Tclarke Share Discussion Threads

[cc2014] 15/11/2017 16:39

No big seller today and he had several hours to take the volume off from 71.5 to 72.25 on the bid.

So, maybe he had finished. Maybe maybe.

[cc2014] 15/11/2017 11:39

It's bounced now back to where it was yesterday and more strangely on a day when the sector isn't doing very well. Kier down 2.5%, GFRD down 0.9%.

I would really like to understand what's going on but I suspect it's as simple as someone wanted out before the results and the market couldn't absorb the volume they wanted to shift. I think we also entered the area of sometimes when stocks are falling fast, instead of drawing out buyers more and more selling occurs.

I have been here so many times where I spend huge amounts of energy trying to figure out why such and such a share price seems irrational. History shows me that although a share price can remain irrational for years sometimes, if the directors are delivering profits it sorts itself eventually.

As long as I'm getting the dividend stream I'm happy to be patient.

[tuscan4] 15/11/2017 10:51

Just to cheer ourselves up,Bowman & Kirkland won the second highest number of places on the £8 bn. Schools Framework announced yesterday . CTO North are active with this company. See P 26 of the Annual report.
Slightly ominous when a share price falls ahead of an update like this. Could be just poor liquidity/ Brexit nervousness/ concern that the order book may be falling/problems in specific contracts etc. If none of the above materialize we can expect a decent bounce.
If I were the Directors I would be concerned (assuming nothing untoward is going on) about the obvious mismatch between market value and intrinsic worth.

[cc2014] 15/11/2017 08:39

Got a few in the end at 70.7. Reckon the MM ripped me off but that's life.

Edit: The price action confounds me. The push down to the 70 area on the offer and the refusal to fill orders would usually indicate the MM's only want to collect stock. I'm guessing we will see some delayed sells coming through after 9. Possibly some delayed buys too.

So, the question is now whether it was deliberately pushed down as a buyer wants in and/or whether yesterday;s seller will come back or neither lol.

[cc2014] 15/11/2017 08:18

MM's absolutely refusing to fill my buy order this morning. It's not usually like this.

[igoe104] 15/11/2017 07:59

CTO continue to be picking up work.

from the twitter feed.

Another busy day in our Engineering workshop - These fixing and alignment templates will be used to mount 20 kilometres of overhead electric pylons for Morgan Sindall.


Surely a massive correction, has to be on the cards.

[spooky] 14/11/2017 22:47

CC2014 - Which company downgraded them on Nov. 2nd?

[basem1] 14/11/2017 22:08

Could be prone to a bid at these levels ?

[effortless cool] 14/11/2017 21:18

I'm with Dozey3 on this. The value looks obvious, but I am concerned about CTO's predilection for nasty surprises.

[cc2014] 14/11/2017 19:08

I'm sorry I don't have that info Dozey. The only possible reasons I can think of are perceived fall in the high end type of work CTO do in London due to lack of confidence and the slower increase in annuity rates than was expected a month ago.

Tbh I don't particularly see either impacting that much from where we are now and as for the slower increase in annuity rates, this also means low interest rates for companies to invest, which I would have thought would encourage investment.

It makes no sense to me. A P/E of 4.75 and if I re-do based on a profit of £9m for 2018 (basically no bad first half of the year a bit of growth and Eton) that would give a P/E of 4. If things go well at the four new offices £10m looks not unreasonable which is a P/E of 3.7.

And on top of that net cash reported at half year and year end and based on the interest payments it looks to me as if although they are using the £3m revolving credit facility, the overdraft facility isn't being used, all of which becomes irrelevant as there should be enough cash flow from profits,even after purchase of Eton to not even need the revolving credit perhaps by the end of 2017, perhaps might take another 6 months.

[dozey3] 14/11/2017 18:48

CC, did they give a reason for the downgrade? Presumably Brexit fall-out as you say, in which case the question is how low can it go? We shall see :-(

[cc2014] 14/11/2017 18:32

My guess Dozey is the fall is due to the analysts downgrade on 2nd November. Whilst there is no doubt that the selling accelerates from this date there was selling before this date too.

Other than this it's all Brexit woes. Anything Brexit related with high gearing is getting battered. I wouldn't call CTO highly geared but the pension fund deficit is an annoyance which although it should have improved lately, is about £10m higher than I'd like to see it.

[cc2014] 14/11/2017 18:18

So, after today's fall I went and did some research.

Analysts consensus for 2017 is an EPS of 12.4 and a dividend of 3.5p (5.0%) This equates to a profit before tax of £6.5m. So, a P/E of 6.

Analysts consensus for 2018 is an EPS of 14.74 and a dividend of 3.85p. (5.5%) This would equate to a profit before tax of £7.74m. So, a P/E of 4.75

Personally I think the profit figure for this year is low by about a million and low by 2 million for 2018. Let's put that aside for a moment.

Only one of the analysts to my knowledge provides a recommendation. On 2nd November 2017 the recommendation was changed from overweight to hold. In other words downgraded.

I then looked at the others in the construction sector.

Galliford has a P/E of 20 and a dividend yield of 8.2%
Kier has a P/E of 68 (!?!check) and a dividend yield of 6.4%
NMD (market cap £35m) has a P/E of 10.5 and a dividend yield of 1.8%

[dozey3] 14/11/2017 17:51

One would have thought the fundamentals would mean that the market would soon mop these up in quantity near the 70p mark: net cash, high yield, low PEG - all according to Sharescope. The fraud case should no longer be influencing sentiment, and the Eton takeover seemed to be a perfect fit. I can understand an executor sale for example unloading large numbers of shares in a hurry, but not the null response of the market to an apparent bargain.
Could it be that the healthy order book reported at the interims is tailing off? Forward visibility was never great, especially as slow payers seem quite common. Or is it the microcap nature of CTO, which would obviously sit better on AIM where
IHT-relief hunters would soon bid it up.
Seems to me there is something lurking in the background not quite right, with insiders jumping into the lifeboat, which stops me adding to my modest holding. Time for an update from the BoD methinks.

[cc2014] 14/11/2017 16:25

That's another 76k sold and whoever wants out must clearly know the market can't absorb this sort of sell volume at this speed.

[cc2014] 14/11/2017 08:39

Presumably someone took the day off Friday and we didn't see any selling then.

Someone is in a hurry again today. 26k dumped at 8:25 and another 16k at 8:29, although the second one could be a triggered stop.

Roll on the IMS

[cc2014] 08/11/2017 13:31

Thank you Tuscan. Your thoughts on MIFID II and their impact on smaller companies hadn't occurred to me. Particularly the unbundling of research from execution services.

Maybe this would account for some of the selling. I have the privilege of being able to watch L2 all day and whoever is selling CTO isn't doing in such as way as to maximise their exit price. Indeed from what I've seen the MM's appear as confused as I do as to the price action over the last month and most of the time don't want anything to do with this stock, thus the crazy spread at certain times.

We can see another 24k trade at 73.1 today. It's clearly a delayed sell which has now been absorbed but one wonders if whoever is selling has yet managed to sell whatever they want to today

[tuscan4] 08/11/2017 12:50

I too am a patient investor. 4 years in January since my first purchase. Unfortunately the outlook for the construction sector has deteriorated in recent months,so it is understandable that a steady drip of selling is taking place.
Could it be that technical factors are also weighing on the CTO price? MIFID II in January will negatively impact interest in smaller companies and perhaps the few remaining investment advisors left in the City who are able and willing to look at the CTO's of this world may throw in the towel.
I retired from stockbroking nearly five years ago in the face of rising regulatory onslaught, and I suspect that the new breed of "advisors" must sing from a fairly bland song-sheet and have little appetite for sub £100m companies. Indeed , the appetite for investing in individual companies is under attack, as risk levels are racheted downwards.
Current CTO selling may be merely partly the result of portfolio cleansing and not specific to the company.
Value will out has always been part of my investment philosophy, however , with the rise of Passive investing, which will never encompass smaller companies, we must now assume that there will be a growing disparity between large/small, liquid/illiquid stocks . For the smaller quoted company this opens the way to acquisition, and perhaps CTO could be vulnerable on this count but after 100 years plus as an independent company one shouldn't hold ones breath.
If ,as I believe CTO will come in with c £8m pre-tax, a strong balance sheet,a diminishing pension problem as rates go higher, and a business model which will help build an economic moat around its market position, then the shares are clearly outstanding value sub 100p. Patience will be rewarded IMO.

[cc2014] 07/11/2017 17:35

I have to say I'm a little frustrated in that the selling continues. No one big trade today but a couple large enough to move the move down to the 73 area for a few hours.

If it's the same seller every day and he's going to sell 30-40k every day until the trading update I can't see it continuing to bounce back to 75 over and over.

On the other hand it doesn't really matter to me as I expect to be in this trade for 3-5 years so the vagueries of one or two big sellers are kind of irrelevant.

It would however be nice to see a day when someone doesn't sell at this level

[xajorkith] 07/11/2017 10:33

Thankfully, not long to wait for an update here.

IMS on 17/11 should help clear the fog of uncertainty hanging over this.

[cc2014] 06/11/2017 17:00

And the selling continues. Another 42.5k dumped by someone at 73.5.

But we end the day where we started

[cc2014] 03/11/2017 16:56

Another load of trades today at what I consider knock down sale prices, with whoever wanting to sell shifting another lump today.

I'll be glad when they've finished.

[cwa1] 03/11/2017 11:30

Morning all. Just picked up a few at 74p. Hoping that longer term this will look a sensible price to get in at. Fingers crossed for the IMS bringing something either good, or simply to settle nerves! Good fortune to all holders.