Wednesday, January 19, 2011

DPLM.L - a buy

DPLM.L (Diploma) is engaged in the following activities:
Diploma PLC is engaged in the supply of specialized technical products and services. The Company operates in three business segments: Life Sciences, Seals and Controls. The Life Sciences sector businesses supply a range of consumables, instrumentation and related services to the healthcare and environmental industries. The Seals sector businesses supply a range of hydraulic seals, gaskets, cylinders, components and kits used in heavy mobile machinery and specialized industrial equipment. The Controls sector businesses supply specialized wiring, connectors, fasteners and control devices used in a range of technically demanding applications. The healthcare businesses are managed through Diploma Canada Healthcare Inc (DCHI). On January 12, 2010, it acquired 8.2% interest in Somagen Diagnostics Inc. On July 30, 2010, it acquired 80% of Big Green Surgical Company Pty Limited. On September 8, 2010, it acquired All Seals Inc. In December 2010, the Company acquired Carsen Medical Inc.

During 2010, it had an ROA of 9.6%.  Its current ROE is 15.7%, and its median ROE over the last decade is 14.9%. Its minimum was 12.8% and maximum was 17.3%. So, it has been earning consistently good ROEs. It is currently a top 10 holding of (BNY Mellon) Newton Smaller Companies, rated 4 stars by MorningStar.

I bought into DPLM at 307.5p today (inc. transaction costs), when the Footsie was at 6030. DPLM has a PER of about 15. EPS is expected to rise by 15% for y/e 30-Sep-2011, and another 8% in y/e 2012. Overall, analysts rate it a "buy", although on 12-Jan-2011 Numis Securitas downgraded it to "Add".

Some highlights from an interim management statement on 12-Jan-2011
The continuing strength in revenues and operating margins, together with contributions from recent acquisitions, provides confidence that the Group should achieve good progress in 2011. 
DPLM has a mkt cap of £340m, PBV of 2.5, Graham Gearing of 67%, ROC of 89%, and GEY of 10.8% (Greenblatt Earnings Yield).  It has a z-score of 6.10, and negative gearing. It has positive net current assets. Non-current liabilities amount to 10m, and it net profit for y/e 2010 was 21m. So it has an excellent balance sheet. DPLM is ranked 18 in a list of 377 companies over £300m by Greenblatt ranking, putting it in the 5th percentile.

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