Just, in time

Retirement and equity release advisers Just Group (LSE: JUST) has crashed 17% this morning after announcing plans to raise money through a share placement and a debt offering. The news overshadowed today’s 2018 preliminary results which showed underlying operating profit climbing 31% to £315m in 2018, although there was disappointing news here as well, with adjusted operating profit down 5% to £210m.

Overall, Just reported an IFRS loss before tax for 2018 of £85.5m, against a £181.3m profit for 2017, “driven by changes to property assumptions in light of the economic and financial uncertainty caused by Brexit.”

Capital question

New business profits rose 44% to £244m due to strong sales growth and a jump in the new business margin from 9% to 11.2%. The group now has a solvency coverage ratio of 144%, but today announced an underwritten debt offering of at least £300m and an underwritten equity placing of 9.99% of existing share capital. This should strengthen its balance sheet amid changes to capital requirement rules.

CEO Rodney Cook pointed to a “year of contrast,” with growth in new business profits, stronger margins, and higher sales offset by uncertainty over the Prudential Regulation Authority’s consultation on equity release mortgages. Its guidance in December was less demanding than many feared, but Just still has to set aside more capital to protect against the risks.

The uncertainty forced Just to delay dividend payments, although that will now restart in the 2o19 financial year. Today, the £778m FTSE 250 group trades at just five times earnings with a PEG of 0.4. This is deep into bargain territory, too deep for some. Today’s news will continue to cast a shadow, but I still think this is an exciting opportunity.

IQE easing

AIM-listed IQE (LSE: IQE) has also had a bumpy time. Its stock peaked at 175p in December 2017 but today it trades at almost half that level, 87p. Yet it’s rallied 33% in the last month. Is it about to recover its Mojo?

The group, which calls itself “the global leader in the design and manufacture of advanced semiconductor wafer products,” has tempted investors looking for the next big domestic-based technology play. As my Foolish colleague G.A. Chester recently pointed out, demand for its chips could skyrocket.

Apple uses IQE’S materials, but this can be a mixed blessing as iPhone sales weaken, while investors may remember how Imagination Technologies crashed in 2017 after Apple said it would stop using its graphics.

Better times ahead

IQE’s 2018 results were disappointing as earnings slipped from £37m to £27.5m following supply chain issues, disruptions and one-off charges. However, it has a number of investment programmes reaching completion this year, and management has assured investors 2019 will be better. We’ll see.

Earnings are forecast to grow 118% this year, then another 42% in 2020. Manager will need to deliver on those with the stock trading at 26.1 times earnings, with a price-to-revenues ratio of 3.6. Like Just, I reckon IQE is an exciting buy. It depends on your attitude to risk, though.

The post Have £2,000 to invest? These 2 growth stocks could be ready to rocket appeared first on The Twelfth Magpie.

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• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

PZ Cussons (LSE: PZC) is a former dividend aristocrat that had raised the dividend for a staggering 44 years before persistent trading troubles in Nigeria and consequent profits drops forced it to axe its progressive policy last year and freeze the annual payout.

Those hoping for an immediate return to dividend growth are likely to be disappointed as conditions in Africa remain ultra-challenging. Last month Cussons’ share price plunged again after it warned that profits were likely to fall again in fiscal 2019 as the “weak consumer environment, higher supply chain costs and lower exchange rate” in its African territory are offsetting good performances in Europe and profits improvements in Asia.

Accordingly City analysts expect the household goods leviathan to pay an 8.28p per share reward for a third successive year. The good news is that this projection still yields a pretty-mighty 4.2%.

Poised to bounce back?

Just as cheery is news that the number crunchers expect its profits, and therefore dividends, to start growing again from next year.

Why, you may well ask? Well recent economic data from Nigeria has suggested that a turnaround in the FTSE 250 firm’s fortunes here could be around the corner — gross domestic product in Africa’s largest economy sped up markedly in the final quarter of 2018, to 2.4% from 1.8% in the prior three-month period, and raised hopes that Nigeria is finally emerging from the crushing recession of three years ago.

I’ve long lauded the evergreen appeal of Cussons’ heavyweight brands like Imperial Leather soaps and shower gels, and trading data from its non-African regions illustrates just how beloved they remain with global consumers, with sales helped by a flurry of innovations across these labels and new product launches. And I’m confident that they will push the company’s profits column back on the road to strong and sustained growth sooner rather than later.

At current prices Cussons sports a forward P/E ratio of 16.3 times, way, way below its historical average. And this is a particularly attractive point at which to jump in given the signs of improvement in its key African marketplace.  

New business is booming

Another great income bet from the FTSE 250 is Just Group (LSE: JUST).

A projected 3.8p per share dividend for the current fiscal year would yield a mighty 3.8%, and I am confident that payouts can continue rising beyond the near term and that profits can take off. Indeed, latest financials from the retirement products provider this month reinforced my positive take when they showed that new business sales boomed 15% in 2018 to £2.83bn as companies passed on the risks related to their defined benefit pension schemes.

At current share prices Just Group trades on a forward P/E multiple of 5 times, well inside the accepted bargain-basement benchmark of 10 times (and below). This is a steal given the company’s solid sales momentum, and could lay the foundation for exceptional share price growth in 2019 and beyond, in my opinion.

The post Have £3k to spend? I think these FTSE 250 dividend stocks are trading far too cheaply appeared first on The Twelfth Magpie.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of PZ Cussons. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Once in a lifetime

Just has looked dirt cheap for a while but there’s a sticking point. Management deferred an interim dividend declaration due to the threat to its finances from proposed changes around equity release lifetime mortgages.

Its share price plunged more than 30% after the Prudential Regulation Authority launched a consultation in July on whether firms operating in this growing sector should set aside more capital to protect against any fallout from a house price crash. Options include re-insuring some of its book, or even raising equity. Just also has the flexibility to issue further Tier 2 debt or Restricted Tier 1 debt.

Just in!

Market worries may have been eased by today’s numbers, which saw a healthy solvency coverage ratio of 150% for the six months to 30 June, up from 139% at the end of 2017. New business profit rose 88% to £121m year-on-year, driven by strong sales growth and an increase in new business margins, from 8.9% to 10.2%. However, IFRS profit before tax fell from £66m to £45.7m.

Group CEO Rodney Cook hailed pleasing trading results, saying: “Exceptional sales growth, new business profit growth and adjusted operating profit growth are testament to our financial discipline and our group capabilities.”

The retirement and lifetime mortgage market is growing strongly and this £843m FTSE 250 company trades at a ridiculously low forecast valuation of 5.7 times earnings, with a prospective yield of 4.5% and chunky cover of 4.3. Dividends payouts are on hold for now, but will hopefully flow later. The lifetime mortgage issue seems very much in the price and, if you’re willing to gamble, the stock could fly if it finds a resolution.

Ship shape

At the other end of the valuation scale, financial services company Hargreaves Lansdown (LSE: HL) trades at a whopping forecast valuation of 44.4 times earnings. There’s a reason for that, and it’s a nice one. The stock has delivered a decade of pretty much steady upward share price growth and the momentum is continuing, with a 57% rise in its share price in the last year alone.

I have one of the group’s popular Vantage accounts and if you do too, you’ll know that Hargreaves may not be the cheapest but offers excellent service. And of course, it has scale and visibility on its side.

And Bristol fashion

Royston Wild recently labelled this £10.35bn FTSE 100 company expensive but exceptional! and that seems to cover it perfectly. He also urged investors to ignore the low forecast yield of 1.9%, with cover of 1.2, pointing out its generosity with special dividends.

So can it keep growing? City analysts are pencilling in 16% EPS growth in the year to 30 June 2019, trimming the valuation to 38.3 times earnings. As ever with investment-related stocks, much depends on the market. If you’re worried about contagion from the emerging markets crisis, for example, you might want to delay your purchase. But if you see a buying opportunity, jump on it.

The post I’d buy this absurdly cheap FTSE 250 dividend stock and this supremely expensive FTSE 100 growth monster appeared first on The Twelfth Magpie.

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• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

harveyj has no position in any of the shares mentioned. The Motley Fool UK has recommended Hargreaves Lansdown. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Just right

The £1.3bn company, created in 2016 by the merger of advisory firms Just Retirement and Partnership, was previously hit by a dip in equity release lifetime mortgage sales, despite a booming overall market. Today group CEO Rodney Cook reported a 35% increase in operating profit, “driven by our focus on profit over volume and by our relentless pursuit of merger synergies”.

Statutory net profit rose 4.73% to £155m year-on-year, while new business profit of £170m was up 37% on 2016. New business margins hit 9%, up from 6.8%, reflecting pricing discipline and merger synergies. Just is also working on improving its capital structure and financial flexibility, arranging a new banking facility, putting its new investment grade credit rating to work, and issuing a £230m Tier 3 bond on attractive terms, boosting its capital strength.

Retirement income

The board proposed a final dividend up 6% to 2.55p, making 3.72p of total dividends for the year, also up 6%. Cook said this reflects the group’s confidence for 2018. I am delighted by today’s positive results, since I recently named it one of my top stock picks for 2018. It still trades on a forecast valuation of 9.4% for 2018, with an anticipated yield of 2.7%, covered 4.2 times.

City analysts are forecasting 20% growth in earnings per share (EPS) this year, and another 12% in 2019. The equity release and at-retirement market is growing rapidly, as the nation gets older and the state struggles to keep up. A good home for your money.

Bricks and mortar

International real estate advisor Savills (LSE: SVS) has issued its preliminary 2017 finals today and a share price rise of just 0.36% suggests markets are satisfied, if hardly ecstatic. 

Today saw plenty of positives, including an 11% increase in group revenue to £1.6bn, and a 3.5% rise in underlying profit to £140.5m. The total dividend for the year rose 4% to 30.2p per share. Savills benefited from a resilient performance by its UK residential business, strong commercial markets and its geographical diversity, with an international network of more than 600 offices generating 61% of its revenues.

Property problems

It also reported a solid start to 2018 then dampened expectations by saying that these positive results must be set against “the backdrop of heightened market uncertainty, geopolitical risks and rising interest rates”. It warned of a tempering of strong recent transaction volumes in some markets but at this early stage, its expectations for 2018 remain unchanged. Given this proviso, maybe you would be prefer to spread your bets with these two investment trusts.

Economic and political uncertainty is a worry for every business, but property is particularly exposed after the strong rises of recent years. Today’s figures show underlying growth declining to 5% to 75.8p, while the City is pencilling in 2% for 2018 and 6% for 2019, solid but slower than before. The forecast yield is 3.2%, covered 2.3 times. A forward valuation is 13.6 times earnings seems fair. Savills’ prospects look solid, if not spectacular.

The post 2 bargain growth stocks I’d consider buying with £2,000 today appeared first on The Twelfth Magpie.

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• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Struggling for growth

Insurance firm Just Group (LSE: JUST) is the product of a merger between Partnership Assurance and the Just Retirement group in 2016. Combining these companies was supposed to boost profits by reducing costs.

According to today’s third-quarter update, that’s exactly what’s happened. Cost savings resulting from the merger have now exceeded the group’s original £45m target. According to the company, this remains “a key element of delivering a better return on equity”.

Just’s sales are split roughly equally between de-risking insurance for final salary pension schemes and annuity-type products for individual retirees.

As you’d expect, the group has benefitted from new pension rules allowing individuals to transfer cash out of their final salary schemes. What concerns me is that despite this, growth is pretty much non-existent.

Shrinking not growing?

Today’s third-quarter update reveals that total new business sales fell by 6% to £1,631m during the first nine months of this year.

Sales of Guaranteed Income for Life products rose by 1%, while sales of de-risking insurance for final salary pension schemes fell by 2%. Sales of care plans have fallen 33%, suggesting a fundamental shift in the market.

The company doesn’t provide much explanation for this, except to say that “our focus on margin rather than volume continues to deliver profit growth.” Fair enough, except that most other companies in this sector appear to be delivering a mix of volume and margin growth.

At 153p, Just shares trade around 30% below the firm’s embedded value (an industry measure) of 221p per share.  Measured against earnings, the stock trades on a forecast P/E of 12 and has a prospective dividend yield of 2.4%.

Although these figures look cheap, I think the firm’s lack of growth makes it risky for shareholders. I feel there are better choices elsewhere.

The ‘local’ choice

Shares of pub chains have fallen out of favour over the last year. And I’ll be honest, things could get worse. But there’s a fair amount of bad news already in the price of these stocks and recent trading updates haven’t been too bad.

My top choice in this sector is Mitchells & Butlers (LSE: MAB). This FTSE 250 stock recently reported like-for-like sales growth of 1.8% for the 51 weeks to 16 September, with total sales up by 2.9% over the same period.

Given the impact of inflation, this probably means that volumes have been flat or slightly lower over the year. But Mitchell & Butler has a number of attractions which I think could make it a worthwhile investment.

The first is that although the company’s dividend yield of 2.9% is relatively low, it should be covered three times by earnings. This reduces the chance of a dividend cut and hopefully lays the foundation for future growth.

My second point is that Mitchells & Butlers is starting to look quite cheap. The stock trades on a forecast P/E of 7.5. And at 258p, the share price is almost 30% below the group’s net asset value of 360p per share.

In my view, this stock could soon make sense as a recovery buy. It’s on my watch list.

The post One dirt-cheap dividend stock I’d buy and one I’d avoid appeared first on The Twelfth Magpie.

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• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Roland Head has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Still, the pensions giant remained locked around recent record peaks above 160p per share, and I fully expect it to remain a well-bought share in the weeks and months to come.

Just Group advised today that underlying operating profit shot 49% higher during January-June, to £100.6m, while new business profit more than doubled year-on-year to £64m.

The Reigate company saw retirement income sales boom 16% during the first half, while new business margins also picked up to 8.9% from 5% in the corresponding 2016 half.

And chief executive Rodney Cook struck an upbeat tone looking ahead, commenting that “the outlook remains favourable for each of our key businesses. We expect the Guaranteed Income for Life (GIfL) market to continue to grow, driven by demographics, individual customer defined benefit pension scheme transfers, and continued growth in shopping around.”

He added that “the defined benefit de-risking market is set for more rapid expansion as trustees seek to assure the benefits of their members,” while “the LTM [lifetime mortgage] prospects remain positive as a property rich, but pension poor, generation prepares to retire.”

Just too cheap

Just Group’s positive outlook comes as no surprise given the ample revenues opportunities created by its broad suite of retirement options, demand for which should continue to step steadily higher on account of Britain’s rapidly-ageing population.

The City certainly expects earnings at the business to keep creeping higher, and its army of brokers have chalked in bottom-line growth of 4% and 19% in 2017 and 2018 respectively.

And current estimates make Just Group stunning value for money, the company sporting a forward P/E ratio of 11.6 times, comfortably below the widely-regarded value benchmark of 15 times. I consider this to be far, far too low to pass up given the financial star’s vast structural opportunities.

GLS A-OK

While an economic slowdown in Britain and terminal decline in the letters segment may cause some near-term choppiness over at Royal Mail (LSE: RMG), I am convinced the long-term picture remains pretty rosy.

Britain’s oldest courier advised in July that while UK letter and parcels revenues slipped 1% in the three months to June 25th, its GLS pan-European division continued to be a star performer. Royal Mail noted that its continental division “continues to be a driving force for the Group… its ongoing, focused international expansion is increasing our geographic diversification, scale and reach.” The arm grew revenues and volumes by 5% and 6% respectively in the three-month period.

The number crunchers expect Royal Mail to suffer a 16% earnings slippage in the 12 months ending March 2018, although it is expected to get profits rolling higher again in the following year. A 2% improvement is anticipated.

And current numbers make the business exceptional value, in my opinion, the parcels powerhouse sporting a forward P/E rating of just 10.1 times. When you also chuck vast dividend yields of 6.4% and 6.7% for fiscal 2018 and 2019 into the bargain, I reckon investors should consider capitalising on recent heavy share price weakness at Royal Mail.

The post 2 bargain value stocks I’d buy right now appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Sold performance

Reporting on Tuesday was diversified financial services company, Just Group (LSE: JUST). Its first half of the financial year shows that the recent merger has had a positive effect on the business. It has delivered growth, while also balancing careful risk selection. In fact, Retirement Income sales were 16% higher on a pro forma basis, while total sales rose by 24% versus the same period of the prior year.

The merger is still expected to deliver significant cost savings and synergies. Already, Just Group is ahead of its original £40m cost synergy target more than a year ahead of schedule, while it is now seeking to increase this amount to in excess of £45m. As well as cost reduction, it is aiming to benefit from a growing market for its products. It anticipates favourable conditions due to demographic changes, individual customer defined benefit transfers and a continued expansion of the open market.

Looking ahead, Just Group is forecast to post a rise in earnings of 21% next year. Despite this high rate of growth, it has a relatively low valuation and trades on a price-to-earnings growth (PEG) ratio of just 0.4. This suggests that there could be upside ahead, with the business well-placed to deliver improving returns in the long run.

Low valuation

Also offering a wide margin of safety at the present time is institutional stockbroker and corporate adviser, Numis (LSE: NUM). The company trades on a price-to-earnings (P/E) ratio of just 11.2, which suggests it offers significant upward re-rating potential.

Of course, the company faces a somewhat uncertain future. The financial services market remains relatively unstable due to the potential impact of Brexit. With a weaker pound, higher inflation and lower confidence in the UK’s macroeconomic outlook, it would be unsurprising for investor appetite for new issues and IPOs to be somewhat lower than it otherwise would be. Therefore, Numis is expected to see its profit dip modestly this year.

While the company may have an uncertain near-term future, its long-term potential remains high. It currently yields 5.2% from a dividend which is covered 1.7 times by profit. This suggests there could be scope for a higher dividend, while with rising inflation forecast, the company could become a more enticing income stock. This may increase demand for its shares while they are relatively undervalued and lead to stronger performance over the long run.

The post 2 cheap stocks I’d buy and hold forever appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Peter Stephens owns shares in Numis.

Deep discount to book value

Livermore Investment Group (LSE: LIV) is my first pick. It flies under the radar of most investors, even though its market capitalisation is £95m. The company may appear difficult to understand because it is an investment business that invests in property, debt, and equity. Therefore traditional valuation analysis is not appropriate. Instead, the best way of valuing Livermore is to consider the company’s growth net asset value, as well as cash returns to investors. 

At the end of 2016, it reported a net asset value of $0.9 per share, around 71p at current exchange rates. Year-on-year net asset value grew by 16.8%, and the figure above excludes a $15m dividend to investors as well as an $8m share buyback. Including these two cash distributions, adjusted shareholder funds at the end of 2016 would be $180m, up 21% year-on-year. 

Two things stand out about the above numbers. First off, shares in Livermore are currently trading at a 27% discount to book value, which is a highly attractive margin of safety. Secondly, management is returning a healthy amount of cash to investors and buying back stock at a discount to net asset value, which is extremely impressive as such a strategy creates an enormous amount of value for investors. By purchasing shares at a 27% discount to book, management is spending 73p to buy £1. Who would pass up such an attractive offer? 

The one downside to Livermore is that, as an investment company, the firm’s returns are lumpy and not guaranteed. Still, with management set on creating value, investors can take comfort in the fact that over the long term, it will produce positive returns. Over the past year, shares in the company have returned 108%.

Growth and value

Just Group (LSE: JUST), formerly JRP Group looks to be another unloved value play. It is a financial services business, offering products for the retirement market. Thanks to the shakeup of the UK retirement market in recent years, the company has fallen out of favour with the City and investors, but management has managed to stabilise the business, and now earnings per share of 13.4p are pencilled-in for 2017. Earnings growth of 20% is expected for 2018, taking earnings per share to 16.1p and putting the company on a forward P/E of 7.3. 

Even though concerns remain about the viability of the company’s business model in the rapidly changing retirement product market, Just’s low valuation coupled with expected growth in the years ahead, lead me to conclude that the firm is not on the rocks just yet. The low valuation more than makes up for any troubles that might be ahead. Shares in the company currently support a dividend yield of 2.9%. 

The post These 2 value and growth stocks are trading at deep discounts appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.