Sweett Grp Share Discussion Threads

[mo123] 27/10/2013 18:56

Cheers for the info ic2. Even 7% would be a great achievement.

[cfro] 27/10/2013 18:05

Great stuff ic2. That looks very achievable to me too.

[interceptor2] 27/10/2013 14:00

After the AGM in August which stated that management are expecting within 2 years revenue of £100m and margins between 7% and 8%, I did post on the day what the EPS figure would look like if this was achieved. Seeing that management have said that they are on course to achive this target in last weeks impressive trading update. I thought it was worth posting again below, with only the PER figure changed because I needed to use the 51p Friday closing price.

ic2...

I wouldn't want to become carried away here, but I have just worked out what 7 to 8% net margins would work out to, on a predicted revenue of £100m within 2 years.

The 7 to 8% net margin figure is realistic imv, because Driver Group DRV (Same sector are about 1 year ahead of CSG in their recovery and their last reported net margins were 6.25%. They were only 1.54% in January 2012, at the start of their recovery.

Using most recent shares in issue of, 67,694.055, and revenue of £100m.

7% net margins = EPS 10.34p = PER of 4.93
8% net margins = EPS 11.82p = PER of 4,31

Food for thought?

[battlebus2] 25/10/2013 18:48

Nice write up by Paul. Thanks for that lunarjim.

[cfro] 25/10/2013 18:40

Nothing we dont already know in that report. With a forward pe of ten or possibly less, its obvious this is cheap. Just a matter of awaiting further contract wins.

[lunarjim] 25/10/2013 16:49

Got a mention on Paul Scott's - page yesterday:



WHICH EXPLAINS YESTERDAYS SPIKE UP!

Good morning! Some companies seem to constantly deliver bad news, and your heart sinks before you've even started reading their latest trading update. Whereas others just deliver a steady flow of good news, and the shares are a pleasure to own, as you wait for the re-rating. If you can find the latter still at a reasonable price, then that is the proverbial needle in the investing haystack.

Sweett (LON:CSG) is, in my opinion, just such a share. I've written about this share five times so far this year, but hesitated too long, and only bought shares in it after they had already doubled, which is always very difficult to do. I belatedly pushed the buy button on 30 Aug, at 42p, and explained why here.

Today's trading upate, in advance of its half year results to 30 Sep 2013, follows the usual pattern of out-performance. Sweett indicate that all their international operations are trading well. This is the key part of today's statement (my bolding);



As a result, the Board anticipates that the Group's results for the year ending 31 March 2014 will be slightly ahead of management's expectations. Furthermore, the full year profit before taxation will also be increased by the £1m referred to above. Our efforts to achieve the objectives of our 3 year plan of turnover growth and margin improvement remain firmly on track.


Incidentally, the £1m referred to is a one-off gain on the unwinding of a currency hedge.

Here is the usual - graphic that I like so much, as so much information on trends can be gleaned from these five simple performance graphs. In my opinion, access to these graphics alone is worth the annual subscription, as it saves me so much time when researching & gives me excellent insights;

So what can we tell from these graphs? That turnover is trending upwards, that profit margins are fairly slim. Apart from a bad year in 2012, the company has been fairly steadily profitable - not bad considering their markets have generally been depressed over this period (they are a construction consultancy, quantity surveyor). The PER has generally been low over this period, and it has consistently paid dividends.

Given the steady stream of positive trading updates this year, I would not be surprised if broker forecasts lag behind reality. You can see from this graphic on the right that broker EPS forecasts have been steadily upgraded this year, another excellent sign.

So it seems to me that CSG are probably heading for around 5p EPS this year, and therefore at about 49.5p the shares look to be on a current year PER of about 10, which strikes me as a bargain, given their positive trading momentum.

Here is the usual growth & value graphic on the left, for Sweett. As you can see, it is mostly light green, indicating better value than average valuation metrics.

The dividend yield is not bad, and is likely to grow. Note that the dividend was cut in 2010, and again in 2011 and 2012, from 2.4p to only 0.5p. However, it is now on an upward trajectory again, rising to 1.0p in 2013.

I have double-checked their most recent Balance Sheet, and it's OK. There is net debt of £7.1m, which is a little higher than I would like, so keeping the dividends down in order to repay debt seems the best strategy to me.
- See more at: hxxp://www.-.com/content/small-cap-value-report-24-oct-csg-trcs-gbo-bmy-mlin-78420/#sthash.CsbCWUNY.dpuf

[hatter2] 25/10/2013 16:16

Had an order filled at a bid of 50.9p this afternoon; fairly happy to get these at this price but to be honest only a toe in the water as less than 2% of my portfolio. However, if I can get a return of better than 10% (includes risk)then I will be happy enough.

[cfro] 24/10/2013 18:18

Superb statement today. Ahead of expectations and plenty of potential to win new contracts too.

Thanks superstarDJ for the WH Ireland note and also the Westhouse upgraded target from markyjacob123. Very encouraging.

[markyjacob123] 24/10/2013 12:30

Superb statement. Ahead of expectations and scope for further upgrades for the 2015 numbers.

Westhouse Securities has also increased price target to 70p from 58p.

[jaf111] 24/10/2013 08:04

Excellent update...agrre with the 75p short term target which i expect to be reached by December

[cheshire man] 24/10/2013 08:02

Very nice :-)

[superstardj] 24/10/2013 07:59

W H Ireland comment:
This morning's trading update from CSG reads well, with increased activity across all the markets in the company's biggest geography, the UK, and positives of one kind or another across all the geographies.

We are upgrading our numbers by 8% on an LFL basis, the third upgrade this year; and note that adding back the financial unwind to the interest charge results in even greater upside. Pleasingly, with the extra stimulus to the numbers deriving largely from the UK, this is not purely a result of the improving UK environment – though this is certainly a driver – but is also a reflection of the success the business has enjoyed in new areas.

Self-help was clearly important in establishing the platform for success for the business, and continues to play a part, but we believe the company has moved on to a very healthy growth phase.

In the run up to the half year results in December, we remain Buyers on a new target price of 75p (60p) which puts the shares on a 2015E sector rating of c.13.5x ahead of probable upgrades in December.

[interceptor2] 24/10/2013 07:52

Happy with the update, should keep the momentum going here.

ic2...

[broadwood] 24/10/2013 07:21

Ahead of expectations. That'll do nicely.

[battlebus2] 24/10/2013 07:21

UPDATE OUT!
The Group's performance since the trading update at our AGM on 30 August has continued to be strong. For the reasons described above, trading operations have maintained the positive momentum referred to at the AGM. As a result, the Board anticipates that the Group's results for the year ending 31 March 2014 will be slightly ahead of management's expectations. Furthermore, the full year profit before taxation will also be increased by the GBP1m referred to above. Our efforts to achieve the objectives of our 3 year plan of turnover growth and margin improvement remain firmly on track.

[sirgainalot] 23/10/2013 14:20

Trading update was scheduled for mid-Oct (according to the last AGM statement). Expecting in this week.

Share price looks ready for the next leg up.

[norbert colon] 19/10/2013 10:39

Further to posts above, I know I am preaching to the converted here in this board but I have spent a few hours this morning researching acquisition valuation ratios in this sector (I must get out more...) and of 18 companies I have looked out (either engineering / professional services consultancies or PM / QS firms) the average price / sales ratio was 0.74.

This is a mixed bag of companies over the last 5 years hence taking a conservative view with CSG and using 0.6 x sales we get a valuation of 51.3m GBP or 76p / share (some 31% higher than current share price even after the increase this year) Even if we dont get bought out this provides a reasonable valuation 'floor' IMHO.

You wont find this sort of valuation anomaly with any other listed consultants (except WTM) including DRV who are all valued at or well above 0.6 x sales.

I will continue to sleep well at night.

[battlebus2] 18/10/2013 07:35

Yep seen that Norbert, no better time to buy than at the beginning of a recovery cycle. Ditto for Waterman Group.

[norbert colon] 18/10/2013 07:20

I see RPS have today announced an acquisition of OCE for 31m GBP (1.2 x sales) to expand their PM / Managed Services offering.



Seems this peer group (RPS, Atkins, Genivar) are all expanding into this area.

On a simple like-for-like basis such an acquisition of CSG would have to be at the 130p/share level (2.8 x current SP)

Just for info.

[cfro] 10/10/2013 18:07

50p is the next resistance point on the chart, but i dont expect it will be much to hold the share price back.

[battlebus2] 10/10/2013 16:51

Not a chartist but when 50p goes i hope we can get sharpish to 60p.

[scottishfield] 10/10/2013 16:39

useful, tks inter2 (have been buying in this week)

[interceptor2] 10/10/2013 16:36

I thought I would post a chart that shows the old 50p resistance level from early 2011. Normally I wouldn't expect an old resistance level over two years old to have that much influence. Once CSG can break above this level, I can't see the older resistance levels before 2009, causing much future effect.

ic2...

[broadwood] 10/10/2013 11:32

Moving nicely now.