Tag: Zetar


    The second set

    This post follows on from the last in the series - looking at my current porfolio holdings and trying to get back up-to-date with how they're going and how I feel about their valuations.

    Trinity Mirror (TNI)

    I came late to the party to Trinity Mirror, but it's still up about 40%. Most of my other stocks rising about that level, or a bit more, start to be interrogated along the lines of whether I really want to keep them. Trinity Mirror avoids that fate. Why? Well, it's pretty much the flipside of the argument I posted here when I was distinctly sceptical of Trinity Mirror. There, I argued that situations where debt represents a big part of the capital structure and equity represents only a little are particularly dangerous because the (small) equity portion becomes especially volatile. Small changes in cash flow assumptions make big changes to equity value. It's basically just the story of leverage and aversion to high levels of debt that many investors have, really.

    If you turn that around, and keep the assumption that small changes in cash flow assumptions have a big impact on equity value, it's easy to see the positives when market opinion starts rallying. Even slightly more optimistic outlooks boost the share price significantly. It's in that vein that I'm keeping Trinity Mirror, then - even a 40% rise in the value of the equity doesn't change the story much.

    Verdict: If my analysis was right, it's still cheap and has a while to go. If it's wrong, it's wrong at both my purchase price and this price, and a wide range of prices either way. Such is leverage! (more…)

  • Zetar (ZTR)

    Going forward, standing still?

    It's only been a few weeks since I covered Thorntons, confectioners of note and name recognition in the UK, and today sees me looking at another company in the business of chocolates and snacks. Unlike Thorntons, Zetar are a member of my portfolio - and, also unlike Thorntons, they're a manufacturer and not retailer. Today Zetar released their preliminary results for the year, so it's a good time for me to refresh my opinion, check the numbers, and take an objective look at whether they still offer good value.

    The chart top right has been updated to reflect the full year results, and show a slight dip in all three of the lines. Revenue dropped as the company executed a 'strategic exit from low margin commodity snack products'  and due to a weak Easter performance, and both issues fed through to lower operating profit and net profit. That aforementioned exit presumably doesn't make sense if the capacity isn't being filled with higher margin products, but may give them more slack in the next couple of years as they seek to improve their product mix.  The share price is up 3% as of writing, since the results were more or less in line with market forecasts and the news about the weak second half had already been communicated by management.

    Sales in the first 11 weeks of this year stand up 16%, but at £19.9m (against a FY revenue of £128m) shouldn't be given too much weight. Easter and Christmas are still far and away the most important periods. In that figure is also counted £1.5m of 'Olympic gifting', which I guess is a figure that'll pick up in the next couple of weeks... before disappearing entirely, while said products sit sadly in cupboards around the nation. Still, regardless of the one-off nature of that item, there seems to be good underlying growth in the business as it expands it portfolio of licensed and house brands. There's talk of a more optimistic Easter period next year, too: (more…)

  • Twelve for 2012

    Part Two

    With six of my stock choices briefly explained here, I conclude my twelve for 2012 in this post. The format for my last picks is exactly the same as for my first - I want to explain them briefly, simply, and without too much jargon. If you want a more detailed analysis, of course, I did do full posts on all these companies - just use the search bar above right or tags at the bottom to find them!

    Howden Joinery

    Howden Joinery, makers of predominantly kitchens and fittings, have a very low cost business model and growth which is both deceptively recession-proof and surprisingly strong. Due to Howden's approach to selling to the trade instead of consumers, stores tend to 'mature' over time as they increase in account holders - something which is still driving growth even before store expansion. On top of that, though, Howden is continuing to pursue growth in the vein of its existing model - cutting out the expensive high street stores customer-facing sellers need, and allowing themselves to focus on margins, which continue to be very strong. French expansion is on hold at the minute due to the uncertainty, but the business seems solidly run and consistently profitable since their troubled beginning.


    Cranswick make sausages and meat products, and were memorably described in one of my very early blog posts thus:"This seems like a Buffettesque company. I think the company will slowly accrete value." That's a description I probably agree with as, through various cycles of pork selling prices, Cranswick has continuously grown and remained profitable. In fact, they've grown revenue year on year for the last 10 years, and almost grown profit consistently for that same period. The balance sheet is extremely conservative, the management seem the same, and so the question always came down to valuation; and at a P/E of below 11 an extremely safe, consistent grower whose margins had been slightly squeezed seemed a solid bet. (more…)

  • Zetar (ZTR)

    The sweet taste of success

    I had recently noticed that there are a number of stocks in my portfolio which I haven't really discussed in detail yet - in that frantic first month, trying to put together all my thoughts and come up with a list of only my best ideas, I never really had time to write up everything. In the next month I'll aim to rectify that - particularly as most have declined with the market. Hence, if you agree with my reasoning, they're likely even more solid buys now than they were in the first place!

    Zetar are a very small (30m market cap) confectionery and snack food group operating entirely in the UK - though their website says they have plans to expand into Europe. They're one of the companies behind the scenes of products we all know; they are market leaders in advent calendars, for instance, and have had considerable success with their Baileys branded chocolates. On a more healthy side, they also have a natural snacks division - selling nuts, seeds and dried fruit. They seem to offer a fairly broad range of product categories - as well as producing their own, higher end brands such as Marmite flavoured cashews, they're also a key supplier of own brand product to the supermarkets. This gives them a level of resilience to changes in disposable income - while I would imagine these sorts of discretionary purchases are somewhat impacted by how consumers are feeling in general, I don't think people give up 'treat' foods in a recession. Trade down maybe, but hardly give up! I should note that for the chart above, adjusted net profit is used. This subtracts a number of exceptionals for easier comparison with previous years, but I've added back in a couple of the figures for the P/E metric so it represents the fairest number I can come up with.

    I bought in on July 4th on the expectation that results would be positive and continue to be so for the next few years, and hence the market price (at that time 201p) undervalued the potential of the business. The company duly reported results ahead of expectations - which is always a good feeling when expectations are already placing the stock on a P/E of ~8. Unsurprisingly, they've risen since the results. That may leave you feeling I've just contradicted my opening italicised text - but in fact, in a sense, I don't feel particularly more positive or negative on the stock at this price than I did back when I bought it. (more…)