Wednesday, January 19, 2011

DNO.L - Domino Printing Sciences - a weak buy

DNO is a bit unusual for - it's my first "growth" share - i.e. something on a high PE that isn't a cyclical in the dog house. DNO is one of the top 10 holdings of Aegon UK Smaller Companies, which has a five-star rating by Morningstar.

Here's the business activities of DNO:
Domino Printing Sciences plc is a United Kingdom-based company engaged in the research and development, manufacture and sale of industrial printing equipment, controllers and consumables for the printing of variable information. It develops, manufactures and sells a range of products and solutions, which enable manufacturers to code, identify, mark or personalize the products and packaging. The Company’s subsidiaries include Alpha Dot Limited, Domino UK Limited and Domino Printing Sciences QUEST Trustees Limited. On June 22, 2009, the Company completed the acquisition of Labeljet - Comercio e Industria de Etiquetas, S.A. (Labeljet S.A.) and it’s wholly owned subsidiary Marque TDI - Technologias de Codificacao S.A. (Marque TDI S.A). On May 20, 2009, the Company disposed certain assets of Domino (Australia) Pty Ltd to Insignia Pty Ltd. During the fiscal year ended October 31, 2008, the Company completed the acquisition of Alternative Printing Services GmbH. (APS).
 DNO is currently rated a "strong buy" by analysts. EPS growth is expected to be 4% in y/e 31-Oct-2011, and another 9% growth is expected in y/e 2012. It is currently trading on a PER of 17, although this is expected to be 15 for y/e/ 2012 (I think there's going to be more shares in circulation during that period).

It has a z-score of 7.46 - very high. It has negative gearing (-28%). It has positive net current assets, and non-current liabilities of 12.9m - amply covered by net profit of 37.1m for y/e 2010. For y/e 2010, it has a ROE of 22.9%. During the last decade, its maximum ROE was 22.9%, its minimum ROE was 14.5%, and the median was 16.8%.

Some highlights from their preliminary statement for the year ended 31-Oct-2010:
Record sales and our 32nd consecutive year of revenue growth ... Investment in Research and Development increased by 36 per cent ... I am delighted to report that Domino has again achieved record results in terms of sales, profit and cash generation. ... Whilst economic concerns do remain in Europe, our strength in the fastest growing regions of the world, China, India, South America and Eastern Europe, gives us confidence as we enter 2011. ... The combination of an exciting range of new products and additional investment in selling and marketing, together with a strong balance sheet, gives us confidence in the future.

DNO is ranked 40 in a list of 377 companies over £300m by Greenblatt ranking, putting it in the 10th percentile.

I bought in today at a price of 652.2p (inc. dealing charges), and the Footsie stood at 6030. DNO has a mkt cap of 713m.

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