(CLA) Capital Lease Aviation

September Value Stocks: Five to Watch
Wednesday, Sep 21 2011 by ExpectingValue
http://www.stockopedia.co.uk/content/september-value-stocks-five-to-watch-60343/

Last month, I decided to begin listing value stocks I was interested in - ones that I perhaps hadn't covered yet, wasn't planning to for some reason, or numbers that just caught my eye as I cast my gaze down my various screens. August's list was rather monumental - a feat that I don't think I'll be able to match for quite some time. As I'm looking for diversity, most of the value stocks I discuss became cheap because of both a combination of company specific and sector-wide factors. But it'd surely be no fun if my 'value list' entirely comprised of all the UK housebuilders trading on small tangible books - that doesn't give anyone ideas, just reminds everyone that the housing sector is down in the dumps at the minute!

And so, this month, I've aimed for 5 companies in different sectors, giving different types of exposure, but with one common theme - they all look cheap on an earnings or assets basis. Upon further investigation, I'll probably find most of these difficult to invest in for one reason or another; but throwing them out here at such an early stage helps show what I look at and perhaps will give fellow investors some ideas.


Capital Lease Aviation

This certainly comes under the 'interesting' category! CLA buy (using a large amount of debt) aircraft, which they then lease to other companies - Thomas Cook currently in possession of 3 of their fleet of 6. If you've ever wanted to own an Airbus, then, here's your chance for a slice of that - and you're getting a slice off the actual value, too, as the business is trading for 57% the value of its net assets. The structure of the business means it's currently highly cash generative - depreciation is its main 'expense', with huge cash flow spikes as a new aircraft is purchased and extremely strong inflow otherwise. Realistically, I know I can't invest - I'd want far more knowledge about the depreciation of aircraft, and Thomas Cook being in possession of half their fleet isn't hugely reassuring. With no fundamental knowledge of the aircraft leasing industry, I have no idea how easy it is to renegotiate leases, and industry dynamics are especially vital in a company as leveraged as this. For anyone with that inside knowledge, it may be worth a look.


Begbies Traynor

Begbies Traynor look like a nice counter-cyclical play - potentially a good hedge for my portfolio, whose top three constituents (Barratt, Howden Joinery and N Brown Group) are very closely tied to the whims of the British consumer. They popped up on Twitter a while ago as a fellow tweeter asked for potential 'recession' stocks - ones that'd benefit from a double dip - and my off the cuff answer, sticking true to my value roots, was Begbies Traynor. This nature comes about from their business - insolvency, restructuring, liquidation and risk management. Essentially, their pool of business grows as the number of failing businesses grows. The balance sheet is surprisingly sound for a professional services firm (which usually have few assets and substantial borrowings) , cash flow looks strong, and profits both last year and forecast are good. Last year was marred by a number of exceptionals which more or less saw them breaking even, though, so that'd have to be an area for further investigation. Founder Ric Traynor still sits on the board with a substantial shareholding, which is nice to see, and the dividend richly rewards shareholders, though it was recently cut. Curiously, on the day of writing, the share price has fallen 11% on ostensibly no news. That may be the incentive I need to take a closer look - Communisis were a similar story, with one large and determined seller thumping the price down ~20% in one day. Of course, I need to be certain it's not just a large piece of information I've missed!


Topps Tiles

Topps Tiles sh

big changes afoot to the shareholding register following approx 12m of sales, and a new holder of £m in MF Global. Looking forward to more announcements.

I added again today confident this is very undervalued

is anyone going? and anything you would want to see asked at the meeting?

I am very pleased. Vindicates my stance in holding this share. Hope for a good return if that merger does come around. Paying off the debt in this climate makes this share even more attractive now.