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STADIUM GROUP 25 January 2014

I noted yesterday, that the company delivered a Trading Update to the market ahead of its Preliminary results due out in March.

 

Having covered this Electronic Technology Group on a few occasions including penning an article for the weekly column last year,

I thought it worth catching up on this one.

The update yesterday was clearly positive being reflected in the share price, which duly rose 15% to 54.5p up 7.5p on the day, closing at 54.5p.

Although the company had endured a bit of a set back prior to my original article, there were nevertheless building blocks in place for recovery and a subsequent turnaround and that now appears to be feeding through.

 

The board confirmed that trading for the year ended December 31 2013 will be in line with its expectations after significantly improved profits were delivered in the second half, as anticipated.

 

I am hoping to catch up on a Broker note for Stadium, which it is also worth noting, provides a decent dividend yield in excess of 4.5%.

Current forecasts from N+1 Singer cite pre-tax profits of £1.7m and EPS of 4.3p to be delivered in March, rising to £2.9m with EPS of 7.3 for the year ending 2014. That implies a forward PER of just over 7 which looks very good value to me if achievable.

While the profit projection would appear to be making a tidy jump, one would assume it is well founded and it is perhaps worth noting that Stadium has achieved such a marked increase in profits before.

 

In 2010, pre-tax profits jumped from a previous £1.4m to £2.8m, while the following year, that figure was in turn trumped, by the delivery of a £3.9m profit.

Clearly, the company has endured a few peaks and troughs over the years, but with a focus on cost cutting and other self help initiatives along with a recent acquisition perhaps bedding in, Stadium may be worth my keeping a close eye on.

 

It is perhaps also worth noting that Henderson has recently upped its stake in the company to 16%, where AXA also holds.

As mentioned in my earlier comments, there is a pension deficit here, although that is nothing new these days, while gearing stands around 45%.

I will perhaps add a few more thoughts once I have had chance to view the most recent Broker notes, but feel Stadium remains an interesting recovery story.

             http://www.stadium-electronics.com/investors

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