategy has rendered the management relatively impotent in that respect - doing a sizeable deal would presumably involve equity and at this level cause material dilution." It added that sentiment would only improve after the company delivers a better than expected set of results, and that until then a re-rating looks unlikely. However, it moved its stance for the shares to 'hold' from 'sell'.

[tsmith2] 29/2/2008 08:19

looks like either the overhang has cleared or its been tipped..

[tole] 12/2/2008 21:22

Thx Marben - appreciate you posting on the board here.

[marben100] 11/2/2008 22:11

Hi GHF,

I can't see what will give the an uplift in the short term other than a bid - which isn't out the question.

"What will give the uplift?" is an argument used by Seymour Pierce too... but there is one thing: if Edison are correct and there is an overhang, we could get a rise once it's cleared. However, I agree that it's hard to see a major one until Maxima prove themselves with results.

For anyone that hasn't seen the TMF post, here it is:

Since my last post, I have spoken to Kelvin Harrison, Maxima's CEO. Here's the result of my Q&A (please note that answers are paraphrased from my notes and I can't guarantee accuracy):


Q1: How is the (possibly) worsening economic climate affecting your acquisition strategy?

A1: Maxima's low rating means that acquisitions will largely have to be made from cash rather than shares. 2H cashflow is generally much stronger than 1H (last year was exceptional, due to timing difference in settlement of a payment). This means that we will have to focus on acquisitions below £10m but our cash position will allow us to make several such acquisitions.

My interpretation: circumstances will put "a crimp" in the strategy but not halt it altogether. I believe Kelvin will act prudently and not overstretch. The balance sheet should remain sound. Any acquisitions made should be available for good prices: the imminent CGT regime change may encourage business owners to act before there is an adverse CGT impact.


Q2: Has there been much unrest from employee option-holders and shareholders from acquired businesses?

A2: Most shareholders from previously acquired businesses are no longer with those businesses, so do not impact operations. Whilst such share- and option-holders are "upset" with Maxima's share price fall, they are not "distraught".

My interpretation: shouldn't be a major problem but highlights the fact that future acquisitions will largely have to be paid for in cash.


Q3: How is Boris Huard getting on (new COO appointed 29 Oct 2007)?

A3: Kelvin is very pleased with the appointment. Boris is already "doing some things better than I could have done". Kelvin explained that Boris was dealing mainly with day-to-day operations and line-management, whilst he focussed on major clients/projects and on "relations with the City" etc. Kelvin had attended some 30 meetings in the City since the interims.



A couple of further things to note:

a) On the day the interims were released (and the closed period ended) reasonable share purchases were made by almost all directors:

Of course, directors are not always the best to judge when to make purchases but at least they are putting their money where their mouths are.


b) Seymour Pierce have today downgraded Maxima to "sell": :

In a research note published this morning, the analyst mentions that the company is likely to post disappointing results for 2H, in the wake of the weakening demand in several of its business segments. Maxima Holdings' highly geared balance sheet is an area of concern, since the company needs to make additional acquisitions, the analyst adds.

A few points on this:

i) Neither Maxima nor Edison expect "disappointing results" in 2H (other than as previously announced). Of course, we have the old adage that "profit warnings come in threes" but Maxima's high proportion of recurring revenues should provide some insulation. Kelvin mentioned that it was particularly unfortunately that one of Maxima's largest clients had decided to consolidate their IT support business with a single major IT supplier at this particular time and that there were no other clients that we likely to make similar moves that could have an impact on the same scale. My own view, supported by ratios shown in the Edison report is that Maxima are better placed to withstand a general downturn than most of their peers.
ii) Maxima's balance sheet is not "highly geared". There is some gearing but it seems perfectly manageable to me, with £11.7m of long term borrowings (and net cash short term) against annual operating profits of around £5m and a total balance sheet of £33.5m (admittedly including substantial intangibles). There was also £10.2m of deferred income (i.e. "guaranteed" future income) on the balance sheet.
iii) The company doesn't "need" to make acquisitions but it does wish to do so. The current rating certainly does not reflect growth by acquisition.
iv) Elsewhere, I have read that share price also stated they saw no reason for Maxima to be re-rated in the near term. However, if here is a share overhang as Edison have stated then Maxima's share price could well rise once this overhang is cleared.
v) I note that MXM changed its NOMAD from Seymour Pierce to Cenkos in December 2006. I have observed that it seems rather common for ex-NOMADs to turn bearish on companies they formerly advised ;0).


Cheers,

Mark

[glasshalfull] 11/2/2008 18:01

Thanks Tole & Marben

Not holding at present,and thankfully not when the warning came through.
Speaking to Linda Andrews a few weeks before I certainly didn't see it coming.

I think it a little premature to begin buying again though. Sure, they are cheap as chips but in this uncertain market I can't see what will give the an uplift in the short term other than a bid - which isn't out the question.

With a geared balance sheet and the possibility that there may be a further warning (as indicated by S.P) I prefer to watch this for the time being and perhaps start buying once it's clear that the warning was simply a one off.
Might pay slightly more but I want to be clear that the risk/reward is in my favour.

Far better opportunities in the small cap arena at present IMHO.

Regards,
GHF

EDIT - Excellent post on TMF marben......food for thought.

[tole] 11/2/2008 17:13

Maxima downgraded to "sell"

7:35a.m. - Seymour Pierce
LONDON, February 11 (newratings.com) - Analyst Derek J Brown of Seymour Pierce downgrades Maxima Holdings Plc (VL7) from "underperform" to "sell."

In a research note published this morning, the analyst mentions that the company is likely to post disappointing results for 2H, in the wake of the weakening demand in several of its business segments. Maxima Holdings' highly geared balance sheet is an area of concern, since the company needs to make additional acquisitions, the analyst adds.

[marben100] 08/2/2008 11:38

Updated and comprehensive Edison note now out (see ). Excellent report IMHO.

08 EPS f/c 25.6p; 09 EPS 28.8p, (07 was 24.8p) giving P/Es of 5.7 and 5.0 at the current offer of 145p

Over the last six months the market has already discounted the potential risks of a slowing economy on IT spend. Maxima has highlighted this risk in its results, however, the vast majority of the business is tied to long-term maintenance contracts which will not see material swings in demand. In fact Maxima's business model, with comparatively high gross margins (73%) and recurring revenue (56%) leaves it well placed to be an industry winner.

On p7 margins and recurring revenues are compared across the peer group. I believe that over the next few years this will result in MXM outperforming its peers. Peer group average P/E for calendar '08 is 6.7, against 9.7 for medium size IT companies and 15.5 for the sector as whole. The bias against smallcaps is quite stark ATM. I strongly believe that, over the next 5 years, this bias will be shown to be unjustified. Rather than taking the simplistic view that "small is riskier than large", more sophisticated investors need to consider each propostition on a case-by-case basis: balance sheet strength/weakness; management quality; margins; recurring revenues; exposure to risky large scale fixed price contracts etc.

The report also mentions that there is a stock overhang depressing the share price

NB looking at the sector comparison, it appears to me that Sanderson (SND) might be worth further research ;0).

Regards,

Mark

[richoneday] 07/2/2008 19:42

I hate to offer a contrary view but MXM will not be able to continue their aggressive acquisition strategy in this climate and my view is that they are faltering in realising integration benefits.

I'll continue to watch and maybe buy in at 50p