DX - not frightened of Royal Mail, UPS, DHL, etc.

DX: One of quite a few small companies nibbling away at Royal Mail’s heels. The CEO Petar Cvetkovic cut was MD at City Link before it went mouldy, joining DX almost five years ago. Spotting that bog standard parcel delivery is a cut-throat business, DX specialises in time critical, high value and mission critical deliveries, mainly for the B2B market. Through DX Freight (acquired in 2012) it provides similar added value services in the freight market. Clearly, this is all a highly competitive space but so far DX has dodged most of the banana skins. Having floated in the big class of early 2014, the shares have struggled to gain traction. This is not too surprising in a parcels market where Amazon and Royal Mail are taking lumps out of each other despite being ‘friends’ and City Link finally took its last breath at Christmas.

In these interims to 31^st December 2014, the comparatives are all pro-forma from their private days. So, revenue is down a tickle at -1.7% as unprofitable business was shed, but this helped move EBITDA up 5.2% to £14.2m, with PTP down 1.8% at £10.7m and eps up 2.4% at 4.3p. A maiden interim dividend of 2p has been declared, which is guided to be one third of the annual total. The balance sheet is strong with net debt of only £12.1m, down from a post float £12.2m at the last year-end. The company points out that it is traditionally second half weighted.

Consensus eps looks like 11.3p, so at today’s 95p the PE is only 8.4x. A nearly twice-covered dividend of 6p is expected, using the company’s guidance, for a yield of 6.3%. At a market capitalisation of £190m, DX is a tiddler and it is swimming with some big fish. However, these numbers are very tempting for the more risk taking income growth investor, who would be in good company as the shareholder register is dominated by well known institutions. (Neil Cumming^, 16^th February 2015)

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 or e-mail at info@dividendpower.co.uk  Twitter:  @DividendPower