Yes, Tiger, the AGM is a week on Wednesday. After the preliminary results announcement, I wrote to Mr Pollock along the lines of my earlier post here, asking what the management succession plans were, the need for a technical director and at least one female on the Board. Additionally, we needed to see a vision as to how the company could grow from its very small company base. I received a reply thanking me for the letter and saying that the Board were going to consider it at their meeting that day. I am hoping that the AGM, which I am unable to attend, will address some or all of these matters.
Reading the results and their enthusiastic reception by Tiger and others, with forecasts on imminent rises in the SP, I thought I was back one year ago, when results and reception were more or less the same. I have written to Mr Pollock the CEO along the following lines.
I read the report with a mixture of pleasure and frustration.
The best news was was the higher level of the current order book, the worst news was that sales only increased by 4.9% at a time when global trading conditions have rarely been better. Results were against weak comparatives, there being no bad debt write offs which, in themselves were a worry with two Chartered Accountants on the Board.
LPA has excellent staff, products and technical knowledge but remains a very small company and seemingly very vunerable to any adverse occueance.
Both Mr Pollock and Mr Rusch are in their seventies but we know nothing of any succession plan. I would like to see a plan for profits to grow 25% year on year for five years, for a technical director to be appointed to the Board and a highly qualified female, preferably an engineer with a marketing background, also appointed to the Board.
The Company operates or has agents in 22 countries and is active in very large industry groupings but this is not reflected in the size or apparent ambition of the Group. Already we are reading of potential capacity constraints both in terms of people and premisies, which is surprising.
I would hope that the group's vision for the future can be communicated to shareholders.
There were few other points, but the above is of the essence.
In my view, there is unlikely to be a better time than now to grow the company in order that it can prosper and not be so vunerable to the next adverse circumstance that will no doubt come along one day.
Without more dynamism, LPA will struggle to exceed 200p by much i.e only back to where it was and Tiger's 300p forecast last year, only something for us all to dream about.
Tiger - There is a good chance that in a couple of months' time many
a small private investor will say: ' Wish I bought when I could when
the price went below 170p'.
LPA certainly does look seriously undervalued. I am well invested.
CTiger - Probably a bit lazy. What was the old target in the broker note?
Generally wise not to take to much notice of broker notes, they are just too
often out of kilter / each way.
Anyway let us have the old/unchanged target please?
Agree. Mm look to be buying stock ahead of a push up
Its a lazy note today. The company is having a superb first half but no its not reflected.
Anyway sitting very tight with my stake
In my view the shares ought to be trading at around 210p, which I
base on EPS 15p miltiplied by PE-ratio 14. Higher is possible, but
meantime I think it reasonable to look to 210p for the short term.
Your grasp and summing up (here and elsewhere) is outstanding.
Systems (MM's?) just now do not allow buying, just selling. Feels
like MM's are building stock for a good gain later.
Give it a day or two and the share price will be well up on current
level of 170p.
Our order book and prospects in our home and export markets are very positive indicators. The current financial year has started well. We look forward to our medium and longer term future with great confidence."
"Sales output in the first quarter is significantly ahead of the same period last year confirming the continuing growth potential of the business."
With the Results this good, and as I said last week, 190p+plus now
looks firmly on the cards, probably see that within next couple of weeks.
EPS for current financial year are almost certainly going to be close to
15p or over. Put that to a very reasonable PE-ratio of 14, and we are
looking at a prospective share price of 210p.
The excp gain all but went with EXC costs but that's good for the future.
I was slightly under with my forecast but reading the results the first half has been much better than last year.
EPS over 14p now should be over 16p in this year as we are well (4 months) into it.
Anything under 200p is a steal I remain a buyer trying to pick up before WI Ireland put out a new target today.
Probably 220p plus but we know company always exceeds targets.
Dividend increase of 10% is a nice touch but the capital growth is where we can make money.
Strong asset base I expect a record first half that will push the price even further.
I particularly liked the following comment on the outlook,
"Last year finished full bore and this has continued into the current financial year. We expect business to settle down to a higher level than that previously achieved"
-- Sales up 4.9% at GBP22.482m (2016: GBP21.422m)
-- Operating profit before exceptional items up 23.6% at GBP1.895m (2016: GBP1.533m)
-- Exceptional and non-underlying items GBP73,000 (2016: GBP14,000)
-- Profit before tax up 26.3% at GBP1.914m (2016: GBP1.516m)
-- Basic earnings per share up 17.1% at 14.40p (2016: 12.30p)
-- Final dividend increased 10% to 1.65p (2016:1.50p), total for the year 2.70p (2016: 2.50p)
-- Gearing 25.7% (2016: 29.2%)
-- Order entry GBP26.1m (2016: GBP20.7m) up 26%
-- Order book GBP21.6m (2016: GBP18.0m) up 20%
-- LPA Lighting Systems successfully relocated to new facility during the year
I expect Results to be out early next week.
As for EPS, I think we can look for somewhere between 13p and 14p.
Should also the outlook for 2018 be robust, then, almost inevitably, the
share price could easily head for 190p-plus. Fingers crossed.
Winning streak. I would point out that as well as the main board directors they have 4 divisional directors, thats maybe a bit on the heavy side,time for a shake up and let some new blood in.
See their website.
The board own a fair chunk of shares. That's good but also puts us in a weaker position if we are sold by them.
Its always been a worry that we are sold before we get to a fair point in the cycle.
With the investments made and the orders in the pipeline we should be getting close to 3 million in the next 2 years.
So if a predator comes to take this to a bigger group what price would they pay?
As a buyer I want to give 6/10 times but I feel we should attract 12/15 times.
The shares are backed by real assets over 10 million so about 50% of the market cap.
If we were to be sold this year based on profits of 2m and 12x earnings plus assets I get us to 35m or about 320p a share.
As you know I am in DART and asked MEESON who owns 38% what his exit route was as he is knocking on a bit. He was far from happy. ( however he did pay for lunch later)
So the BOD may want to grow this further.
The one thing I am pretty sure about is that the shares look undervalued and there is a fast buck to be made here.
We are still below the peak of 200p so a move there would be the least I expect.
Castleford you are the expert here, with 4 of the 5 directors over 65 and at least one 73 and a large shareholder it seems to me that there is a very good chance of takeover coming for the company as these guys will want to retire with some cash soon.
IF the update, due shortly, provides the expected continuing good news and gives the boost to the shareprice I think it will This could be on the cards shortly this year.
Whats your view?
Comments from last update
"LPA Group Plc, the LED lighting and electro-mechanical system manufacturer and distributor, is pleased to provide the following trading update for the financial year ended 30th September 2017.
Further to the Chairman's Statement issued with the interim results on 26 June 2017 which confirmed that the Group had established itself on a new trading level, output during the second half was at record levels and, given the volume of deliverable orders on hand, this is likely to be sustained during the new financial year. Margins, which had been depressed by an unfavourable product mix in the first half, responded well to higher volumes and manufacturing efficiencies have improved significantly. Expectations for the year just closed anticipated significant progress and the Board believes it has delivered on this.
The new lighting facility in Yorkshire and the electro-mechanical facility in Saffron Walden, both achieved record levels of output, challenging the increased capacity recently created and further investment in plant and equipment is planned.
The UK market has been buoyant, looks well set for the future and is well supported by export opportunities in Europe, Asia and Australia.
The Group remains very confident of further progress in the current year."
Share price since then has hardly moved so I am anticipating that the market will be surprised when results come out around 21 January.
Also, this announcement was very bullish from a company that normaly is very modest in its oulook so better than expected results could well be in the offing which could lead to a rerating..
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