Marketing services provider is on the up

By Graeme Dickson
Updated: 12:54 EDT, 1 September 2010

Keep an eye on marketing services provider Communisis (CMS) over the next fortnight.

The firm announced upbeat interim results, but has since slipped back to a reasonably solid support level ahead of an investor road-show next week.

The £32 million company announced post tax profits up to £2.2 million versus £1.7 million last year, whilst earnings per share rose to 1.58p compared to 1.22p in 2009.

Its interim dividend fell to 0.43p compared to 0.86p in 2009, but this was largely seen as a rebalancing exercise, which hopefully will see the high yield restored for its year end.

The company has two divisions to its business: Intelligence Driven Communications (IDC) and Specialist Production and Sourcing (SPS).

The former is doing very well with an overall profit improvement thanks to the growing demand for analytical data services, while the latter has struggled with its Direct Mail offering after a general reduction in volumes.

The company recently added Tesco, BrightHouse, Bank of Ireland Group, TNT Post UK and Nationwide as new customers in the first half of its financial year.

The company has also addressed its net debt liability, by reducing it from £24.8 million in 2009 to £16.3 million at the interim stage.

The stock trades on 7.8 times 2010 forecast earnings and is expected to yield 5.6 per cent. 62 per cent of the stock is owned by institutions and directors of which Gartmore has the largest stake at 28 per cent.

Given that the free-float is relatively small, if the company can garner enough investor support, the stock should perform well - although if the stock closed below 20p I would consider revising my view.

Update

IQE – tipped at 24.25p last week, the stock closed yesterday at 25.5p ahead of its interims announced today. Keep holding, especially after the acquisition news we hear from Intel.

Tissue Regenix – suggested as a buy two weeks ago at 16p, the stock is unchanged. Nothing has changed with the idea so remain long.

Pursuit Dynamics – suggested as a buy three weeks ago at 223p, the stock closed yesterday at 238p. The idea is going to plan. Look out for initial resistance at 275-280p: through here expect more upside towards 320p.

United Utilities – buy idea as suggested on 4 August at 593p, the stock closed yesterday at 570.5p. The stock is worth holding for the six per cent dividend yield alone but one also might expect some excitement regarding M&A activity within the sector, after a number of approaches had been initiated, such as the International Power/GDF Suez earlier in the year.

Bodycote – buy idea suggested on 28 July at 236.4p: the stock closed yesterday at 225.75p although its peer Melrose Group's interim figures may have encouraged investors to review the sector again.

The material for this report comes from Alpha Terminal. The writer does not hold any shares or derivatives in the above mentioned companies except IQE.