What is needed is a swift Treaty to change budget disciplines …

… and debt control in the Eurozone to create a legally enforceable fiscal union.

Angela Merkel 

 

Last week …

… the FTSE 100 increased sharply up 7.5% to 5552. The FTSE 250 improved a pacey 6.9% while the AIM All Share at 702 increased 4%.  Markets benefited from Central Banks boosting US and the Euro liquidity by cutting the price of emergency borrowing.   Improving US Job figures have given the lowest Unemployment rate since March 2009 at 8.6%.

 

This week …

… the pressure is on France and Germany in another critical euro week.  The euro could be saved with a trillion new funds but there will be heated argument over the T&Cs of fiscal policy and austerity measures. In the UK the BOE is expected to keep interest rates at 0.5% but could boost QE by £50bn to £325bn in Thursday’s meeting. Tuesday’s GDP figure is likely to remain in the blue, but manufacturing and Industrial Production figures on Wednesday may not bring any Christmas cheer. Markets seem set to give up some of it’s recent rally.

 

Companies:

Plastics Capital (PLA) – £19m at 69p

Plastic bearings and products manufacturer Plastics Capital continues to reduce its borrowings even though revenues held steady. In the six months to September 2011, revenues were flat at £16.3m. The Japanese earthquake knocked plastic bearings sales to Japanese customers and there were also lower revenues from the creasing matrix division. New and thinner specialist films helped that division to grow significantly. Longer-term revenue growth will come from a combination of new products and new customers.

Underlying profit improved from £1.79m to £1.97m. The Thailand factory is running at 80% of capacity and there is room available to double the existing capacity. New offices in India and China are helping Plastics Capital win new business in those countries. The main raw materials prices have either flattened out or started to fall. There has been some destocking and softening of demand. House broker Cenkos forecasts a rise in full year profit from £3.9m to £4m. The shares are trading on just over 6x prospective 2011-12 earnings.

The low rating makes it difficult to secure earnings enhancing acquisitions and, anyway, Plastics Capital is finding it difficult to identify suitable acquisition candidates. It only wants to acquire businesses that are already successful and profitable.

Finance

Net debt continues to fall. It reached £11.3m by the end of September 2011 and is forecast to be £9.7m by next March. The new bank facility is worth a total of £14m. A maiden dividend of 0.33p a share has been declared.

 

CSF Group (CSFG) – £104.2m at 65.5p

Data centres operator CSF almost doubled its revenues to RM91.7m (£18.4m) in the six months to September 2011 but pre-tax profit was slightly lower because of the sale and leaseback gain on a data centre in the corresponding period of the previous year.

The Malaysia-based company reported a fall in profit from RM32.5m (£6.5m), including a £4.5m gain on the sale of the CX1 site, to RM30.1m (£6m). That means that the underlying operations made a significantly higher profit. The CX1, CX2 and CX3 data centres were running at full capacity in the period.

CX5 is still being developed but the first tenant is being signed up. The first phase should be completed by the end of the year. CSF believes there are plenty of opportunities for expansion in Malaysia, Singapore, Vietnam, Thailand and Indonesia. An Indonesian joint venture plans to open CXJ in Jakarta. The company has also secured joint venture partners to help it move into the Chinese market. CSF wants to double its capacity over the next three to five years. For the March 2012 year end a profit of £13m gives an EPS of 6.45pand a prospective P/E of 10.2x.

Finance

CSF had cash in the bank of RM58.2m (£11.7m) at the end of September 2011. There was a cash outflow of RM24.1m in the first half but the majority of that was the final dividend.

There are plans for two more data centres in Malaysia that will each cost £20m, plus another aimed at the government which will cost £14m. There are also proposals for data centres in Singapore and Taipei.

 

Advanced Power Components (APC) – £3.69m at 14.38p

Electronic components and energy efficiency products distributor Advanced Power Components reported strong profit growth last year but it is cautious about the outlook for 2011-12.  Even so, APC should be able to achieve further growth in profit this year and components distributed by the company are still being designed-in new products.

APC reported an improvement in revenues from £13.4m to £14.4m in the year to August 2011. There were some weak areas in the business but the majority of the activities performed strongly. Pre-tax profit jumped from £247,000 to £402,000, after digesting a £36,000 loss from QV Controls in the two months that the efficient lighting systems company was part of the group.

There is more positive news about the imop energy efficiency product than there was in the more cautious trading statement in September. APC has case studies which show that the device does save electricity, while the University of Greenwich is validating the level of savings that can be achieved. The share price has risen by strongly in the past month. There was a relatively large amount of trading in the shares early in November – certainly more than at any time since March. The shares are trading on 9x historical earnings and for the August 2012 year 5.7x if profits forecast of £0.65m are achieved.

The order book was strong at the end of September but there have been signs of softening trading since then. Management is still hopeful that trading will remain strong enough to improve profit this year.

Finance

Net debt was £1.24m at the end of August 2011 and cash generated from operations will continue to reduce borrowings.

 

Pan Pacific Aggregates (PPA) – £2.34m at 0.06p

Canadian Quarry operator Pan Pacific Aggregates is shaping-up to to have a successful 2012.

Production started at the quarry earlier this year and an important new contract has been won. Investment in road building in the Vancouver area means that Pan Pacific has a strong local market.  This development is significant not only because it increases the workable reserves in the quarry by over a million tonnes, but it also further reduces the operating costs by allowing direct delivery of shot rock to the processing unit.The cost of the diversion (estimated to be approximately C$200,000) will be met from existing cash resources and work will take up to two months to complete.

Finance

If acquisition plans go as hoped PPA should be cash neutral and not need to raise any additional cash for working capital so any cash raisings would be for financing acquisitions.

M&A

Pan Pacific is looking at potential acquisitions of quarries in its region of Canada.

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