Xp Power Share Discussion Threads

[woodcutter] 25/7/2014 10:20

some interesting thoughts guys.

I'm inclined to look for companies who carry debt which is serviceable and will make a judgement based on the Net Debt/EBITDA ratio.

As an example; a few years ago FIF was trading around 16/22p and heavily indebted but it had fantastic cashflow, so was able to service the interest and was also reducing the debt yoy by a decent amount. No one was buying the stock but it was clear that as the debt reduced the earnings were going to improve, which they subsequently did and as a consequence the share price rose threefold.

Debt can be a good provider of value if looked at in the right context particularly with interest rates at their current level. What's more i do not believe we are going to see a rise in interst rates anytime soon despite Carney and a few others making noises in this respect. There is still too much debt out there and political pressure will prevent a rise at least before the UK general election and the 2016/17 presidential election.

So my conclusions are we are still in an economic cycle with low interest rates which will be around for sometime yet and on that basis there are companies with serviceable debt that are worth a look, particularly if they have strong margins.

aimho.

Woody

[thorpematt] 15/7/2014 18:52

My valuation is close to PHs (a tad higher in fact).

I generally utilise the writings of Ben Graham for this purpose and indeed owners earnings are not earnings if they do not consider interest payments. Companies without such expense have far more cash generation with which to enhance growth, plough back or return to shareholders.

Nowadays folk often quote PER as the king of all valuation metrics but where they fail most in recognition IMO is a)assessing future earnings outlook (which justifies differing PERs and b) EV versus MC (again another function of debt).

If we take DEB as an example, interest payment and debt is high and thus EBITDA is a poor measure. Earnings after interest being much lower. Further, if we consider that to buy the company (become THE owner) one would have to pay the EV price, we see that DEBs real PER is twice what ADVFN lists it to be. Hence I value it at about 55p.

XPP on the other hand has a very strong record of consistent growth, a future market which is growing, a market share which is growing, a margin which is growing and a debt which is shrinking to zero rapidly. Hence its true PER is well short of a sensible valuation.


All IMO DYOR etc.

[losos] 15/7/2014 08:45

sharw - "The reduction in debt strengthens the ability to pay dividends"

I am a great believer in keeping debt low, in fact I can see no valid reason to have any debt. Lord Weinstock built up GEC with very little reliance on it (Shame the muppets who followed him destroyed the business)

The problem I see is that the financial institutions badger company managers to take on debt since it ultimately benefits them (The institutions) not the company itself which has the burden of interest payments to contend with.

Yes, that's a simplistic view I admit, but often the simple ideas are the best.

[rocheberie] 09/7/2014 14:21

Small mention in Daily Mail Finance section giving main figures of trading update and also noting that Peel Hunt's target price is 1840p, just under 20% above today's price

[sharw] 08/7/2014 13:00

Almost certainly before the year end. Here is the net debt record:

£m
30/06/12 15.0
31/12/12 10.6
30/06/13 8.5
31/12/13 3.5
30/06 14 1.6

The reduction in debt strengthens the ability to pay dividends, making this one good for yield at the current price.

[owenski] 08/7/2014 08:41

I calculate this should be debt free within 3 months?

[fozzie] 08/7/2014 07:37

They never 'glamourize' their trading statements, just a presentation of facts with no spin. I am disappointed at the move down over the last few months with the market but this is a tuck away long termer that just keeps delivering.

[woodcutter] 08/7/2014 07:31

Looks a pretty decent trading statement to me.

[woodcutter] 07/7/2014 10:19

It's following the index at present, lets hope it's near it's low!

WC

[owenski] 07/7/2014 10:03

The company should be debt free also very soon, not only does this support the dividend profile but Duncan Penny was talking about the possibility of an aquisition.

The company reports tend to be factual with a reasonable amount of forward visibility, so they tend to be accurate and no nasty surprises.

Agree, its a well run business

[woodcutter] 07/7/2014 09:42

a bit risky before the trading update but i've added another 500 today. Div pay date is 10th july so i expect divi reinvestments to drive the price a little too, particularly as it's illiquid.

post 1952 - there's a lot to go until it meets resistance of the downward channel at 1600p and with decent support at 1400p it looks to have decent risk reward profile to me.

Anyway it looks like a well managed business and on a fundamental level i've decided to go LTBH barring any disasters.

woody

[tudes100] 07/7/2014 09:09

Good to see a few familiar names here.
I bought in a few weeks ago encouraged by last trading update which I thought was the most positive for some time (as well as the fact it seems undervalued/decent yield/had a decent chart).
Most interested in outlook statement tomorrow and margin growth.

[woodcutter] 05/7/2014 00:51

TM

VLX is a basket case............loads of exceptionals yoy and badly managed imv. so agree there, lets hope we make a few bob here.

i only bought 500 but if it breaks through upper trend resistance i'm a bigger buyer.

woody

[thorpematt] 04/7/2014 13:15

Woodcutter
Fair summary I think. A very well run company IMO who unlike (let's say e.g. VLX) has grown all aspects consistently (EPS, revenues, NAV etc). Really producing owner's earnings over a long period.

Latterly some cap-ex into factory facilities and as you say increasing own products (which in themselves create brand loyalty - or hand cuffing depending on how you look at it) now completed showing potential for higher margins.,

Although a market leader still only a small proportion of global sales and thus more to come.

My intrinsic value calcs show this VERY undervalued. Concur with you your chart.

[woodcutter] 04/7/2014 10:36

Been watching XPP for a while now and decided to make an initial purchase today. The FA looks very good, strong margins and solid P&L, strong balance sheet and good cashflow. The growth in own design revenue is also likely to result in even better margin performance. The environmental power issues should drive growth too. The dividend is also appealing and gives some insurance and support.

From a TA perspective it looks to have settled at potential support and the matching lows coupled with the MACD and RSI divergence give some suggestion that there might be a reversal from here.

aimho

Woody

[kingjames] 04/7/2014 08:48

Has anyone asked the co why a director sale on 16 May was announced on 1 July? Looks very poor.

[penpont] 03/7/2014 00:22

Trading update for the six months to 30 June 2014 due on 8 July
2014.

[matt123d] 25/6/2014 14:35

Triangle expansion a thing of beauty.

[matt123d] 24/6/2014 15:27

Perfect short candidate here.

[owenski] 23/6/2014 12:59

Although dealing with Taiwan, does give credibility that XPP are likely to be in an upcycle.

[felix99] 19/5/2014 18:51

time to buy more Fozzie. I might tomorrow but its a mugs mkt to buy anything at present

[fozzie] 19/5/2014 16:41

Cant quite believe where we are here. We should have been reaching for all time highs but instead we are looking weak. 10,000 traded and down another 2.5%, baffling.

[cockerhoop] 12/5/2014 09:44

I assume they both picked them up from Larry Tracey's recent sale.

[the juggler] 12/5/2014 09:37

Standard Life increasing their holding here too. All bodes well for continuing success here.

[the juggler] 09/5/2014 16:14

Nice RNS Mawer investment have almost doubled their holding.