Insider: Bosses go fishing for bargains

Jardine Lloyd Thompson chiefs buy low

Jardine Lloyd Thompson is down on its luck. After failing again to make headway much past 1,080p, JLT shares plunged 12% following this week’s third-quarter results, forming a classic double top.

Government changes to UK occupational pensions have caused a major slowdown at the UK employee benefits business. Underlying trading profit there fell again during the period and Jardine now thinks full-year revenue at the unit will fall by mid-to-high single-digits and profit by about £13-£15 million. Sterling strength will cost Jardine another £4 million.

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But it’s not all bad news, says chief executive Dominic Burke. "Our Risk and Insurance and international employee benefits businesses have continued to perform robustly despite challenging trading conditions. We are confident that these businesses will deliver good levels of organic revenue growth for the full year, with the performance of our emerging markets operations particularly encouraging.”

Now, at an 11-month low, management is piling into the shares. And Burke, boss for a decade next month, clearly has deep pockets. He’s just spent £267,000 on 30,000 shares at 889p, and now owns 295,513 worth £2.5 million.

Deputy CEO Mark Drummond, at Jardine for 28 years now, and his wife have just bought £31,000 of shares at 881-888p. His 115,220 shares are worth £977,000.

Joanna Parsons at Westhouse Securities is not so sure. "There is no need to rush in at the moment as the group undergoes some major structural changes," she says. "We cut 2015E PBT (Norm) by 5% to £168.3m. We like the long term story, especially in the US, but JLT needs to deliver and not keep finding (small) issues that cause it to stumble. We stay at Neutral."

Northbridge Industrial Services men call the bottom

It’s been a nightmare 12 months for Northbridge Industrial Services. The industrial services and van hire firm warned in April that there had been a cyclical downturn in its oil and gas-related rental revenue. In late May, it warned again that there was no reliable sign of any upturn for the rest of 2015.

In an effort to slash debt, Northbridge reduced capital expenditure, cut the dividend, made other cost savings, and offloaded non-core and surplus assets. It also sacked finance director Craig Robinson. But the shares have kept falling.

And, despite management’s protestations last month that they’re not aware of any other reason for the price slump, the shares are now down more than 80% in less than a year to a low of 60p.

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That makes Northbridge shares a buy, say top brass. Chairman Peter Harris has snapped up 100,000 shares at 70p. Chief executive and Northbridge founder Eric Hook bought 150,000 at the same price, and Western Selection, chaired by Northbridge non-executive director David Marshall, increased its stake by 600,000 shares to 2.5 million, or 13.6% of the company.

Northbridge shares have risen to 90p since, but investors will demand evidence that business is on the turn, and that the company can reverse a half-year operating loss of £0.3 million versus a profit of £3.6 million a year ago.

Alastair Stewart at Westhouse pencils in a £15 million pre-tax loss this year and £0.2 million in 2016, but still thinks the shares are "fundamentally under-valued 3.0x EV/EBITDA for 2016".

HSBC’s Robertson dives in

The response to HSBC’s third-quarter results was muted, initially at least. The shares have improved a little after a short period of reflection, and deputy chairman Simon Robertson thinks he’s spotted bargain.

Robertson has bought 9,770 HSBC shares at 511.6p each, costing near-enough £50,000. And it’s probably not a bad buy. As we said this week, HSBC trades on a forward PE ratio of just over 10 times for 2016. A tangible net asset value (tNAV) per share of just 1 times is hardly a stretch either, and there’s that prospective dividend yield of around 6.5%.

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All HSBC needs to do is keep cutting costs fast enough to offset pressure on the top line. That is a concern for some, as is the outlook for credit quality, currently at cyclical lows. It's certainly a worry for Rohith Chandra-Rajan at Barclays:

"This gives us limited confidence in the earnings outlook, and although the capital position is progressing well it’s not strong enough for us to yet start factoring in additional capital returns. As a result, we remain Equal Weight with a 550p price target."

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.