Ms Share Discussion Threads

[wjccghcc] 29/11/2005 14:35

Yup. Good luck with it.

[cockneyrebel] 29/11/2005 13:29

True about SFR and I hold them - but it's a lot harder to double your earnings with a market cap of £176m than it is with a market cap of £29m.

Also to say growth is leveling off is a bit disengenuous. Growth may be slowing from around 100% pa over the past two years to 60-70% but I don't call that levelling out - when you've just been doing 100 mph up the motorway then 60 mph up the sliproad seems slow.

Even 50% growth on a PE of 7 is a PEG of 0.14.

We'll have to disagree but I'm willing to bet even Rivaldo is being cautious and that defence contract boosts H2 more than we expect and these are £2 before long.

Punters (in the main) buy when told to by tip-rags remember, not by thinking for themselves.

CR

[xdavid] 29/11/2005 13:22

I'll expand on my last comment re 50% growth...
I think this is a cautious low side estimate. I don't presume that MSI have stopped their recent high growth. Nor necessarily have to for a few more years. As alluded to in an earlier post they still have an expansionist attitude and I have no reason to presume that either the Defense or the Forecourt businesses will take part in any general economic slowdown. Both are expanding markets, for different reasons, and MSI is the proven niche player!

[xdavid] 29/11/2005 13:12

Well a fine day for my main computer to crash on me! Rebuilding the disk as I type :-)

In the meantime, looks good to me. Glad I never started transferring them out of my ISA now - delighted about that news!

I'm sure there will now be some people who sold isa early on presumption of moving to AIM, who will now have to sell again to move back. I think MSI would have been better to have released the news re not moving to AIM prior to the results though - and got the double whammy effect.

I'm happy too with statements re future earnings. They are a cautious bunch and don't tend to say anything just for effect (for example, not issuing an RNS when they got that MOD contract - a lot of companies would have milked that!).

With downside well protected by low PE, I'll very happily take an achievable 'measily' 50% growth over next 12 months! Wish all my shares could do that!

[wjccghcc] 29/11/2005 12:24

CR, regarding the defence contract, it was over eight years starting 2006. Not sure how they'll account for it so there may well be some profit booked in H2.

"* The contract was awarded to MSI Defence Systems Ltd following a competition.

* Production of the gun systems will take place at MSI, Norwich. The initial requirement is for 26 systems. The contract covers both the production and the installation/setting to work of the guns.

* The prototype system was trialled under the UK MoD Applied Research Programme (ARP) in April 2003 on HMS Somerset.""

I'm not knocking MSI, I think H2 will be better than H1 and I certainly don't think the share price will fall. All I'm saying is that their outlook has levelled off a bit - hey, I didn't write the statement.

Oh and SFR hiked their interim dividend 43% and have since said they're trading significantly ahead of expectations :-)

[rivaldo] 29/11/2005 12:18

I'm also pretty sure that H2 will be better than H1 (borne out by the last couple of years' results) due to the quiet summer period. Together with the possibility of initial revenue recognition from the £15m MOD contract, I'm willing to bet that H2 will come out at 10p EPS+ at minimum.

So at worst MSI would earn 18.1p EPS this year. Note also that MSI's cap.ex has "placed us in a good position to take advantage of the many global opportunities available to us." I've seen references to MSI expanding their forecourt operations into Eastern Europe for a start - as the European market leader, just imagine the opportunities opening up now to Global-MSI in that region.

On a minimum current year P/E of maybe 8.5, with global growth opportunities, and all tax-free in an ISA, I'm very happy to hold for another 50%+ from here. The Board's judicious use of language is another reason for confidence!

[cockneyrebel] 29/11/2005 11:19

Well you can spend your life trying to guess what the wording of a company means but I'd say if they were less than confident directors would not have been buying shares recently.

As for the gun contract, read it again:

"In September, the order book was enhanced significantly when the UK Ministry of Defence (MoD) announced that it had awarded the Company a £15m contract to up-grade a first batch of twenty-four of our in-service MSI-DS 30mm naval gun systems.

"a first batch".....suggests there are more likely imo.

A 15% hike in the interim divi - now I've held engineering companies and few are likely to raise an interim divi so much without very sufficient confidence imo - and this is when they have been spending a packet buying back shares.

Ignore the historic growth then, the current growth for this year is 50%+, I don't see many engineering firms achieving that and their directors buying shares after the shares have risen 200% in a year.

But don't let me influence you - if you have found better performance than this you keep your money in it.

CR

[johnrxx99] 29/11/2005 11:10

WJCC - many thanks for that analysis. A bit on the cautious side but fair.

[wjccghcc] 29/11/2005 11:01

CR, at the full year they said "we are cautiously optimistic that the markets that we serve will remain strong throughout the remainder of this calendar year" which is about their markets staying strong, which they have. This time they say "The Board remains cautiously optimistic that the levels of trading will continue through the remainder of the year". To me that implies H2 will be similar to H1 (although of course, I think they're being conservative and I'd factor in some growth), but to me that implies H2 EPS of 9p. Maybe I'm being too pedantic.

Regarding the 15mm defence contract, as far as I recall it's spread over 6 years. Assume a 15% margin (it was a competitive bid) and you're looking at maybe 400k profit a year which is 1.6p EPS. Nice business to have and a very good deal to justify their defence business, but not company transforming.

Yes, the historic growth has been very impressive but they were coming from a very low base. And that's been reflected in the share price performance. All I'm saying is that, unlike say SFR where there has been a structural shift to using steel in construction from concrete and who's growth and margins are still accelerating, MSI has ridden the upturn in the engineering cycle but that growth is levelling off. Good company, good management and certainly good value but it will be tougher for them going forward.

[cockneyrebel] 29/11/2005 11:00

They'll get tipped somewhere I'm sure, were mentioned in the press a couple of months ago.

Been here long enough to know that you get profit takers on spike. What then happens is punters wait to buy as it starts to move up, but don't realise that trying to get just 2-3K can be a job without paying a premium - so they chase the price up and before you know it there's th complaints that you can't buy in any volume. Well you can buy in volume of a sort, but you have to do it when others are selling or at least not buying.


Wait for the chase imo.

CR

[bigbigdave] 29/11/2005 10:19

Added this morning after the news of no move to AIM.
So difficult to find this sort of growth anywhere for a fully listed Co.
Think Shares mag will like this.

[cockneyrebel] 29/11/2005 10:12

WJCC - they were 'cautiously optimistic' at the final results too, that's what makes this a lovely share, no hype, it just does exactly as it says on the tin and despite them being 'cautiously optimistic' at the final results H1 eps is up over 50%!

That £15m defence contact never came in until Sep - the bulk of that, and the profit will fall in H2 or next year - £15m - that's nearly half a year's turnover - I'm not surprised directors were buying before they announce this.

1.1p, 3.1p, 4.8p, 6p, 7.7p - that's the half on half earnings growth here and they are on course to do far better than 9p in H2 on that momentum and with that contract under the belt.

If that is 16.7p for this year that's a PE of 9. With that defence contact I suspect it's a PE of somewhat lower for this year and probably a PE of 6-7 on a forward basis.


I don't know what eginbeering companies you look at that are fully listed and ISA'able WJCC but these have annual earnings growth of 1.1p, 4.2p, 10.8p, 17-18p. I don't know another company with growth like this.

The usual 1K traders scalping their 'indian take away' today but now they have to sit and think where they find this sort of earnings growth on this PE. If and when they find it I bet it's not as sustained as MSI and it will be on AIM, not ISA'able, but then CGT probably isn't an issue for punters who sell a stock this cheap.

I've watched them sell at 80p, 100p, 120p, 150p, I'll watch them do it again at 200p. I'll watch them buy back again when it's racing away on a tip too because the only time you can buy this without pushing the price north on 1K buys is when there's a bit of stock about.

CR

[leopold555] 29/11/2005 09:37

Bought another 700 @ 154.61 as that was the only spare cash I had. Couldn't resist that dip :-)

[johnrxx99] 29/11/2005 09:34

I'll second that.

[leopold555] 29/11/2005 08:21

Fantastic results, really pleased with this share. It remains a star in my portfolio :-))

Leo

[wjccghcc] 29/11/2005 08:18

Well, they say they're cautiously optimistic the current level of trading can be maintained. To me that implies maybe 8p diluted for H2 putting them on a PE of 10 for the year. Certainly good value but tha PE isn't a screaming buy versus the engineering sector. Good news on AIM though.

[cockneyrebel] 29/11/2005 08:05

Are punters slow or what?

One weak day in the market and they sit there and watch.

Forward PE below 7 and this sort of growth - buy later and higher then imo

CR

[rivaldo] 29/11/2005 07:47

Yep, terrific stuff - a cracker as well as a craker!

Here's the link:


8.1p EPS in H1, plus a traditionally better H2, plus the effect of share buybacks, plus rosy prospects - I agree CR, it looks like EPS should come in at 20p+ this year, with future prospects heightened by the £15m MSI-Defence order.

And no move to AIM! Hmm....£2-£2.50 here we come...

[cockneyrebel] 29/11/2005 07:12

Great results, all sectors doing well, boosted interim difi by 15%+ and no move to AIM.

PE for the year ending soon = 7 maximum. Forward PE well below 7, possibly 6 ...................and growth running at around 100% pa over several years.

Cracker - and ISAable :-)

CR

[xdavid] 24/11/2005 15:06

The fact that they have restated last results under IFRS suggests to me that there is now less likelihood of them going to AIM.

One of the reasons for quite a few others moving recently was the fact that they will have another 2 years results (in AIM) before having to go to expense etc of IFRS since it is being applied later 'down there'.

Hopefully they will clarify in the interims.

[rivaldo] 24/11/2005 12:12

Must be soon - this looks like a clearing of the decks to me before announcing the results. Which I'm looking forward to given the director buying...

Not much in the IFRS statement on first glance other than the pension liability adjustment, which was known about anyway.

[cockneyrebel] 24/11/2005 11:50

just the restatement of last years results under IFRS accounting.

The results should be out soon then - tommorow?

CR