AMO, CHG, UTW

AMO (Amino Tech) is down 26.3%. It issued a trading update stating “The Company now expects to report a second half shortfall in revenue”.

AMO is a company that crossed my radar recently, as it has a high Stockopedia (http://www.stockopedia.com/) SR of 94, with V 46, Q 91, M 94. Its RS6m was 25.4%. Those figures are as of yesterday.

On the face of it, it all looks well and good, except for the surprise statement today. It has a high current ROCE of 19.9%, but its average over the last 5 years was -0.5%. That put me off, as it did not have a well-enough established track record. ROCE had been steadily increasing, though, so I thought it had attained economies of scale. The cashflow statements looked reasonable, too.

I also did not like the the fact that it had a recent placing and made a couple of acquisitions: Entoine and Booxmedia. It’s not that I’m “against” acquisitions, it’s just that on AIM, the whole business of placings and acquisitions needs special caution.

I have crossed AMO off my list.

CHG (Chemring) the Defence contractor has reared its ugly head again, I see. It is down 36.9%. It issued a trading statement today stating that there will be revenue delays, and a reduction in expected profit. Furthermore, there will be a rights issue and a discussion with creditors over covenants.

I wrote about CHG in Nov 2012 (http://www.stockopedia.com/content/chemring-bid-abandoned-69201/), where I talked about the abandoned bid, and called it a “tricksy” value play. The price was 258p at the time. The price did reach a high of 306p on 22-Aug-2013, so if your timing was exceptionally good, you could have made money. It’s questionable whether anyone would really have had the skill to capture much of that, though.

CHG has been a bit of a dog for some time now, and looks to be sucking in more equity than it is paying out in dividends.

CHG seems to have had a good dividend track record up until 2011. After that, the whole process unravelled. The net debt at the time was recorded as £307m, which would have been a large proportion of its EV. I think that this is a hugely important point when looking for dividend stocks and building a dividend strategy: it is not enough that a company has produced a long series of dividend increases. It must be accompanied by adequate ROCE and only modest borrowings.

UTW (Utilitywise) is one of Woodford’s stocks, which “specializes in energy procurement and management services for businesses”. It issued its results today. Revenues were up, as were dividends. However, there are some prior year adjustments. Also, as one poster on ADVFN said, and I noticed too, the company had negative operating cashflows. Questions have also been raised about its revenue recognition policies.

The shares dropped around 5% yesterday ahead of its trading statement today. It’s a bit of a mixed bag in the results, and the market seems to be grappling as to whether they are good or bad. It is tending to oscillate between rising and falling.

I owned some shares in this outfit, and sold out earlier today. I am down about 30% on this share overall, but fortunately it was only a small holding. I sold out because I am now not happy with the quality of the company. The business model is also a little flaky for my liking.

I’m sure others will disagree with my assessment, and I wouldn’t blame them, but I have lost confidence in the shares. Good luck with whatever you decide.

Looking at the statistics on Stockopedia, it has a M score of 12. Low momentum can be a warning sign. Having said that, its RS6m is -5.9%, which is not in the lowest decile. So whether or not momentum is bad, or just plain mediocre, is dependent on which statistic you choose to look at. The fact that it’s supposedly a growth company on a value company rating is something of a sign that the market is not quite liking it.

We shall see.
AMO 113.75
CHG 154.17
UTW 175.5
ASX 3499

27-Oct-2015 edit: Fixed typographic glitches that resulted from posting via email, and cleaned up some of the English.

28-Oct-2015 update: “Blood In The Streets” posted an interesting bearish article about UTW back in June 2015. I also note that the company floated in June 2012, which, in my books, makes it an unsufficiently mature company.

06-Nov-2015 update: UTM has a Stcokopedia Momentum score of 10, which I view as ominous. RS6m=-10.8%, so at least it is not in the bottom decile.

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About mcturra2000

Computer programmer living in Scotland.
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