Fundamental Research & Trading

Market cap £1.8bn

Tidewater (NYSE:TDW) - new fleet and trading closer to tangible NAV

Published on: 14/09/2011

• World’s largest provider of marine support services for the offshore energy industry
• Shares trading at close to net tangible book value  
• Big investment in new fleet
• Exposure to NOCs
• Operating leverage

Market cap £11.4bn

Rolls-Royce: more upside?

Published on: 28/06/2011

• Valuation seems high by historic standards
• Share price over the long-term driven by investment in new products
• Strong order book
• Energy a potential turnaround division
• Better aftermarket mix

Market cap £4.5bn

Now powering Japan

Published on: 06/04/2011

• Japan contract unexpected given absence of local business
• Would represent a significant contract win
• High margin potential
• BUT - looks more than fully valued
• Negligible earnings growth currently forecast

Market cap £1.75bn

Modern fleet and newbuild pipeline could attract suitors

Published on: 18/03/2011

• Consistently grown the top line and earnings
• Operating margins highest amongst peers
• Return on equity also highest amongst peers
• Strong balance sheet
• Attractive new build prorgam

Market cap £10bn

More to go for as offshore drilling resumes

Published on: 04/03/2011

These industry giants could be big beneficiaries of increased drilling offshore and in deep water, notably in the Gulf of Mexico - our note updates the key numbers

Market cap £1bn

Fast Response System will help oil companies satisfy more stringent permitting requirements

Published on: 03/03/2011

• High oil price supports Group’s production activities
• Oil spill response system has garnered lots of support
• Noble Energy (NYSE:NE) contracted with Helix
• Strong asset backing
• Increased gulf activity will boost earnings

Offshore drillers look well positioned

Published on: 25/02/2011

We offer an update of some of the largest offshore oil and gas drillers who are not only set to benefit from an increasing amount of deep water drilling around the globe but who will also be big beneficiaries should US offshore drilling resume.

Market cap £3bn

Focus on energy efficiency will attract supporters

Published on: 24/02/2011

• High oil price is highly supportive of company’s business  
• Worst of the bad news is over and its main markets are beginning to improve
• Very strong underlying cash flow
• Strong balance sheet and cash position  
• High return on capital employed

Market cap £34bn

ABB - buy into results on 17th Feb?

Published on: 15/02/2011

• Demand for energy efficiency and renewables is lifting group orders  
• Financially very solid with US$5.3bn net cash at 30th Sept 2010
• Share price outlook better driven by stronger market fundamentals
• Siemens 1st quarter 2011 positive read across for ABB
• Products are all ‘high added value’ so less competition from China

Market cap £3bn

Updated note - 4th qtr results reassure

Published on: 07/02/2011

• Recent 4th qtr results and growth estimates reassured
• Modest levels of debt for supplier into regulated markets yielding over 5%
• Spanish state review better than leading analysts had expected  
• Consistently grown earnings per share over the past 5 years
• Significant investment has been to control gas storage facility.

Market cap £4.1bn

Industry leader with growing exposure to energy and emerging markets!

Published on: 17/01/2011

• Two thirds of sales come from international as opposed to local US markets, notably to Asia Pacific (18%), Middle East (14%) and Latin America (10%).
• Grew operating margin consistently from 7.5% in 2005 to 16% in 2009 financial year
• Significant investment in business over the past few years
• Material exposure to strong growth markets - Oil and gas (41%), Power (17%), Chemical (17% and Water (5%).

Market cap £$13.7bn

Seadrill - modern fleet means it is well placed to benefit

Published on: 06/01/2011

• Deepwater drilling which looks to be in good shape for 2011
• Modern fleet of deep water rigs which will satisfy stricter safety legislation  
• Strong 3rd quarter results announced on 30th Nov  
• Limited exposure to Gulf of Mexico

Market cap £12.3bn

Europe’s largest oil services contractor looks in great shape

Published on: 09/12/2010

• Current trading is good with the first 9 months profits up 9%
• New contract wins this year up materially
• Bid pipeline in Brazil is 2-3 times higher than last year
• Share price has had a great run but still good value relative to peers

Market cap £2.18bn

Well placed offshore Brazil & valuation attractive relative to peers

Published on: 09/12/2010

• Valuation is modest relative to peers
• General market outlook “buoyant” outside Gulf of Mexico
• Exposure to high growth developing markets
• Leader in its sector

Market cap £10m

The only UK-based manufacturer of machine guns comes to AIM

Published on: 23/11/2010

• AIM float via reversal into cash shell Hurlingham plc
• Modest valuation and exciting growth opportunities
• The Quick Change Barrel system
• New management team reinvigorates the business
• UK MoD dominates but lots of growth potential elsewhere

Market cap £2.6bn

Is a bid from China (or elsewhere) imminent?

Published on: 17/11/2010

• Rail is booming in China
• The CEO gets carried away
• But what about the pension liability
• Upside would appear to be a minimum of 15% 
• An unusual move for a Chinese business? 

Market cap £328m

The next big Indian oil and gas hit on AIM?

Published on: 10/11/2010

• Exciting story with a diversified and balanced portfolio
• The Jubilant Bhartia empire
• Increasing demand for natural gas in India
• Attractive reserves potential
• Near term valuation-enhancing catalysts

Market cap £15bn

Set to benefit from the Brazilian oil bonanza?

Published on: 27/10/2010

• Strong positioning in South America
• Cost base largely in the developing world
• High operational margins.
• Strong balance sheet and net cash position
• Excellent generator of cash

Market cap £1.1bn

It’s Wimbledon and the sun is shining in the UK

Published on: 29/06/2010

• Valuation/growth prospects to peers
• Outperforming UK peers
• Promising international expansion
• Entered French market with compelling acquisition of market leader
• Recent share price momentum

Market cap £1.1bn

Material discount to peers looks overdone

Published on: 09/06/2010

• Trading at more than 25% to peers
• Perception is that business is a late cycle heavy industrial business
• Global steel production+31% in first four months
• Positive interim management statement on 26th April
• Analysts forecasts have risen over past months

Market cap £10.7bn

On the right track?

Published on: 25/05/2010

• Cheap compared to peers
• Ticks the right environmental boxes
• Good visibility with backlog stretching out 25 months
• Financial position very sound
• Solid results and realistic outlook

Market cap £18bn

Is this the cheapest $27bn company on the marklet?

Published on: 24/03/2010

• Market leader with huge competitive edge
• Valuation looks compelling at current levels and Company has strong balance sheet and cash flow
• Guidance on costs by management appears overly prudent
• Announcement of $3.2bn share buyback and proposed reinstatment of dividend (yield 3%)
• New CEO appointed March 2010

Market cap £1.25bn

A deal that looks too good to miss?

Published on: 16/02/2010

• Merger gives the predator not just critical mass but a stronger Balance Sheet
• Both companies have very high visibility with contracts running out 10s of years
• Predator ‘reputedly’ has more favoured management team
• Profit growth at the interim level was c16% for both companies. 
• Predator has identified significant merger benefits

Market cap £7.46bn

Advertising powerhouse with significant exposure to emerging markets

Published on: 15/02/2010

• Recent share price weakness could present a buying opportunity into results
• Strong emerging market exposure
• Valuation relative to peers
• Early cycle beneficiary of global economic recovery
• Strong management story
• Excellent generator of cash

A consumer defensive that could attract strong interest in 2010

Published on: 15/01/2010

• Share price weakness as herd has followed more cyclical excitement
• Valuation relative to peers
• Free cash generation
• Move into higher margin areas
• Strong market position
• Exposure to emerging markets

Market cap £9.56bn

Valuation looks compelling and status as a potential target adds further attraction

Published on: 16/12/2009

• Valuation relative to peers looks highly compelling
• Share price has underperformed relative to European peers in recent times
• Cash generation excellent
• Lots of fire power for potential acquisitions
• US operations overhauled

Market cap £2.25bn

Set to benefit from the drive to greater fuel efficiency

Published on: 23/11/2009

• Need to lower CO2 emissions is driving demand for group products
• Benefits from trend to diesel
• Restructuring nearly complete
• R&D 5.5% of sales and good margins
• Imposition of stricter mileage standards will benefit

Market cap £2.4bn

Recent trading update much better than expected

Published on: 26/10/2009

• Management has done a terrific job extending the brand
• Huge potential in emerging markets
• Balance sheet is very strong with net cash position
• Quick to implement an aggressive cost cutting plan
• Terrific generator of free cash

Market cap £3.5bn

Recent underperformance presents buying opportunity

Published on: 19/10/2009

UPDATE 26th October 2009
3rd quarter earnings release - SELL

Somewhat disappointing earnings announcement.
Q3 EPS of $1.07, 2 cents better than the analyst estimates of $1.07 but revenue for the quarter was $1.88 billion, which compares to the estimate of $1.94 billion.
Group sees full year sales down 7%, versus previous guidance of 5.5%-6.5%.
Sees FY09 EPS at ‘top end’ (just) of $2.20-$2.25 range, versus the consensus of $2.24.
Disapointing numbers for S&P related index business.
Doubts surround education.
Concerned about the potential press fall out from sale of BusinessWeek.
SELL

• Profit outlook looking better
• Current PER historically low
• Yielding over 3%
• Tremendous generator of cash
• Schools business is well placed to benefit

Market cap £881m

One of the most compelling growth stories in the Defense sector

Published on: 06/10/2009

• Dominant market share
• Strong position with both US DoD and UK MoD
• Potential takeover target for larger Defense contractor
• Excellent generator of cash
• Recent contract win underpins previous laggard

Market cap £4.2bn

Doubling of profits to make the valuation reasonable - unlikely!

Published on: 05/10/2009

• Valuation implies a sharp rebound in the sector - wishful thinking!
• Outlook, according to management, is “extremely difficult”
• Negative growth in all divisions in last results
• Volume upturn,when it comes, will suck in a lot of working capital
• Recent share issue is highly dilutive

Market cap £2.1bn

Current Valuation Does Not Allow For Slip Ups

Published on: 22/09/2009

• Valuation looks very pricey on 16.7x (2010)
• Current valuation does not allow for slip ups!
• Net debt of £1.2bn. Position improving as dividend not paid, but will take a long time and probably disposals to really address
• Net pension liability of c.£110m (reversed from £70m asset 6 months ago – shows what a nonsense the system is!)
• What is the long term business model in these mature markets? ( last 5 years doesn’t offer any clues)
• High net debt (£1.2bn) ‐ repayment only down to non payment of dividend, but good LT facilities
• Lots of provisions established in last two years (£120m). Potentially hard to track actual cost savings and clean operating profits
• Shares have soared over past 12 months and are at their highest point since Dec 2007 – justification?
• Small fall in share price could result in demotion to 250 index

Market cap £2.4bn

Results loaded with exceptional items and restatements

Published on: 14/09/2009

• Results loaded with exceptional items and restatements for continuing businesses only (rewriting history).
• Under‐investing in assets – good for cash flow, but a competitive industry.
• Large pension fund liability (c.£300m) subject to upward revision due to widening credit spreads. Volatility reduced with conservative assumptions & investment policy but ongoing cash drain (£37m p.a until 2017)
• Operational restructuring resulting in rise in provisions.
• Shares have had great run and valuation of 18 x (Mar ’10) and 14.7x (Mar ’11) seems to anticipate recovery fairly fully.
• Shares trade at a premium to similar sized ‘Engineering’ sector peers.
• Earnings picture still clouded by ongoing legacy issues.
• Lowly dividend yield.
• Earnings recovery initially based on FX movement (mainly US dollar & Euro), then on cost cutting and finally market recovery. Market recovery in Controls division at risk of delay.

Market cap £1.7bn

Attractive Dividend Yield And Well Covered

Published on: 09/09/2009

• Goldman Sachs recently predicted that stock could rise c30% based on forward energy prices
• Position is a play on improving health of the economy (sentiment)!
• Shares have dramatically underperformed the sector and AllShare and are only c11% above level of recent placing
• Attractive dividend yield, well covered
• On course to deliver £10m of cost savings for the full year
• Capex reduction of £20m to be delivered in 2009

Market cap £5.5bn

Shares Look Cheap Relative To Key Peers

Published on: 03/09/2009

• Strong presence in professional markets with strong portfolio of key publications
• Largely subscription, as opposed to advertising, based (non discretionary) facing professional/trade markets
• Fund raising out of the way and balance sheet in much better shape
• Estimated Net debt:EBITDA under 3x
• Yielding c5% (cover 2x)
• Superb cash generator; free cash flow c£700m per annum
• Shares have dramatically underperformed and remain close to lows