Tuesday, January 31, 2012

CRE- Creston

Let's see if I can replicate my success with IDH (Immunodiagnostic) (up 19% since I highlighted it!), with CRE.L (Creston).

CRE was first highlighted extensively in a post by ExpectingValue (many thanks!) in July 2011:
The group itself is a ~£66m market cap, diversified marketing and communications company ... marketing and general consultancy ... advertising, both digital through mobile, social media and general web platforms, offline, and in-store/promotional activity
Sounds like the kind of people for whom you'd slam the phone down mid-conversation.

CRE trades on a PER of 3.3, PFCF 4.5 based on full results. Clearly, all isn't happy in the world of annoying phone calls and jiggling-baloney spadvertising, or whatever it is they really do. Their IMS on 27-Jan-2012 contains the deadly words:
Despite this revenue growth, Headline PBIT is expected to be slightly below that of the prior year
The interims issued on 30-Nov-2011 showed negative net cash flow. It had net debt of £5.8m at the interim stage, and the latest final results showed a net profit of £2.3m, and net cash flows of £8.0m, so we're not at distressed levels.

Over the last 5 days, the share price has dropped 28% off the black of the recent IMS. It reached a hig of about 122p in 2011, and made it down to 46.5p within the last couple of days. Looking at the charts, it seems that from about June 2011 Mr Market was somewhat prescient about the trouble ahead.

The RSI indicates that the shares are heavily oversold (although with a drop of 28%, it would do!), has been in downtrend since July 2011, trades on a PER of 3.3, and I think we've just witnessed an exhaustion gap. So, if you're brave, and don't mind holding your nose, now might be the time to buy.

I just want to emphasise that I have no position in this company.



Lewis said...

Hi Mark,

Oh dear! Another one of my significant fallers.

The group benefits from a very long-term client portfolio, like many of the media companies, so it growing revenue is rather unsurprising, especially with the acquisitions!

My suspicion is that the market doesn't really believe the profit figures or management spiel. Cash flow (IIRC) is still negative, and the following suggests even management recognise tough times are here to stay:

"Appropriate actions have begun to align operating costs to the lower expected sales levels, the effects of which will predominantly be realised from the start of the new financial year."

Priced in? I think so. That's what I always say, though!

Mark Carter said...

Thanks Lewis. Frustrating, isn't it? I'm hoping for a good bounce out of these badboys. Fingers crossed!

Kudos for the initial writeup, BTW.