Stobart Group - one for the Fan Club

Stobart Group: The pre-close trading statement was confident in tone, although lacking in too many hard numbers. The Investments Division is largely the remaining 51% of the original lorry business, where William Stobart now works. This leaves Andrew Tinkler to concentrate on the other four divisions of Infrastructure, Energy, Aviation and Rail. The trading of assets between entities employing these two gents has been a regular occurrence over the years and for some investors is a reason not to invest, full stop. In recent years, the rapid and frequent changes to the board, has not helped investor nerves either. In this statement Stobart notes that the Energy division has seen over 50% tonnage growth but at lower (unspecified) margins. The other three divisions sound on track, as is the lorry stake. Having paid down £168m of bank debt (helped by the lorry stake sale proceeds) interest costs will be significantly lower. The problem for analysts is that this is now a year of transformation and re-structuring, making forecasting trickier. Edison have a forecast to February 2015 of 3p, followed by 5p to February 2016. That is a hefty PE (at 125p) of 42x dropping to 25x. The dividend for both years is a long-maintained 6p, being a yield of 4.8%. Whilst the dividend is not covered by earnings the strengthened balance sheet means that is should not be in danger. The share price upside could be in the newer, growthier, activities at airports, rail and biomass, meaning that a sum of the parts valuation may be a better metric. On this basis Edison have a calculation of 166p rising to 186p. However, if you are looking for moderately rated stocks, in equilibrium, with growing dividends, then Stobart is not that stock. (4th September 2014)

These comments are not a personal recommendation to deal. Any investments can fall as well as rise in value, so you could get back less than you invest. I may have a financial interest in some of the stocks written about. www.dividendpower.co.uk