Creightons #CRL

Creightons
#CRL

Buys -
Average -  
Currently -
Target –15p
Timeframe - within 1-2 months

Current Mcap -

What do they do?
“The Creightons Plc group is made up of a select group of brands and companies specialising in the creation of high quality personal care and beauty products for the consumer and trade market.” From their website http://www.creightons.com/about-us


Past performance

	£ Millions	£ Millions	£ Millions	£ Millions	£ Millions
Income Statement	31 Mar '15	31 Mar '14	31 Mar '13	31 Mar '12	31 Mar '11
Revenue	21.09	19.35	17.33	16.33	14.13
Operating Profit / Loss	0.50	0.50	0.33	0.26	0.17
Net Interest	(0.02)	(0.03)	(0.03)	(0.03)	(0.03)
Pre tax Profit	0.85	0.47	0.30	0.22	0.14
Post tax Profit	0.85	0.47	0.30	0.22	0.14
Profit for the Period	0.85	0.47	0.30	0.22	0.14

	31 Mar '15	31 Mar '14	31 Mar '13	31 Mar '12	31 Mar '11
Operating Margin	2.36%	2.60%	1.92%	1.57%	1.18%
Return on Capital Employed	16.48%	10.08%	7.14%	5.88%	4.26%
Dividend Cover	n/a	n/a	n/a	n/a	n/a
Dividend Yield	n/a	n/a	n/a	n/a	n/a
PE Ratio	7.80	5.20	6.10	5.20	10.00
PEG	n/a	0.10	0.20	0.10	n/a
Dividend per Share Growth	n/a	n/a	n/a	n/a	n/a
Net Asset Value per Share	8.71p	7.27p	6.22p	5.79p	5.55p

Investment case 
Half yearly report is due out in November. Net borrowings (bank overdraft and loans less cash at bank and in hand) at the year-end have reduced by £527,000 to £75,000 (2014: £602,000). Always nice to see an AIM company be prudent with their debt management and get rid of it. Diluted earnings per share for 2015 was 1.27p so they are only on a PE of 5-6.
One of the big reasons to buy for this particular update is the headline profit figure is likely to be highly impressive, perhaps over the £1mill mark! On 28 May 2015 the Group completed the disposal of "The Real Shaving Company'' business for £1,000,000 which is expected to generate an exceptional profit of £844,000. That profit will be in these figures. Now I know this isn’t exactly actual profit growth in the traditional sense as its an exceptional item, but CRL buy, develop and sell these brands as seen with the sale of TS Ventures Ltd previously so further brand sales is a real possibility. The largest shareholder has also been adding recently in decent chunks. Should bode well.
 

Bear case
Operating margin of 2.36% isnt eactly earth shattering. The 2015 profit figure includes the exceptional item of a brand sale so like for like profit was static.

Must read resource

Have you came across a website called simplywall.st? Its superb! A must read is the CRL page on it... (info correct at 7/11/15)
https://simplywall.st/LSE:CRL/creightons
They calculate the future cash flow value at 15p a share at 8p SP and 13p a share at 7p SP

Industry average PE is 16.3! and they are massively undervalued compared to the industry on price based on value of assets.




A note on the PEs. If based solely from the recurrent core business profit then they are still sitting on a PE of around 9 with about 80% upside to the industry average of 16. When you factor in the exceptional items that are now recurring it gets very interesting indeed.





                                                                                                                                              
         





They rank CRL and one of the best (5/6 criteria met) and full marks for financial health (6/6 criteria met). With a strong balance sheet and at deep discount, the downside is minimised.
Their exact words are "potentially undervalued and in a flawless financial position" - fairly reassuring

It is also worth noting that the above graphs and valuations are based off the last results and as explained i think these results will be materially better due to the sale of The Real Shaving Company

Although its not all sunshine and roses...





Comms with the company
So far theyve not replied to me, bit of a black mark but ive been busy myself so not chased up on it.


Summary 

With the upcoming headline half yearly profit figure of around £1mill having them on a PE of 2-3, youd like to think there is some upside to come considering the industry average is 16. Boosted by a large exceptional item but this type of brand developement and sale is in their business plan so perhaps exceptional but may recur with other brands. Speculative buy with 100% upside target. Difficult to see a large negative bar them unexpectedly dropping a bollock with a profit warning however this 6 months profit will be £1mill+ i think. 100% upside on future cash flow position and in a "flawless" financial position.

Disclaimer
Clearly dont just buy based on my recommendation or anyone elses. Do your own reseach. Pick an entry you are happy with, pick a target exit you think is achiveable. This share may go up and down quite a bit before the target catalyst. The target catalyst may not be as good as hope resulting in an AIM sell off with decent losses if your entry is wrong - that said CRL is on the main market!

Decison
I think this is a buy, certainly at current levels. Ive shared this with a few smarter investors than me whom agree. Lets see what happens!  

Northern Bear #NTBR

 Northern Bear
#NTBR


Buys -Not bought
Average -
Currently -48p-50p
Target – 100p
Timeframe – by mid december

Current Mcap -£8.66mill

What do they do?
Northern Bear family of businesses provides specialist building services to local authorities, housing associations, NHS trusts, universities, construction companies and national house builders throughout northern england. 
 

The Northern Bear group includes 12 businesses with an excellent reputation for delivering specialist building and support services in Northern England.  Clients include local authorities, housing associations, NHS trusts, universities, construction companies and national house builders.
Each company operates as an autonomous business, with Northern Bear providing the additional security of group strategic management and financial consolidation. All of the companies continue to be managed by key personnel who helped them become established and profitable businesses.
Services provided by the Northern Bear group of companies include

• Asbestos management
• Building services
• Roofing services
• Solar PV installations
• Fire protection
• Forklift truck supply and maintenance
• Health and safety training and consultancy
• Unmanned aerial imagery

source http://www.northernbearplc.com/building-services/

Past performance

	£ Millions	£ Millions	£ Millions	£ Millions	£ Millions
Income Statement	31 Mar '15	31 Mar '14	31 Mar '13	31 Mar '12	31 Mar '11
Revenue	41.72	36.78	35.15	36.41	27.16
Operating Profit / Loss	2.46	2.23	1.08	1.47	1.34
Net Interest	(0.35)	0.02	(0.40)	(0.45)	(0.52)
Pre tax Profit	1.86	1.75	0.68	1.02	0.82
Post tax Profit	1.51	1.33	0.49	0.72	0.64
Profit for the Period	1.51	1.34	0.49	0.56	(0.22)
Equity Holders of Parent Company	1.51	1.34	0.49	0.56	(0.22)
Minority Interests	n/a	n/a	n/a	n/a	n/a
Continuing EPS
Earnings per Share (Basic)	8.50p	7.60p	2.70p	4.00p	3.40p
Earnings per Share (Diluted)	8.40p	7.50p	2.70p	4.00p	3.40p
Earnings per Share (Adjusted)	10.80p	7.60p	5.50p	4.80p	5.00p

	31 Mar '15	31 Mar '14	31 Mar '13	31 Mar '12	31 Mar '11
Operating Margin	5.88%	6.07%	3.08%	4.04%	4.92%
Return on Capital Employed	40.34%	40.70%	28.04%	35.26%	25.96%
Dividend Cover	7.20	10.13	n/a	n/a	n/a
Dividend Yield	3.30%	2.20%	n/a	n/a	n/a
PE Ratio	4.20	4.50	2.50	2.40	2.50
PEG	0.10	0.10	0.20	n/a	n/a
Dividend per Share Growth	100.00%	n/a	n/a	n/a	n/a
Net Asset Value per Share	(1.67p)	(9.54p)	(17.11p)	(19.73p)	(22.91p)

Investment case
Im sure you get the gist by now. I like these companies that have growing revenues and profits but sit at a very low PE for whatever reason. 

NTBR does have debt but they are reducing it in a comendable way if you ask me. It is systematically being reduced every year as follows.

End of 2011: £8.4M
End of 2012: £7.0M
End of 2013: £6.4M
End of 2014: £5.6M
End of 2015: £4.8M

The chairman comments on the debt "The Board's priority in recent years, even whilst trading conditions have been challenging, has been to use operating cash flow to reduce bank debt levels.  Whilst this remains our overall priority, we will continue to monitor opportunities for other uses of funds generated, including capital investment, bolt-on acquisitions and capital repurchases"

The 2015 profit figures would have been higher but for exceptional bad debt defaulted of £259k. The businesses have been streamlined and new integrated offices moved into. In the EOY results they say "this strategy has already resulted in operational efficiencies and the opportunity to make significant overhead reductions is already being reflected in current trading figures"

Also from the EOY "current order book levels remain very strong across the Group and the new financial year has started well"
Perhaps the best indicator of a nice profits boost comes from the website and says "It has been a successful summer period so far, with various projects being completed within the University and Northern Bear Building Services are on for a record breaking summer, completing 19 school, college and university projects" - Record breaking doesnt sound like any profit warning is about to land. Record breaking sounds like the PE is going to be getting even smaller.

An old chairman Jon Pither has been selling recently but still holds 14.4%and current BoD own 25% collectively.

It is hard to consider what my wholesale price is here looking at the charts. The SP has came off somewhat from all time highs and there does seem to be good support at 50p level which is now breaking. I think buying as close to 40p as possible is ideal.

Bear case
Well there is still debt desipte how it is managed. The old chairman may still be a seller in the market. The chairman also states "despite operating in a difficult sector in recent years, Northern Bear has an impressive record in terms of minimising bad debts, despite some well publicised failures in the sector in which it operates". Now just because they have so far out performed the sector this is still the possibility of regression to the mean and more bad debt and exceptional losses for the next results. The building trade isnt doing very well currently and house builders have took a bit of a hit.
 
Comms with the company
Interims are November - confirmed Northern Bear building Services had a record period but this is just 1 of 10 companies in the group.

Summary 
I like this. Profits on the up and current PE only 5.7. They have had a record summer (part of the business) so you would imagine profits and revenue are again on the up pushing the PE at current mcap even lower. If Jon Pither isnt going to dump his load at the first sign of volume this has the potential to re rate to the 100p level (or £1 if you will) and beyond. Support seemed to be about 50p but wholesale would be as close to 40p as you can get it

Disclaimer
Clearly dont just buy based on my recommendation or anyone elses. Do your own reseach. Pick an entry you are happy with, pick a target exit you think is achiveable. This share may go up and down quite a bit before the target catalyst. The target catalyst may not be as good as hope resulting in an AIM sell off with decent losses if your entry is wrong.


Decision
Im going to watch and wait. If a sell off gets the SP to near 40p then its a stonking buy in my opinion.