DX Group (DX..L): Well,
the very brief trading update for the year ended 30th June 2015
would easily fit on a postcard. It is seemingly a case of no (or little) news
being good news, although the appointment of Numis as broker is a new positive.
Since I wrote favourably on it at the interims in February, when the share
price was 95p, the stock has been a bit of a puzzle to me. The group’s
management, led by Petar Cvetkovic, has grasped that it needs to specialize and
add value in order to thrive. At the margin it will have been helpful to see
City Link go under at Christmas (after which DX cherry picked some assets) and
see Whistl hit turbulent waters in the wake of withdrawing from door to door
letter delivery. The overall delivery market remains very competitive and at
the bottom end there are few barriers to entry. In addition the big competitor
is Royal Mail, who are getting their act together post privatisation. How
aggressive Royal Mail is, will depend on how earnest the regulator is in
policing it.
But for now, DX has confirmed that second half trading has been
‘satisfactory’, with cash generation ‘remaining strong’, which would appear to
underpin their dividend prospects. Back at the Interims consensus eps forecasts
for the year now ended were 11.3p, but that seems to have slipped to become the
FY2016 forecast. With the new FY2015 consensus at 10.6p, the share price of 86p
gives a PE of 8.1x dropping to 7.6x. The interim dividend of 2p was stated to
be a third of the anticipated annual total, giving a yield for FY2015 of nigh
on 7.0%, with scope for a modest increase in FY2016. There are many risks in
their market, but the current valuation just seems plain mean. (Neil Cumming,
16th July 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
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