Sunday, 10 July 2011

Still Vert for Go

Jacques Vert announced its full year results on 5 July and showed that there is still life in some retail stocks. The previous analysis is here.

Year to 30 April 2011

In a nut-shell, the Company held its own, which is more than a lot of retailers can claim. Turnover, margin and profits were all there or thereabouts compared to last year. The recently reinstated dividend was increased by 3% (v FY10), which is encouraging.

Cash generation remained strong, although there was a big adverse swing in working capital (stocks up, trade creditors down) and increased capex (IT system), but closing cash balances were over £10m. The full year results are here.


Based on a share price of 17.5p, the market cap is £34m. Adjusting for the net cash of £10m, the Enterprise Value is £24m. The PAT, which is the profit attributable to shareholders, was £5m. Put it another way, if you buy a share in the Company, it would take only five years for the Company to generate enough profits to pay back your initial investment. Of course, that assumes that profits do not grow (or fall, as the market may be implying). No doubt, FY12 trading will be tough with increased margin pressure, but given the customer base and the cash cushion, I do not anticipate that it will fall off a cliff. EV/EBITDA is around 3.5x, which is very, very reasonable.

The PER comes out at 6.9x (FY11 EPS of 2.55p), ROE 19.6% and ROCE 23.3%. The current yield is 3.8% (EPS 0.67p).

Source: Digital Look

The shares trade on a 30% discount to the general retail sector, which trades at a PER of 11x, (source: Sharelockholmes) and this (probably) does not even reflect the cash-rich nature of the Company, although the shares have handsomely out-performed the bigger AIM shares in the past three years. 

There has been sign of some institutional buying with New Pistoia Income Settlement now up to 5%, whilst Schroders have been trimming their substantial holdings. No sign of director buying since January 2011.

The normalised PER appears to be in the 6 to 9x range based upon the trading history of the past ten years, so I am still maintaining some upside PE arbitrage potential. I'm still aiming for a share price close to 30p (being EPS of ~3 and a PER close to 10x). Seymour Pierce reiterated its price target of 28p.


The Company is probably unloved because it is a small, AIM listed retailer and therefore off the radar of most folk. I still think that the valuation is too stingy for a solid, profitable and cash generative potential, and that there is further upside potential to the share price, so I have topped up some more.