A flood of interesting news from stocks that I follow… I liked the Wood Group (WG.) statement although Mr Market is sending the shares down over 5% as I write. Famously the stock was one of my tips of the year – and it was looking good until the recent oil price declines (and associated extra concern for the oil services sector). It has not been a disaster though and I still like this one looking into 2019 because of the mix of sales growth ('in 2018 good momentum in trading has driven revenue growth of over 10%') and self-help synergies associated with the Amec Foster Wheeler acquisition ('we secured revenue synergies of over $500m and increased our cost synergy targets to over $210m')...
Energy companies have to invest otherwise supply depletion issues will materially kick in...which will push the energy commodity prices up (and therefore justifying more investment!). To this end, I note a (potential) new contract announcement punched out in a separate RNS, where the company noted that 'Wood has been awarded a major contract to deliver engineering, procurement and construction (EPC) services on a reimbursable basis for a world-class plastics manufacturing facility along the US Gulf Coast'. Buy. Another loser - but far more predictable - is the ongoing popcorn moment at the 'faux-Japanese' (love this phrase!) Superdry (SDRY) which I warned you about a couple of months ago, since when the stock has dumped from the 700s to the now c. 400p level. The latest super shabby update includes a citing of weather issues ('unseasonably warm weather has continued through November and into December') which continues to cause problems given its exposure to jackets/fleeces. It also admits to a 'lack of innovation', changing consumer behaviour and hence a decline in profit expectations of either side of 30%. Ugh! The co-Founder must be apoplectic with rage having lost a bunch of money (c. 18% stake) and seeing the business he carefully built up getting hammered under new, professional management. A private equity funded bid with the backing of the co-Founder? Quite possibly.
Elsewhere in the retail space, the Dixons Carphone (DC.) share price is also currently down substantially. The fall probably reflects a bit of shock towards the £490 million ‘non-headline’ charges due to goodwill writedowns, lower year-on-year first half profits and cash flow generation plus a rebasing of the forward dividend cover, which pushed the interim dividend down a third in order to free up some extra cash for investment back into the brand. This countered comments such as 'gained market share', 'Q2 like-for-like up 4%' and maintaining full year £300 million profit target. I have got to say I think the fall is a bit rude even though trading conditions are clearly not easy - as if we did not know this. x6 EV/ebit seems light to me. Call me crazy, but I am tempted as a contrarian buy with its #1 market position, good balance sheet and non-UK complementary exposure. Of course it needs a solid Christmas too.
And finally...I wrote about the ongoing comedy saga at Domino's Pizza (DOM) on Sunday. On a (sort of) related basis, did you see what DP Poland (DPP) has just said? 'Softening like-for-like sales growth continue into the fourth quarter. A combination of warm and dry weather continuing into November and sustained advertising spend by competing delivery aggregators, in particular, impacted share of voice and sales performance...' Blame that weather angle again...and like Superdry, the DP Poland shares are down 30%. Much easier/better to order a pizza in Poland then buy the shares...
Filed under: Wood Group, Superdry, Dixons Carphone, DP Poland, Bearcast, Bonmarche, Metals Exploration
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