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In his 'Inside the City' column for the Sunday Times, Ben Woods was looking at IT services provider FDM Group, saying it had suffered from the fallout of HSBC's rationalisation, given the banking giant is one of its biggest clients.
Cost-cutting from HSBC, which saw the bank reveal plans to axe up to 10,000 jobs last month, led to concerns that FDM's contract could be hit, which combined with Brexit fears to sent its share price down 26% since May, to 756p.
They have recovered slightly from a trough of 647p in October, at the time of HSBC's announcement, but Woods characterised the sell-off as "harsh", given the bank's cuts are not expected to affect its contract with FDM.
The ongoing confusion around Brexit was having a real impact, however, with chief executive Rod Flavell admitting the company was experiencing "lower activity" from the state sector at its half-year update in July.
It still wasn't enough to hurt the company's numbers, however, with half-year sales to June still rising 14% to £134m, and pre-tax profits ahead 9% at £25m.
A Brexit-precipitated downturn could still hurt the sector, but Woods wrote that FDM has managed economic turbulence before.
Its rival IT service providers were battered by the banking crisis last decade, but FDM still managed sales growth of 4.8% in 2008 and 1.3% in 2009, which could be put down to - at least in part - the fact it charges a third less than market prices for its services.
Peter McNally, an analyst at Panmure Gordon, picks ongoing strength for FDM, pencilling in a 10% rise in sales to £270m and profits 6% firmer at £54m for the year.
He is also anticipating that £35.3m of the £40.5m in expected net operating cash flow would be returned to shareholders in the form of dividends.
McNally's target price looked tempting as well, at 51% above the current share price at 1140p.
"As digital transformation and the AI revolution sweep through the workplace, the need for IT services will strengthen," Ben Woods wrote.
"FDM should be a winning bet. Buy.
Over in the Telegraph, 'Questor' said Draper Esprit's strategy of investing in unlisted early-stage companies appeared to be a winning one.
It said that, while the "big buy-out houses" that had gone public seemed to be whetting investor appetite adequately, those in the market for some high-risk, high-reward early stage investing still needed to dig a little bit deeper.
That was the problem Draper Esprit set out to solve, having listed on AIM three years ago as an investor in private and primarily digital-focussed firms
Its portfolio - now worth £683m - included the likes of chipmaker Graphcore, analytics company RavenPack, reviews portal Trustpilot and money transfer innovator Transferwise.
The company's growth was thirst-quenching as well, with the company sitting on a decade-long record of returns of at least 20%, with its latest half-year seeing the gross value of its portfolio rising 15%, primarily due to upward revisions to the fair value of its holdings.
Broker Peel Hunt said that while the increase was lower than the prior two halves, they were still picking decent net asset value growth of around 10% for the period, up from 8% year-on-year.
The core portfolio is also well spread, Questor suggested, noting that the 18 firms within it represented 70% of total value, describing them as "more mature but still growing fast".
Numis - Draper Esprit's house broker - worked on the assumption of £60m of investment each year, with around the same amount being raised from realisations.
The company itself looked to be maturing as well, with an announcement last week that chief executive Simon Cook would move desks to become chief investment officer, with former Kames Capital head Martin Davis taking up the corner office.
"With so much going on, it is a surprise that the shares have trended down since summer last year," Questor quipped.
It said that could be put down to a number of factors, including Draper's much-criticised decision to ignore its stated model of direct investment in a tie-up with venture investor Earlybird, in a bid to move into Germany, Austria and continental Europe.
That move, Questor wrote, appears to have been vindicated, with some of its investments in Earlybird funds - paid for by a £100m placing in January at 530p per share - giving it exposure to software robotics developer UiPath, loan comparison platform Smava and Peak Games - a trio that added a lot to the portfolio's gains in the last financial year.
Looking at the sector as a whole, Questor noted that the condemned sticker slapped on Neil Woodford's empire was giving many investors in portfolio firms reason to be reticent, explaining that while trading in private firms would always be less liquid than listed stocks, Draper was still a long way from any cash cliff with £126m of investment capacity up its sleeve.
A net asset value of 575p was set to be confirmed in the half-year results on 26 November, which would imply a discount of 16%.
"The stock trades on just 4.2 times this year's forecast earnings and is not keeping up with events," it wrote, adding a "buy" rating on Draper Esprit.
Angling Direct was floated on the stock market in July 2017, when it owned 15 stores in Kent and East Anglia, had a distribution facility in Rackheath, Norfolk, and a burgeoning online business.
Chief executive Darren Bailey said then that he wanted to join the stock market so that Angling Direct could add new stores, invest in the Rackheath site and expand the online business.
The company has done everything it promised and more.
There are now 32 stores, some opened from scratch, others acquired from independent shopkeepers.
The distribution facility has become highly sophisticated and automated. The online business is booming, both here and overseas.
Interim results, announced earlier this month, revealed double-digit growth in turnover and the company said too that over the summer like-for-like store sales rose 13.3 per cent while online sales were up nearly 27 per cent.
Most retailers can only dream of this type of growth, yet Angling Direct’s shares have had a terrible few months, falling from £1.09 in August to close at 60p last week (EDIT: October dateline).
Midas recommended the shares in November 2017, when the price was 78p, so investors have had a rough ride. But the company does not seem to have put a foot wrong.
Rather, it has been hit by widespread disaffection with small, AIM-traded stocks, worries about Britain’s economic prospects and persistent bad news from the broader retail sector.
Some big investors have also shied away from Angling Direct because Bailey is investing the group’s cash in future growth, so the company is not expected to deliver pre-tax profits until 2021.
All these issues are very real, but Angling Direct is a fast-growing specialist business, operating in a market with exciting opportunities.
Fishing is a top ten hobby among young and old, with nearly a million anglers in the UK alone, and enthusiasts spend hundreds of pounds on tackle.
Angling Direct offers an extraordinarily wide range of kit, its prices online tend to be cheaper than those on Amazon, and fishing fans on the Continent are snapping up its rods and bait.
Looking ahead, Bailey is keen to continue expanding across the Channel and increase the number of UK outlets to about 50 over the next few years.
He also recruited a new finance director last week – Steven Crowe. He is an experienced former accountant who should bolster the management team.
Angling Direct shares have disappointed investors in the past two years, but it would seem rash to give up hope now.
The company is growing and Bailey is ambitious and knowledgeable, having spent more than 30 years with the business.
Above all, fishing is a hobby that enthusiasts tend to pursue whatever the economic climate. At 60p, the shares should rebound.
I think we should only make one purchase per poll. By all means carry your second favourite through to the next poll, but picking two from three could be narrowing down our choices a bit too much
We'll only be buying one - I only said what I did because I thought the choice was going to be a lot more difficult than normal, on the face of it, before looking a bit deeperrichard@imutual wrote: ↑Wed Nov 13, 2019 4:55 pmI think we should only make one purchase per poll. By all means carry your second favourite through to the next poll, but picking two from three could be narrowing down our choices a bit too much
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