These businesses often have much stronger balance sheets than the average company, and are conservatively stewarded for subsequent generations. Long-term business performance and shareholder returns suggest that pitching in your lot with these families can be highly profitable.

There was mixed news today from three such firms: Daily Mail & General Trust (LSE: DMGT), Fuller, Smith & Turner (LSE: FSTA) and Nichols (LSE: NICL). Could now be a good time to buy a slice of these businesses?

Daily Mail

Daily Mail & General Trust (DMGT) evolved from the eponymous newspaper, launched in 1896. DMGT’s strategy is to grow its business-to-business assets, and offset the slow structural decline of print news circulation with digital advertising revenue from its fast-growing MailOnline website, and other online assets, including Wowcher and Elite Daily.

DMGT has been managing this successfully, but news in today’s Q3 trading update came as something of a shock. Underlying revenue across the group’s media businesses declined by 5% in the quarter; notably MailOnline‘s £1m (8%) growth lagged well behind a £7m (15%) decline in print advertising for the Daily Mail and Mail On Sunday.

DMGT’s explanation of a general “marked deterioration in the UK print advertising market in the quarter” is credible, because local newspaper group Johnston Press said the same thing last week, noting in particular that advertisers chose to reduce or delay their spend around the time of the General Election.

So, the quarter looks to be something of an anomaly, albeit of sufficient impact for DMGT to warn that “the outlook for the Group’s Full Year results is now towards the lower end of market expectations” — and for the shares to fall over 10% in early trading. On the assumption that Q3 was something in the nature of a blip, DMGT looks reasonable value on a forward price-to-earnings (P/E) ratio of 15.5 based on earnings at the lower end of previous market expectations.

Fullers

Brewer and pubs group Fuller, Smith & Turner — founded in 1845 and famous for its London Pride ale — issued a trading update ahead of its AGM today, saying that “the business has made a strong start to the new financial year”.

The update was short and selective on numbers, but those it gave put some flesh on the “strong start”: like-for-like sales in managed pubs and hotels were up 5.7%, like-for-like profits in the tenanted division grew 4% and brewery volumes were level.

The shares are up 3%, as I’m writing. And, after a strong performance since the start of the year (+24%), Fullers trades on an elevated P/E of 22. I would be looking for a bit of a pull-back in the shares, although the P/E is always on the high side. That’s the price you pay for a premium business, with strong freehold property backing and a remarkable record of having increased its dividend every year without fail since 1974.

Nichols

Nichols was established on the back of soft drink Vimto, created in 1908 and now sold in more than 65 countries. The company’s brand portfolio also includes Levi Roots, Sunkist and Panda which are sold in the UK. In today’s half-year results, Nichols also announced the acquisition of premium juice drinks brand Feel Good.

The results showed sales at the same level as last year. However pre-tax profit was up 9% and earnings per share up 11%, as the company’s current value-over-volume strategy lifted the operating profit margin from 18% to 20%.

Nichols’ shares are up 2%, as I’m writing, and up 44% since the start of the year. If the half-year earnings growth carries through to the full year — the company said today that it is “well positioned to continue its growth trend” — we’d be looking at the same premium P/E of 22 as for Fullers. Again, I’d be hoping for a dip in Nichols’ shares, but again they still wouldn’t be “cheap”, partly because the company has a tremendously strong balance sheet, which includes £32m of cash and no debt.

The post Is There Value In Family Firms Daily Mail and General Trust plc, Fuller, Smith & Turner plc And Nichols plc After Today’s Mixed News? appeared first on The Twelfth Magpie.

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G A Chester has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

For companies rich in hard assets — such as miners — investors often look at the valuation ratio of price-to-net assets, also referred to as price-to-book (P/B). The table below shows the calculations we might do for FTSE 100 miners Rio Tinto and BHP Billiton.

You’ll also find Rio on a P/B of 1.2 and Billiton on 0.6 among some of the financial websites that do the work for you. The ratings, particularly BHP Billiton’s, make these two world-class giants appear surprisingly cheap, compared with the mining sector average P/B of around 1.5.

The reason is, if we’ve done the calculation as in the table above, we’ve inadvertently stepped on a banana skin.

Rio Tinto and BHP Billiton happen to be dual-listed companies (DLCs). A DLC functions as a single operating business, but is actually two corporations with separate legal identities, stock exchange listings and registers of shareholders.

The book values in the table above are for the single operating business (as presented in the companies’ accounts), but the number of shares relate only to the London-listed side of the companies: namely, Rio Tinto plc and BHP Billiton plc. We also need to include the shares of Rio Tinto Ltd and BHP Billiton Ltd, which are listed on the Australian stock exchange.

Rio has 0.44bn Australian shares to add to the 1.41bn UK shares, which pushes up the “P” number in the table above from £41.3bn to £54.1bn, and the P/B from 1.2 to 1.5. In the case of Billiton, 3.22bn Australian shares need to be added to the 2.11bn UK shares, which pushes up the “P” number from £33.5bn to £84.5bn, and the P/B from 0.6 to 1.5.

The reality, then, is that neither company is cheap relative to the mining sector average, and that Billiton isn’t cheaper than Rio.

There are a number of other DLCs to look out for, including cruise operator Carnival, which has shares listed in London (Carnival plc) and New York (Carnival Corp). I should also note, though, that many companies’ shares are traded on foreign exchanges, and that this doesn’t in itself make the company a DLC.

I’m not quite finished yet! There are some companies listed on the stock market that have other shares that aren’t even listed at all. But we still need to include the value of these unlisted shares in our P/B calculations.

Fuller, Smith & Turner, for example, has 32.36m shares on the London stock exchange, currently priced at 1,030p. This would give us a “P” for our P/B calculation of £333.3m, with the “B” being last reported net assets of £277.7m: so, a P/B of 1.2 — which looks very attractive relative to a peer such as Greene King on a P/B of 1.8.

However, Fullers has two classes of unlisted shares, which bring the total number of shares to 55.66m, making the “P” £573.3m and the true P/B a rather less attractive 2.1.

Again, Fullers isn’t the only company on the stock market to have unlisted shares. Another example is Haynes, publisher of the eponymous car repair manuals.

The post Don’t Make These Mistakes With Rio Tinto plc, BHP Billiton plc And Fuller, Smith & Turner plc appeared first on The Twelfth Magpie.

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G A Chester has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.