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Market Snapshot: Drifting Lower
The Stock- Picking Performance so far………………..
Performance Review on : Wednesday 27th May on OMG!,Newsletters on ADVFN
PLUS: Preview &Reviews
PTCM- 7.5p – Double growth;
ETQ- 327p- A niche premium ?
This Week…
… GDP will be reported on Thursday and is expected to improve to 0.4% from the pre-election 0.3%. On Friday UK Consumer Confidence is announced and UK growth is sensitive to consumer spending, particularly with European uncertainty.
Markets are not discounting Greece’s potential exit from the Euro after 5th June ,which could be Loan Default Day, as it’s assuming a restructuring agreement will be reached. Germany report Consumer Confidence on Tuesday with Unemployment on Friday.
The US report Employment and GDP on Thursday and if the economic temperature raises an increase in US interest rates would cool it down.
…..Last Week’s……
…… the top performance slot goes to ….. ETQ up 8% !!!, followed by the FTSE Small Cap at 4,781 which improved 1.5%, then 3rd place goes to the FTSE 100 at 7,031 an 0.84% improvement. Trailing the pack was the FTSE 250 up 0.81% and the Aim All Share improving 0.24%.
The UK reported the ‘right-type’ of Deflation where falling prices reflect external forces and not a reducing domestic economy. There was stronger than expected Retail Sales growth at 1.3% reported on Thursday, with further good news of a 23% reduction in the UK Public Sector Net Borrowing to £6.8 billion.
The US, however reported a 0.3% increase in April’s CPI which was higher than expected and running at an annualised 2.6%. This leaves the Fed less scope to delay a raise in Interest Rates from near zero, which would signal a re-basing of world economic growth prospects.
Drifting down with low volumes, seems likely.
Pause for Thought
Good deflation is when prices fall in response to favourable global price falls. Bad deflation is when price fall due to a lack of economic demand.
One Company… One Recommendation: Wednesday 27th May
Preview/ Review
Flowgroup- 28.125p, Finals on Tuesday 26th -£21m raised at 28.5p – on watch list
Porta Communications (LSE:PTCM)
7.25p (7-7.5p)
Mkt Cap: £19m
Next Results Finals Thursday 28th
Porta, the international marketing and communications groups is expected to double last year’s fee income as its Public Relations (PR) – financial, corporate, consumer, public affairs and research division- is reported to be doing particularly well, with its Newgate and Redleaf brands.
As part of Porta’s strategy of building critical mass across the marketing communications mix, two acquisitions were made towards the end 2014 and will make a full contribution in the current year to December 2015.
PPS, a marketing group was acquired for a total consideration of £6.1m of which £3m was cash. The £2m purchase of Publicasity, a consumer PR company was concluded in December and has since won new clients which can now be serviced by other parts of the group. The Advertising division was started 2013 and after a restructuring and cost reduction is starting to gain traction. This year’s break-even should be followed by profits although the rating is not yet supported by a robust profits forecast, which could change. It is, however interesting to note that Director’s including Bob Morton, the chairman, brought shares in March at 7.5p.
Financials
In February 2014m, £7m was raised at 13p a share and the interim’s showed net cash of around £2m.
Trading Strategy
Despite decent trading volumes the share price has hardly moved. The recent acquisitions should help accelerated the earnings growth and as a PR company they should be able to let the market know about it!
Energy Techniques (LSE:ETQ)
327p (315- 340)
Mkt Cap: £7.8m
Next Results: Sept Interim
Reported slightly better than expected finals as sales were up 12.6% to £10.8m and profits improved 19.6% to £776k giving an EPS of 29.1p and a 1.4% yield.
The main trading subsidiary, Diffusion has after 50 years trading become a leading brand in the niche manufacturing of premium quality fan coils and commercial heating products. These are supplied internationally but mainly Europe to commercial and high-end residential sectors. In an attempt to increase shareholder value the Directors put the company up for sale on February 26th 2015. The only news in Thursday’s announcement was that further news can be expected. The current year has started well with high levels of inquiries and a strong order book as the fan coil market demand continues to improve.
Financials
The net cash position improved to £1.38 m from £0.84k with net assets at 31 March 2015 of £2.22 million up from £1.60 m). Cash flow for the current year ending 31 March 2016 will benefit from a six month’s rent free period on the West Molesey lease worth £96,000.
Trading Strategy
This niche manufacture would benefit from being part of a global group. If Directors do not receive an acceptable offer, perhaps 15x earnings or 450p, the company could repeat its share buyback program.
Last OMG! Price 302.5p
