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A bias towards energy and oil service companies meant that net assets at investment company LMS climbed, even as the value of the FTSE All-Share slumped by 12 per cent.
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US oilfield services company Weatherford International - LMS’s largest investment - saw its unrealised book value rocket from £28.3m to £40.3m. And profits and earnings were boosted by the sale of Energy Cranes, which generated a realised gain of £17.9m profit. The transaction brought in net proceeds of £82.9m, giving LMS a substantial war chest to cherry pick future investments in the market.
LMS continued to target more defensive energy and infrastructure deals, making new investments in Gulfmark Offshore, which provides marine oilfield services, and Pims, which supplies sewage and storm water pumping systems in the UK. With the portfolio still weighted to the US, the strong dollar is boosting numbers, but the company took a prudent approach to its unlisted investments, writing down their value by £7.8m in the first half.
In view of writedowns and continued weakness in stock markets on both sides of the Atlantic, Cazenove has cut its year-end net asset value (NAV) forecast from 113p to 108p
LMS CAPITAL (LMS) |
||||
|---|---|---|---|---|
| ORD PRICE: | 60p | MARKET VALUE: | £169m | |
| TOUCH: | 59 - 60p | 12-MONTH HIGH: | 76p | LOW: 57p |
| DIVIDEND YIELD: | nil | PE RATIO: | 3 | |
| DISCOUNT TO NAV: | 45% | NET CASH: | £67.8m | |
| Half-year to 30 Jun |
Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2007 | 101 | 6.0 | 2.5 | nil |
| 2008 | 110 | 9.0 | 20.9 | nil |
| % change | +9 | +50 | +736 | - |
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The discount to estimated NAV is 45 per cent, against a sector average of 25 per cent. This looks too high, even in view of doubts about some of the technology star-ups in the portfolio. Good value.
Last IC view: Fairly priced, 75p, 31 Mar 2008
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