Tuesday tips round up: Aveva, Wincanton and Bovis Homes

13th Nov 2012 06:43

Tempus in The Times says that the launch last month of Aveva Group's Everything3D product is its most significant since the first computer-aided design software was unveiled in 1973, six years after the company was spun out of Cambridge University.Aveva is one of those British-based global leaders that most people will not have heard of, with a market capitalisation of approaching £1.4bn. Halfway figures to the end of September show growth across all three regions, with Asia Pacific the standout at 21%. It has been expanding in India, with a new office in Mumbai. The halfway dividend is raised by 13% to 4.5p. Aveva continues to carry large amounts of cash on its books, £166m at the half-year end. Mr Longdon insists that this could be needed for acquisitions, though no deal of any size has been completed since 2004. It is not a bad place to be, having surplus cash in these markets. The shares, up 14p to £20.15, sell on about 20 times' this year's earnings, if you strip out that cash. High, but worth it for the long term. Tempus writes that some analysts were worrying about the decision by Jon Kempster to quit Wincanton no later than the end of January for an unspecified new role elsewhere. But the logistics group is a very different animal to the one he joined in July two years ago. This year it sold the European operation. The banking facilities have also been renegotiated.The halfway figures were a little better than the market had been expecting. Underlying profits before tax were up from £14.2m to £17.1m in the six months to the end of September, disregarding a raft of one-off items that pushed Wincanton into a loss last time. Revenues were down by almost 12% to £551.2m, but this reflects the loss of more than £100m of business from three retailers. Focus DIY went into administration, the Co-op chose to bring its warehouse distribution in-house and Wincanton walked away from Comet rather than accept less attractive terms from its new private equity owners. Debt remains uncomfortably high, averaging £201m over the first half, and the company is not yet generating cash to repay this, though it will turn cash-positive in the next financial year. There is no prospect of a resumption of dividend payments, which were suspended two years ago. The shares have more than doubled since they bottomed out at 31p in July and, at 76.5p, sell on a lowly four times' this year's earnings. But, given the state of the high street, immediate outperformance looks unlikely. A mere hold, then. Questor in The Telegraph writes that Bovis Homes, in line with the rest of the house building sector, continues to perform well, as it benefits from cheap land bought following the credit crunch. Good land purchases and the robustness of house prices in certain parts of the country mean that margins are continuing to expand. The gross margin is expected to be 22% this year - or 13% at the operating level compared with 10% last year. This is at the upper end of the guidance issued when the company last updated the market in August. The average sale price in the year to date is above £190,000, some £10,000 higher than last year, as the group continued to focus on higher-margin family homes rather than flats. The group has a strong balance sheet - it is expected to be in a net cash position by the end of the year - so it can continue to snap up plots of land. Net debt currently stands at £65m.The current year's earnings multiple is 18.1, falling to 13.3 next year and the prospective yield is 1.7% rising to 2.3%. Questor last recommended a purchase on August 21 when the shares were at 491.6p. Questor keeps a buy recommendation. Please note: Digital Look provides a round-up of news, tips and information that is impacting share prices and the market. Digital Look cannot take any responsibility for information provided by third parties. This is for your general information only as not intended to be relied upon by users in making an investment decision or any other decision. Please obtain a copy of the relevant publication and carry out your own research before considering acting on any of this information.CM