Tuesday, November 22, 2011

Diary: tcg, gmg, icp, pic, opts

TCG - Thomas Cook Group

Thomas Cook down 72% today as of writing on fears of its finances. Readers may recall that I tipped this as "one to avoid" for 2011. Unusually for me, I have been remarkably spot-on for this share. It has fallen 93% YTD, vastly under-performing the market. I am, of course, chuffed to bits at having made a good call.

I can't help thinking that there's actually a viable business tucked in there, if not for the debts. Maybe they'll be a debt-for-equity swap, wiping out current shareholders. I wouldn't say that's a prediction, though, that would be too bold an assertion. I prefer the Delphic Oracle approach - where there's sufficient ambiguity in what I say to be proved right whatever the outcome.

My verdict on this badboy is: avoid. I couldn't rule out a dead cat bounce, of course. No-one can do that. Except for those that can.

A poster on today's Motley Fool article on TCG pretty much sums it up in a nutshell:
This company has large borrowings and negative net tangible assets. It is in a highly recession-prone industry and also vulnerable to international unrest. IMHO it will not survive.

GMG - Game Group

Beleagured retailer GMG drops another 15% today. I can't imagine there's too much doubt that we're in the end-game (no pun intended) on this badboy, and now we're just waiting for the inevitable. It's an interesting share, because there's a poster who I highly respect who bought in on this not that long ago. The theory was that it was a cigar butt that was so cheap that there was a statistical likelihood that a more normal valuation will prevail at some point in the future. It's sliding downhill fast, mind, so that looks like an increasing struggle.

ICP - Intermediate Capital

ICP up nearly 10% today. I own this pup, so that's the kind of thing I like to see. It's on a PER of 6.9, PBV of 0.6. The company announced its results for 6 m/e 30-Sep-2011:
As the majority of traditional lenders continue to retrench from the credit market, we also see considerable opportunities emerging to acquire debt at attractive discounts in a distressed market, to provide finance to existing buyouts to restructure their overgeared balance sheet and to offer reliable financing solutions for new transactions, thereby delivering high returns to our institutional investors. The progress made on fundraising in a difficult environment is also a testament to our fund management franchise
I wont bore you with the numbers they reported, they look OK, nothing noteworthy. I have to admit I'm a little perplexed as to work out why the market upped the shares 10%. The results seemed fairly predictable to me. This kinda reminds me of what I saw with RWD earlier this year - shares marked up strongly on results that contained no surprises.

My investment "thesis" (not sure I like that term) is that the stock is cheap, the management have outlined where they believe growth will come from, and I believe them. So, a pretty simple idea: cheap, with bags of upside.

PIC - Pace

PIC is having a bit of a rebound the last couple of days. Given how far it's dropped, it's probably about time, too. Couple of points from the FT:
Exane forecast Pace’s problems to erode its cash pile to just $35m by the end of the year, though it said concerns over the balance sheet were misplaced. “We believe Pace should be able to accommodate any bump in the road by factoring part of its circa $400m of receivables,” it said. Separately, Pace was facing relegation to the small-caps in next month’s FTSE review.
 I can resist including the following quip from some wag on the bulletin boards:
I can´t see how this stock will correlate with the wider market from the point is has reached. More likely an Asian weather index!
 Amen to that!

OPTS - Optos - Healthcare equip and services - 225.8p/£161m

Shares up 0.6% on finals. Looking pretty good. Revenues up 35%, profit after tac up 63%, and generally all OK, except that they have increased net debt, and cash flow from operating activities is down.

PER is 11.3, ROE is 23%, gearing is 25%, z score 3.71, so there's nowt to dislike there. EV/EBITDA is 5.3, so you're definitely not overpaying.

OPTS is looking like a pretty interesting GARP idea, admittedly a bit riskier than average, and analysts do expect a 12% dip in earnings for 2012.

Other notes:
  • unveiling Daytona, the next generation desktop retinal device, in 2012Q1
  • Optos' core devices produce ultra widefield, high resolution digital images (optomaps) of approx. 82% of the retina, something no other device is capable of doing in any one image
  • potential to offer opthamologists and optometrists the most powerful tools for disease diagnosis and management.
  • expanded salesforce
  • moving into new territories in Europe and Australi
  • newly launched device 200Tx addresses important export markets such as Japan
I don't own any shares in OPTS, but I must admit it's giving me the warm fuzzies. I can see it as part of a smaller-cap riskier but high-growth potential share.

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