Spectris Share Discussion Threads

[mattharrop] 13/2/2004 12:09

jumped in as well, been on watch list for a while for short at £5

[mattharrop] 13/2/2004 12:09

jumped in as well, been on watch list for a while for short at £5

[huwrayhenry] 12/2/2004 18:33

Short this old dog from 500p.
Surprized it's got so far.

[huwrayhenry] 26/1/2004 23:09

Good, TXN off 2.5% after hours in US.
May well see SXS weaker from here.
Yep - short from 470.
HH.

[huwrayhenry] 18/1/2004 16:46

Stopped out 450. holy funk if this goes up its a sure sign that aload more other stocks have far to go too!
HH.

[dr darkstar] 16/1/2004 00:00

strong rise on decent volume and close at highs .. looks like another leg up soon ,, dont see this as a short

[mattharrop] 15/1/2004 13:30

somehow managed to time the bottom quite well on my last short. Looks ripe for another one when it has stopped rising - the rise today seems a little high given the news.

[huwrayhenry] 14/1/2004 23:02

Fair play campy.
I have a small short on still.
Will increase at some point.

[campbed] 16/12/2003 17:39

From the reported trades this afternoon it looks as though someone sold out of his 1,044,399 position but price didn't move up. That suggests there is still stock looking for a home but I decided to realise my profits from shorting as there are IMO now better shorts around than SXS. Might take a position again in January if their trading update is other than in line.

PS I liked Halma's interims last week and took long position at 125p with 150p target. Halma's balance sheet (no debt) and good cash flow offers so much more protection than SXS's.

[campbed] 11/12/2003 12:03

Bid price now trending down to 413p. Looks if price could easily quickly break to 400p if the institution that has been mopping up small scale selling in the last few days stops doing so. I'm short on fundamentals but trading chart looks to favour a short position.

5.30 pm: oh well -- got that wrong, the bid price strenghtened to close at 423p.

[mattharrop] 27/11/2003 12:02

Reopened short at 452 a week or two back. Seems to move quickly between up and down on the day, probably setsMM which appears to add to intra-day movements in stocks.

[campbed] 27/11/2003 11:46

Not sure whether anyone else has position on SXS -- it looks finely balanced
between bears and bulls with relatively big volumes going through. The US recovery is positive, US$ weakness is negative I believe for SXS.

I'm still short from 480p as I suspect H2 results will disappoint.

[huwrayhenry] 23/10/2003 21:26

Campbed,
Looking for retrace to S.M.A(200) or around 390p based on TA only.
HH.

[campbed] 22/10/2003 10:15

Hi Henry - what’s prompted you to re-open your short?

I’ve kept my SXS short. I see you have gone long on Ricardo (RCDO) where I’m long as well as I think recent fall was overdone and AGM trading statement on 7 Nov will reassure.

As for SXS, its share price has fallen a little for the last 4 days. Their chart looks weak to me. The latest broker's forecast (Warburg's) is for adj PBT of under £50m in 2003 and for under 10% earnings growth in 2004.

SXS offers poor overall value compared with other FTSE 250 electronic controls companies such as Halma (HLMA), Kidde (KID) or Renishaw (RSW). Its most recent two large acquisitions of Spectris AG and PANanalytical have costs in EUR but many sales are made in USD so operating margins squeezed.

My feel is for a 12% drop in share price to 410/415p.

[huwrayhenry] 21/10/2003 22:08

Shorts on again.

[huwrayhenry] 01/10/2003 19:33

Out.
Trousers on for the cold?

[huwrayhenry] 18/9/2003 13:17

Shorts back on.
HH.

[campbed] 18/9/2003 10:22

Non Exec director, Andrew Given, today buys 5000 shares at 09.41 per streaming and at 10.39 SXS announce in RNS. He was FD of Logica.

I'm not sure whether to marvel at SXS's efficiency, to wonder what else the company secretary dept does or to think they are desperate to get out any news of director buying.

Keeping my short on SXS for the moment as hedge against long postions on other techie stocks which, in my view, offer better value than SXS offers at above 400p/share with its weak cash generation, aggressive acquisition accounting and weak balance sheet.

[mattharrop] 17/9/2003 10:11

Wish i closed on Friday!
still in profit, but not by that much. Was looking much more rosy this time last week.

[huwrayhenry] 16/9/2003 22:57

Closed short 453, even thinking of reversing this market is mad!!
Good luck fellows.

[campbed] 12/9/2003 23:14

It looks like the 3 of us who have posted have each gone short on seeing the
interims. It'd be good to hear from anyone buying so as to understand their
thinking about why.

Most of my post #51 looked at cash generation whereas SXS's own focus in its
presentation is on profits. The 19% increase in headline adjusted operating profit
looks good. However that profit figure for 2002 is after operating losses of £0.3m on
businesses disposed of later in 2002. If I add that back to H1 2002 adjusted
operating profit to get £18.8m rather than the headline £18.5m. H1 2003 adjusted
operating was £22m for an increase of £3.5m. They spent £96m on acquiring
PANanalytical and even if all the operating profit increase came from that
acquisition then the return is only 3.5/96*2 = 7.3% annualised. And we know that
SXS are not unimaginative in using acquistion accounting. It'll be interesting to see
why they adjusted upwards the £82m goodwill figure for PANanalytical in the 2003
accounts, just as they did on the Spectris AG acquisition in the 2001 accounts.

A 12% increase in adjusted EPS looks OK. That goes down to under 10% growth
after excluding losses on businesses disposed of last year. Full year adjusted
EPS is expected to be around 31p so at 450p that's a P/E of 14.5. That's a
PE/growth of 1.4 which given the balance sheet is too high in my view as judged
from the earnings perspective.

HH #52-- There's no single book/paper I learnt from. There are many things to look
at but my starting point is usually EBTA/EV, which I like to see above 15%, and
(cash flow from operations-capex)/EBITDA which I like to see above 0.9. I
disagree with you that SXS has been overhyped -- in fact it's very low profile for a
FTSE 250 stock and has virtually no retail following. Of course, I do agree that it's
overvalued relative to other stocks.

Mattharrop-- SXS’ businesses are very much knowledge based rather than capital
intensive so I do not worry as much as you about tangible assets, except that
with aggressive acquisition accounting both goodwill and post-acquisition profits
are overstated. Hence the need IMO to look behind reported profits at SXS to
cash generation.

[mattharrop] 12/9/2003 11:13

Good analysis cambed.

I too shorted as soon as I read the results, and is looking very nice so fsr :)

My calculation was a little bit more back of the envelope. I tend to look firstly at net profits and apply a typical p/e to get a rough valuation and then take into account Net Assets (SXS has negative net assets after intangibles) and free cash flow. I reckoned about £300-£400m market cap would be realistic (but IMHO still a little high) so at £600m is a definite short

[huwrayhenry] 11/9/2003 22:09

Good anaylsis campbed, thanks - i need to learn how to do that type of thing.
Can you recommend any good books or papers?

Well you know I'm short of this lot.

I read the results and noticed that all the growth was by aquistion, no improved market share, order improved volume..nothing. Figures include internal cost cutting but thats done now so next results will have to stand alone. That made me sell more.
Hyped over valued stock. Mind you there seems to be a quite a few out there so it's good to be back short on a few.
HH.

[campbed] 11/9/2003 16:08

I seem to be the only one trying to make sense of SXS's results. I'll give my views
this time but unless there is some worthwhile feedback from others then I will not
bother again in future. Aixam's spam above also turns me off posting.

I shorted Tuesday first thing upon seeing the interims. I have a target of 400p on
unchanged market sentiment with a guaranteed stop loss at 510p to offer
protection against a bid.

The number that leapt out at me from the interims was the free cash flow (FCF).
At only £2.2.m this was even less than the £2.9m in H1 last year despite having
PANanalytical this H1 (bought for £96.1m last September). Spending against other
provision/liabilities was £2.1m this H1 against £6.8m last H1 and adding this
spending back gives comparables of £4.3m against £9.7m last H1.

SXS look again to have been playing the acquisition accounting game. Goodwill in
the balance sheet has increased by £8.8m when there were no acquistions in H1 (from £213.6m at 31 Dec to £222.4m) despite a goodwill amortisation charge of £6.2m in H1. Hence additional goodwill of some £15m has been created presumably on the PANanalytical acquisition made last September for £96.1m. In
the Dec 2002 accounts SXS had assigned only £14.1m to fair value of the
tangible net assets acquired (including £3.1m of cash) and so created £82m
goodwill. If the £15m additional goodwill created does relate just to PANanalytical
then SXS will have paid £93m net of cash acquired for no tangible net assets. The
concern of course is that the new debit to goodwill would otherwise have been
accounted for as losses.

With about 123.7m shares, SXS's mkt cap at 490p is £606m. Net debt increased
£14m to £191.5m at June. Hence enterprise value (EV) of about £800m.

To the FCF of £2.2m add back £2.1m of "exceptional spending" and net interest
paid of £5.2m to get A(djusted) FCF of £9.5m.

Hence SXS cash generation earned 9.5/800 = 1.2% in H1 or about 2.5%
annualised after tax.

I just can't see SXS generating AFCF of £80m per year in the near future to justify
an EV of £800m.

A fairer price in today's market IMO is around 330p to give an EV of about
£600m. This gives an EBITA/EV of about 10% based on forecasted EBTA (PBT)
of £50m and £10m interest.

SXS's share price has had a good run to almost 500p, having roughly doubled from
the 230p low last October and in my view has simply overshot. However SXS is
well supported by institutions and its retail following is insignificant. For long
holders, other shares offer much better value IMO.

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