Velosi Share Discussion Threads

[foodcritic] 03/11/2009 07:09

RNS Number : 7879B
Velosi Limited
03 November 2009

Velosi Limited

Agreement regarding Velosi Nigeria

Velosi Limited ('the Group'), the provider of asset integrity and HSE services to a number of major national and multinational oil and gas companies, is pleased to announce that it has reached an agreement with the executors/beneficiaries of Richard Ogunmakin's estate regarding the future ownership and operation of Velosi Nigeria.

Shares in Velosi Nigeria and Velosi Angola owned by Richard Ogunmakin's estate have now been acquired by the Group and as a result, operations in Nigeria are expected to recommence under a new local manager and we anticipate that Nigeria will again make a contribution to Group revenues from 2010 onwards.

The terms of the agreement are not expected to materially affect the performance of the group as a substantial portion of provisions had already been made in prior year accounts.

-END-

[foodcritic] 30/10/2009 13:11

I'm looking to find some more funds for this. Good buying opp soon imo.

[qs9] 30/10/2009 13:09

Looks that way, hopefully forced seller!

[marvelman] 30/10/2009 13:02

You can buy below the mid now at 82.95 so probably futher to fall still. Clearly a forced seller.

[marvelman] 30/10/2009 12:58

And this from the interims:-

"the Company's strong underlying operating performance has allowed
us to strengthen our financial position. As a result the Company has a strong
balance sheet with net cash of $19.7 million, remains cash generative and
continues to increase both revenues and profitability."

An increase of $2 million dollars in cash and this saw the share price go up 50%...people are short term these days but also short sighted when it comes to this company. That balance sheet gives me all the comfort I need. Very pleased to see a company that has the steadfastness to conserve cash rather than fritter it away in small dividends to keep the short termers happy.So many companies these days would rather borrow money to pay out in dividends...ready to add very soon now.

[melton john] 30/10/2009 12:40

I've just refreshed my memory on the AGM statement, I think this bit is reassuring.

"While the Group is in a strong position and is continuing to grow revenues and
expand geographically, we recognize we are operating in a more challenging
market environment and we have adapted the business to reflect this.


A key focus is ensuring we maintain a strong cash position. Currently the Group
has maintained a strong net cash position of approximately US$17 million
and very low gearing levels of 1%, providing a secure financial platform. In
addition, we continue to focus on ensuring the business operates on a
streamlined cost base. In terms of acquisitions we have adopted a more
conservative approach whilst ensuring we do not forego commercial opportunities.


Building on our success in 2008, the current year has started well and as a
result we are trading in line with market expectations and are confident of
delivering a good performance for 2009".

This was end of June when the shareprice was about the same as now and there has been no announcement of a material change so I'm happy to keep 'em and top up as the opportunity arises.

[marvelman] 30/10/2009 12:18

Nice to see the long termers continue to see the real picture.

[melton john] 30/10/2009 12:15

Hi chaps, I agree there's nothing inherently wrong here. Just a combination of poor results from Shell and market jitters causing weak holders to stop loss or take profit. I'm also in for the long game and will top up over the next few months. They are holding on to contracts and getting new ones, although margins will be under pressure I'm happy that the future if not orange is still bright.
I'm buying and holding for the day that they get taken over by a major player.

[darola] 30/10/2009 10:34

A Warren Buffet share this - buy it and hold.

[marvelman] 30/10/2009 10:07

bookbroker.

Its just not "newsy" enough for most. You don't see RNS's every other day announcing orders of tuppence a time as so many companies do to keep their share price up. But I havn't seen a stronger balance sheet in any other company apart from VLE (which is a different story altogether). These have no debt, 25% of their market cap is cash, and orders going up to 4 years into the future.Very frustrating but no way would I want to be out of them and am waiting to see where the share price rests before I add even more.Regards.

[bookbroker] 30/10/2009 09:55

What's the problem with this co. , a fair statement last time but downhill ever since, is this a reflection of the drive by oil cos. to cut costs, and if so has discounting become a major factor. I noticed the mention of the 'D.' word in a recent statement. Looking at their balance sheet strength and revenue I would have expected a higher rating, beginning to wonder. Falls have been on such low volume and maybe market size small, however the downward moves starting to cause a slight concern.

[foodcritic] 30/10/2009 06:52

Thanks taylor20

[taylor20] 29/10/2009 08:45

Tipped in AIM & PLUS Newsletter:

Buy Velosi (VELO) at 91.5p

THE BUSINESS

Listing on AIM in august 2006, raising GBP10 million in the process, Velosi is an international provider of quality assurance and quality control services to a number of major national and multinational oil & gas companies. Services provided by the firm aim to help companies maintain their existing plant, keep it working to the best of its ability and ensure certain legislative and health & safety requirements are met. Customers include Shell, Petrobras, Chevron, Repsol and BP as well as a number of engineering contractors. While the firm is heavily exposed to the oil and gas sector it also provides its services to the mining and nuclear industries.

As of today the firm operates through five main regional headquarters located in Houston in the US, Reading in the UK, Kuala Lumpur in Malaysia, Johannesburg in South Africa and Abu Dhabi in the United Arab Emirates. These are supported by smaller regional offices, with the company operating from 36 countries around the world. By revenues the Middle East is Velosi's largest area of operation, generating 38% of revenues in the first half of the current financial year. at 21% of revenues, Europe is the company's second largest area, with Africa third at 17%. In fourth and fifth place respectively are Asia & Australia at 15% and Americas and the former Soviet Union at 9%

No trader's commission, No quarterly account charges, No inactive charges

CURRENT TRADING

Results for the six months to 30th June 2009 showed continued growth for the period despite the economic downturn. Driven by a 100% retention of existing contracts and by new contract wins, revenues grew by 15.4% to $89.2 million in the half. Pre-tax profits were up by 10.4% to $7.9 million as margins were affected by a change in the business mix and by the economic conditions. Basic earnings grew by 8.2% to 11.2 cents, being affected by a higher effective tax rate, but no interim dividend was recommended. Velosi has stated that it expects to pay a dividend for the full year, subject to performance.

At the period end net cash was $19.7 million, up from $17.8 million six months earlier and up from just over $9 million a year ago. Cash balances were boosted significantly in March 2008 when the company raised GBP4.42 million to spend on the working capital needs of several new contracts and for further geographical expansion.

By geography, there was a particularly good performance from the Middle East where revenues grew by 26% to $33.8 million. This was on the back of several new offices being opened in the region during 2008 and a number of new contract wins. Sales in africa also grew strongly, hitting $15.2 million, up from $8.7 million, having recovered from problems experienced last year in relation to the ownership of Velosi Nigeria, after its general manager and major shareholder was shot dead. Across the other regions sales were either down slightly or relatively flat on the first half of 2008.

Velosi was positive about the outlook stating that it is confident of trading in line with expectations for the full year. The company has traditionally seen revenues weighted towards the second half and this year is not expected to be any different.

OPPORTUNITIES AND THREATS

The main concern for the firm must surely be the weak global economy, which as the interims showed, has put pressure on margins as projects across the world being delayed or even cancelled. While in the industry as a whole spending on oil & gas development is widely expected to fall this year, capital expenditure by the major oil and gas players has held up relatively well so far in 2009. BP recently announced, in results for the first quarter of 2009, capital expenditure, excluding acquisitions and asset exchanges, is expected to be less than $20 billion for the year, down only slightly from 2008. Chevron has a $22.8 billion capital and exploratory spending program for 2009, unchanged from 2008. Shell recently said that it was on track to spend $31 billion to $32 billion in 2009, slightly up from 2008, but expects to cut capex by around 10% in 2010.

Although Velosi is not directly exposed to changes in the oil price, it has an indirect exposure via changes in the development expenditure of its major customers made on the back of any price fluctuations. Since dipping below $40 a barrel at the end of 2008 the price of oil has recovered in 2009, having been trading around $70-75 barrel mark for the past two months. While this is positive for Velosi the reason for the price rise has widely been put down to falls in oil supply and a weakening of the US dollar rather than to an increase in demand. As such, the price rises have not fed through into higher capital investment. The outlook remains challenging, with a recent report from the Centre for Global energy Studies saying there was likely to be "little or no sustained upward pressure on oil prices until global economic recovery is firmly established"

VALUATION

Charles Stanley is looking for revenues of $191.5 million for the full year to December 2009, with pre-tax profits of $16.1 million and earnings of 13.44p. The revenue and profits figures were trimmed slightly following the release of the interims but earnings forecasts were maintained due to a lower expected tax charge and a lower minority interest payment. Further growth is expected in 2010 and 2011 when earnings are forecast to hit 14.43p and 15.88p respectively.

At the current price of 91.5p the shares trade on a current year multiple of 6.8 times, which falls to 6.3 times in 2010. In addition, if the 2008 full year dividend payment is maintained the shares offer a yield of 0.6% - not attractive in itself but reasonable considering that the company prefers to use its retained earnings to fund the development of the business. BUY.

[bookbroker] 22/10/2009 13:14

Just needs a gentle push by the mms.

[glasshalfull] 22/10/2009 13:11

Thanks Koolio. I'll look forward to your update.

I've bought a few more. With oil price rise possibly assisting with sentiment not to mention increased revenues hopefully translating themselves into increased investment with VELO.

PER 6 and $20m net cash on the B/S.

The Outlook mentioned in their Interim Statement also indicated that they were more than comfortable with forecasts for remainder of the year.

"We are pleased with our trading performance for the first half of 2009 and with the first three months of the second half nearly completed, together with our visibility on future revenues, we are confident that we are trading in line with expectations for the full year.
Looking ahead, our order book remains strong and we believe we are achieving our aims of delivering a truly global service offering, providing a range of increasingly diverse and higher margin services."

Regards,
GHF

[koolio] 20/10/2009 17:13

GHF.

I don't think that it is a coincedence, if I see the name of someone who I respect posting on a board I will have a look at that company. If the management have a history of honesty and ROCE is acceptable etc, I may have a few shares.

I always form my own opinions, that said, I think that there are some highly successful individual investors on these pages who put a lot more time, effort and resources into investigating a prospective company than I can. So sometimes I follow the smart money. I hope thats not considered freeloading.

I don't do shorting or charting, I consider myself a long term investor not a trader.

Tis on my list of things to do regards visiting Velo, Just want to see how it's run and what they see are there main strengths. I will put a few lines up on the board to let you know how it goes.

[darola] 20/10/2009 15:55

Any chartists out there - surely this has hit resistance, how are the dma thingys looking?

[glasshalfull] 19/10/2009 18:04

Good to see you in these Koolio.

I'm bumping into the same investors on multiple threads. Can't all be coincidence....Can it?

Will you pop over to see the lie of the land?

Regards,
GHF

[koolio] 19/10/2009 16:30

I dipped a toe in the water last week.
Safety and testing are the future as far as I can see. It's hard to argue with safety, somebody recently said to me "it's a bit like the tax system it will always catch up with you"
I didn't know it when i bought the shares but they have an office just up the road from mine in Abu Dhabi.

[glasshalfull] 19/10/2009 15:16

A few of the oil service companies ticking up today that Ive holdings in...NBI & HMS.
VELO tick a lot of boxes but remember they are substantially up on year lows.
As mentioned, patience required and dips provide ideal opportunity to build a holding. I've tried to get a few under offer today but unable to get hold of them at similar price to last week (looked like there was a bit of stock washing about). Now wish I had bought more.

Regards,
GHF

[melton john] 17/10/2009 11:20

I'm still in too. Patience will be rewarded. I've sold a couple of companies through lack of action in rising markets only to see a rise after selling. Management seem very strong and last statement from chairman very encouraging. Not like CHNS shooting themselves in the foot.

[qs9] 17/10/2009 10:57

GHF, great, good to have a few on board. Sense that VELO need to get their own IR sorted as infrequent RNSs are not going to get it its proper rating, they need to be around the city shouting the story!

[glasshalfull] 16/10/2009 15:19

Not passed us all by QS9.
Just availed myself of a few.

PER 6 and lovely net cash position.

Regards,
GHF

[qs9] 16/10/2009 07:35

seems to have been passed by this one?!

[bookbroker] 15/10/2009 13:43

I always get the feeling that cos. such as VELO., RCG, etc suffer in terms of share price due to the lack of interest from UK institutional investors. They may have London listings, but essentially they are domiciled abroad and this has a bearing on the valuation and rating. Unfortunately it is not on the radar of major investors, we live in hope, also probably difficult to accumulate any meaningful holding.