Today I am looking at the investment case for three London-listed plays.
Quindell
If I had the choice of investing my hard-earned cash in either embattled tech play Quindell (LSE: QPP) or a handful of magic beans I would probably opt for the latter. The latest bout of intrigue affecting the telematics firm occurred last week when the business was forced to temporarily suspend the trading of its shares on the London Stock Exchange.
This is because Quindell had failed to mention that it was offloading chunks of what were once part of its Digital Solutions arm to Australia’s Slater & Gordon — along with its Professional Services Division — as part of the £637m deal. This caused the business to grossly understate the amount of pre-tax profits the divested businesses contributed to the group, from £113.4m for the first half of 2014 as originally stated, to £130.4m in the corrected circular.
PwC has already shaken its head at Quindell’s accountancy techniques, noting that procedures relating to recognising revenue and deferring case acquisition costs were “largely acceptable but are at the aggressive end of acceptable practice“. So last week’s ‘facepalm’ moment will do nothing to assuage fears that anyone at the Fareham-based firm knows what is going on, and raises the prospect of further horrors once the accountancy has concluded its work.
And I have not even begun to address the question of what assets Quindell actually has left after the Slater & Gordon transaction. With the firesale of Quindell’s crown jewels also raising questions over the perilous state of the firm’s balance sheet, I believe that the stock should only be considered by the extremely brave. Or extremely foolish.
Cranswick
Boosted by the recent acquisition of poultry producer Benson Park, pork specialists Cranswick (LSE: CWK) put out a bubbly trading statement today that showed total sales edge 4% higher during January-March. The company’s position as a major supplier to major retailers such as Sainsbury’s continues to pay off handsomely, while its operations in export markets are also enjoying excellent returns.
City analysts expect Cranswick to record a strong 9% earnings uptick once the final results for the year ending March 2015 are released, continuing the firm’s excellent growth story of recent years. And further rises to the tune of 9% and 6% are pencilled in for 2016 and 2017 respectively.
Forecasts for this year and next leave the business trading at attractive price levels, in my opinion, with a P/E multiple of 14.6 times prospective earnings for this year and 13.8 times for 2016 falling within the terrain of 15 times or below which represents attractive value for money.
Carclo
Plastics producer Carclo (LSE: CAR) cheered the market in Thursday trading after also revealing positive financials, and the company was last dealing 7.9% higher on the day. The business said that its Technical Plastics division had witnessed a strong final quarter, with margins continue to improve as high-quality programmes come on stream.
The abacus bashers remain bullish on Carclo’s earnings picture in the coming years, too, and expect the Ossett-headquartered firm to follow a 20% earnings advance in the year concluding March 2015 with an extra 42% rise in 2016. And the bottom line is expected to leap a further 17% the following year.
As a result the plastics manufacturer changes hands on a P/E ratio of just 12.3 times for this year, and which drops to an even-more appetising 10.7 times for 2016. With the company having recently ramped up capacity in the US and Czech Republic, and on course to expand its facilities in China and India, I fully expect sales of Carclo’s high-tech products to surge in the coming years.