Bill1703
08 Jul 2017
Re: Hmm or have I got it wrong? I too have got this one wrong - at least in the short term. But I see no reason to disagree with the consensus on here - just too cheap!I bought a small tranche recently at 120p-odd, feeling that the SP had stabilised... so the most recent further leg down is both a surprise and a quandary. But I will be watching carefully over the coming days, with every intention of buying some more.It's easy to see why it is firmly in the "unloved" basket - a mostly mature, and in part structurally declining business, with limited long term visibility and little by way of "story" to at least intrigue people. And now you have a market eager to sell off any high yield, bond-proxy type investments with inflation on the rise and speculation over imminent interest rate increases.I refer people to an interview, a few days ago, with Neil Woodford, where he talks of the market as an intrinsically emotional, often irrational entity, overly eager to jump on fashionable stocks, no matter how expensive, and shun the "unloved" ones, no matter how cheap. This of course throws up opportunities (with consistent regularity) for any investor prepared to be just a tad patient and with any kind of long term perspective. Woodford talks of needing a "contrarian" mindset - but really, you just need to be somewhat detached from the herd, with any degree of confidence in your own analysis and judgement.CNCT is a classic case of such an unloved stock - already too cheap, and getting cheaper! Exposed to moribund markets perhaps, but management are clearly managing the business accordingly... the balance sheet is strong, free cash flow generation (and the valuation thereof) is compelling, and the dividend looks both perfectly affordable and secure for the foreseeable. You wouldn't put it on anything more than structurally-challenged, discount valuation - but this (on most key metrics) still points to something more like 150p (if not more), as has already been mooted. A recovery to anywhere close to this, whether over a year or three, and throwing in the dividend on top suggests a possible total return well into double-digits - in a market where such opportunities are increasingly scarce, not without taking on considerable risk.
Hydrogen Economy
08 Jul 2017
CEO buys 108k shares in SIPP Good to finally see some faith being shown by CEO, although tax/IHT benefit must make this as safe a bet as they get. A couple more buys by BOD would probably put a line under the SP fall. I hold more than plenty of these but may well follow Mr, Cashmore and add a few.H2Connect Group PLCDirector/PDMR ShareholdingConnect Group PLC (the "Company"
announces that it has been notified of the following transactions in the Company's ordinary 5p shares undertaken by directors / persons discharging managerial responsibility:1. On 7 July 2017, sale (for a market price of £1.100 per share) by Mark Cashmore (Executive Director, Group Chief Executive Officer) of a total of 108,000 ordinary 5p shares and corresponding purchase (for a market price of £1.101 per share) of a total of 108,000 ordinary 5p shares by a custodian on behalf of the administrator of Mr Cashmore's SIPP. Mr Cashmore is the beneficial owner of the acquired shares.
wineberry
07 Jul 2017
Re:Hmmm It's just not sexy! Tuffnells ought to be the key going forward, and that's certainly in a growing sector, (although I don't see the lorries in our road as often as DPD!)Can anyone give the PEG ratio?
Guitarsolo
07 Jul 2017
Re: Hmm or have I got it wrong? MT1231, Well, if you've called it wrong so have I! I've just nibbled again with a bit of spare cash to take holding to nearly 20,000 shares. Look, I don't expect CNCT to set the world on fire. And I appreciate that when markets get frothy they focus on growth stocks - which CNCT certainly isn't. But a P/E of c.6 and a 9%+ divi is suggesting the company is in trouble. Yet, I don't see that. Sure EPS are going to remain pretty flat for the foreseeable future.....but they do make a profit! And I can't see excessive debts or pension problems....So I'll be happy enough just to sit tight and take the dividends.....If anyone out there has an explanation (and isn't going short and wants to keep silent!) why this share is quite so unloved, please say so!Guitarsolo
marktime1231
07 Jul 2017
Hmm or have I got it wrong? CNCT is now trading at around 106p, which is its lowest for 5 years and nearly 50% off where we were a year ago. Volumes are light and the recent steep decent seems curious.The basic financials are that profit and dividend yield are up 20% over the same 5 year period; before the effects of the recent disposal. Assets and debt improved by that, we will see a fall in revenues but better margin, not clever enough to work out the net result.A 10p dividend this year will be over 9% yield and p/e under 6. Not clever enough to calculate forward p/e.All (yes I said ALL) this needs is some glimmer of potential.Or I have called this wrong.
marktime1231
06 Jul 2017
Added another slice Like others I am puzzled why this stock has slipped rapidly below 110p at which point I doubled up this morning. Maybe speculators are disappointed that the proceeds of sale of the education division will be put into debt reduction (and efficiency/growth prospects) rather than a special dividend.Well aware that this is a dull old fashioned logistics business and the horizon in traditional markets is limited. But at over 8% the regular dividends are plenty attractive already and I consider future free cash flow to be a reasonably stable prospect.The idea that management are being prudent with their finances is reassuring.The potential of a tie up with new fashioned business like Amazon, did someone say drone ... now that would be exciting, something to boost the sp back to 150p where I think fair value lies.
Intrepide
01 Jul 2017
very puzzling! While Brokers remain positive the share price keeps tumbling - I have held these shares for 7 years and I have enjoyed the income, but now at a projected 8.5% dividend, the market is trashing the share price and I wonder why? Any clues?
Oxtrader
01 Jun 2017
Re: Puzzling... I am a holder of Connect & don't find it that surprising. They haven't got the luxury of visibility of potential growth in forward earnings. In matter of fact, it's industry known that their newspaper & magazine distribution business is in a managed decline. Which is why the tie up with Amazon for "Part & Parcel" news made the Share price jump quite alot. Although nothing has materialised from this so far. Secondly, their diversification into courier services moves into a pretty high demand & low margin industry. This has had a small sector consolidation in past 5 years. (Citylink gone, TNT merged with Fedex etc).However, I am still a happy owner of Connect as they are well managed. I do think UK has alot of value in Logistics and infrastructure. Lastly, Book & Magazine sales recently have re-kindled(!), in Connect's favour. Oxtrader.
Merlindale
01 Jun 2017
Puzzling... I bought more of these, which seem to be languishing unloved on an incredibly low PE, and a very juicy dividend, and with all brokers forecasting target prices way above the current level....I wonder why that is.
Lisachops
27 Mar 2017
A lot of emphasis will be on Parcel freight but will a new and inexperienced management team be able to deliver the growth experienced before it. The market is certainly available to drive that growth with the primary competitor in turmoil and other carriers exiting from over sized freight
Hydrogen Economy
22 Feb 2017
CNCT Chart I'm no Chartologist but looking at the 3 year chart (which may or may not get attached with this message) the recent rise in CNCT seems rather encouraging, especially when one remembers that a 6.5p dividend was credited in Jan. I'm around break-even on the holdings but with dividends and some realized profits CNCT has returned a pretty steady 8% over last 3 years which is not a bad outcome for a steady income payer.H2
Hydrogen Economy
07 Feb 2017
Education business sold After announcing poor growth of Education division in TU (-4%) today announced that it is being sold.64m Vs 44m paid in 2012 so presume a profit will be realised. Education was highest margin part of the business, but not growing. Seems a bit of a strategic U turn but maybe made clearer in H1 results in April. Key point, no change in Div policyH2Connect Group PLC('Connect Group' or 'the Group') Disposal of Education & Care division to RM plc for £64.4m enterprise value Connect Group PLC, a leading specialist distributor, announces that it has signed an agreement with RM plc ("RM" to dispose of its Education & Care division ("Education & Care", for a cash consideration of £56.5m on a cash free, debt free basis. RM will also assume responsibility for the defined benefit pension schemes within Education & Care which at 31 August 2016 had a balance sheet deficit of £7.9m1. Total consideration equates to an enterprise value of £64.4m. Highlights · The disposal is consistent with the Group's strategy to focus its primary investment on growth opportunities within News & Media and Parcel Freight. · Education & Care's EBITDA for the 12 months to 31 August 2016 was £9.0m. Adjusted profit before tax was £7.8m, while statutory profit before tax was £6.7m. The value of the gross assets at 31 August 2016 was £57.4m. · The net cash proceeds of the disposal will reduce Group borrowings and provide greater flexibility to pursue growth opportunities that can leverage the Group's scale and strength in specialist distribution. · The disposal will complete following approval from RM's shareholders and receipt of clearance from the Competition & Markets Authority. A further update will be provided at Connect Group's interim results on 25 April 2017. · Education & Care is an independent supplier of consumable products to the Education and Care markets, trading through The Consortium and West Mercia Supplies brands. It currently serves over 30,000 customers with an extensive range of over 40,000 products. Financial Highlights · Enterprise value of £64.4m, equating to a 7.2x multiple on 2016 EBITDA. This comprises cash proceeds of £56.5m and an assumed value of £7.9m1, on an IFRS basis, for the transfer of Education & Care's pension schemes liability. · The Group's current progressive dividend policy will not be affected by the disposal. Mark Cashmore, Group Chief Executive, commented: "We are pleased to announce the sale of our Education & Care division to RM plc. Having received a number of approaches and after conducting a detailed review, we have concluded that the disposal represents the right option for the Group, the division and our strategy. The disposal will provide the Group with greater financial flexibility as we continue to drive our operational priorities and growth strategy. Looking ahead, the Group remains focused on delivering long-term value for shareholders, deploying our capital to deliver a balance of strong dividend, deleverage and re-investment for further growth." The Group will announce its interim results for the six months ending 28 February 2017 on 25 April 2017.
Hydrogen Economy
27 Jan 2017
The market gave pretty rough treatment to what seemed like an update indicating things were running to plan, uninspiring yes but no big surprises.Plugging last year’s operating margins in to the forecast H1 revenue by division suggests total operating margin would be flat, but one has to suspect some cost increases will be eating into that margin.The poor performance of the Education division (-4.6%) is a concern as it has the highest operating margin at 8.7%. Also best growth (14.3%) was in books which has lowest (1.8%) operating margin.News at 2.8% remains 75% of revenue and 60% of operating margin declining 2.6%, the question as ever is how quickly can they grow the non-news parts of the business. If the latest growth figures are applied year on year, it would take until 2026 before news is below 50% of revenue. In that scenario, the increase in higher margin business gives growth in operating profit over that period, starting low but rising to ~3%, but I doubt some of the growth rates are sustainable (eg. 14.3% in books).Parcel Freight revenue up 5.2% (had 12% revenue growth H1 last year), also the update indicated ongoing sizable investment in this division. They state greater proportion of profits for Parcel Freight in H2. This is 3rd biggest division after news and books. The effect of GBP on costs, especially fuel will be hurting although presumably most of that will be passed to customers by all. The UK economy continues to do better than forecast, that must help, but the effects of inflation may begin to bite in H2.The News decline may well accelerate, possibly reaching a tipping point where new outlets are no longer viable and the business collapses. This is no 1 focus for BOD, I expect that they are working some additional strategic actions to follow-up the Tuffnells acquisition, hopefully no one requiring another RI!. Clearly there are some concerns. Most are historic and structural. My guess is the reaction to the update was no clear path to jump clear of this, just continued hard graft to work through it. That is rather the Company approach and what they seem to do well. The dividend was well covered by earnings and FCF (both above 2 in FY16) and debt although high at 141.7m was down from 2015. Earnings are likely to be at best flat, down if as seems likely costs are rising. That said a PE of 7 allows for 1-2% decline.I added a few yesterday and will hold for the well covered dividend. H2
Blanketstacker
19 Dec 2016
Re: A look again Thank you gentlemen. As you say, not an exciting investment, or a potential multibagger, but a steady income payer with decent cashflow. Worth a visit!
Hydrogen Economy
18 Dec 2016
Re: A look again WineberryI guess the recent fall is driven by concerns over UK economy and some costs like fuel being driven up by sterling drop. The core newsprint distribution is in decline but CNCT bringing in new business like Amazon click and collect which has more growth potential. Not sure if min wage will have any impact, maybe. Interest rate rise likely to increase finance costs but expect most debt to be long term at fixed rates.Div cover - I get 1.4 on report EPS 13.5p and 2x on adjusted EPS 19.8. I don't expect div t come under pressure any time soon. Forecast EPS (reported) (2016-2019) 13.5 ; 16.2 ;17.9 ;18,7 (4-traders). Adjusted numbers (Digital look) come out flat to 2017Valuation on a DCF basis, CNCT is near the top of my list and is pretty robust, I checked it assuming EPS contraction of upto 3% pa it still looks solid to me.Success depends on Board continuing to find opportunities to substitute for the declining core business, they have being doing a pretty good job of that so far but it is a treadmill.Spread can be a bit high as volume sometimes limited.I'm happy to hold for now, but probably got enough exposure.H2
