Vermilion Compass: Weekly Equity Strategy

The S&P 500 is beginning to come off of short-term overbought extremes, consolidating near the confluence of key overhead resistance and the 200-day moving average. This level is roughly 2,817 on the S&P 500 and roughly 1,000 on the S&P 600 Small Cap index. Some consolidation or a mild pullback is possible in the near-term, which we believe would help alleviate current overbought readings and allow for a more orderly and meaningful move higher. This constructive outlook is supported by the theme...

UAFRS vs As Reported Weekly Highlights - 2018 10 10

This week, Valens identified distortions and the corresponding adjustments to correct for those distortions for TSN, EQC, and BPI.

Vermilion Compass: Weekly Equity Strategy

Remain overweight Tech-heavy Nasdaq; Large-cap Financials on the cusp of a breakout The S&P 500's pattern of notching higher lows and higher highs since early April has continued, with the index managing to stay above 2,800 resistance for the last five trading sessions. As long as this uptrend remains intact the new resistance level to monitor is 2,873, the all-time high set in January. • Nasdaq remains leadership; XLF on the cusp of a breakout. The tech and biotech-heavy Nasdaq continue...

Ford Equity US Rating and Forecast Report

Ford Equity Research covers more than 4,000 stocks using a proprietary quantitative model that evaluates a company’s earnings strength, its relative valuation and recent price movement. Ford’s five recommendation ratings include strong buy, buy, hold, sell, strong sell. For all stocks in our coverage universe, ratings are generated each week and reflect the fundamental and price data as of the last trading day of the week.

Update: UK efficiency gains

British Polythene Industries’ (BPI’s) AGM update confirmed the strong start to the year in Q1 continued in April, slightly tempered by some upward pressure in polymer prices latterly . The company has also announced a proposed transfer of activity from its Sevenoaks site to another group facility. The associated £1m exceptional charge in the current year will be matched by the annual profit uplift in subsequent years once completed. This triggers a further upgrade to our estimates and shoul...

Update: Strong start to the year

British Polythene Industries (BPI) has a seasonally stronger H1 trading pattern and a positive Q1 trading update allows us to upgrade estimates again, having done so after the FY15 results. The previously announced disposal of a Chinese subsidiary has completed on slightly better terms than previous guidance. Despite this progress, BPI’s rating remains stubbornly in single-digit P/E territory.

Update: Steering a steady course

British Polythene Industries (BPI) successfully navigated a challenging FY15 trading year to deliver very respectable progress in profitability, earnings and dividends. Management is sticking to its tried and tested formula of investing in the business to enhance capability, market position and product offering and we expect further progress to flow from this.

Update: Out of China

British Polythene Industries (BPI) is disposing of its Chinese facility for an expected £9.4m. We estimate this to be modestly earnings enhancing with an expected £4m book profit. UK-oriented revenues will largely be retained and the group’s grow and invest strategy is unaffected by the sale. Valuation multiples are now in single-digit territory with, we expect, a growing yield. FY15 results are scheduled for 29 February.

Update: Managing variable demand, maintaining progress

An IMS noted maintained FY15 management expectations, despite some weaker areas of demand seen since the interim results. While H2 volume has been softer than anticipated, profitability has been sustained through operating efficiencies, investment and some easing of polymer pricing during the period. On unchanged estimates, BPI’s P/E rating is approaching single-digit levels.

Update: Trading resilience underpins H1 gains

Progress was expected and achieved in H1, although trading was not without its challenges. With polymer input prices showing signs of easing and more stable FX cross-rates currently, we expect a solid profit performance over the remainder of the year.

Update: Ongoing confidence

An AGM statement highlighted some y-o-y volume growth year to date and ongoing confidence across all three reporting regions even with recent polymer price increases. Investment has provided this platform through increased capacity and new products and remains the template for future progress. This steady, self-generated growth profile has an undemanding rating with a P/E just below 10x and EV/EBITDA below 6x.

Update: Profits ahead on stable volumes

British Polythene Industries (BPI) delivered FY14 profitability above our raised estimates and reduced its borrowings over the year. Investment drove progress in the two largest regions, more than carrying an adverse FX headwind and a short-term setback in North America. Further capex is planned and we expect this to translate to higher earnings in each of our forecast years. On modestly raised estimates, BPI is trading on a sub 10x P/E and adjusted EV/EBITDA of below 6x.

Update: Increasing confidence

H1 PBT was modestly ahead of the previous year and slightly ahead of our estimate. Behind this, strong UK/Ireland performance was substantially offset by a short-term setback in North America, which appears to be resolved now. Underlying momentum should become more apparent at the headline level in FY15, although we have increased estimates in all three forecast years. Even after a post-results share price bounce, British Polythene Industries (BPI) is still trading on attractive value multiples.

Institutional Comment: Daily Comment

Update: Making progress in H1

Trading has been strong enough in the UK and Europe to offset North American production delays to deliver overall progress in H1 and support existing FY estimates. We feel that British Polythene Industries (BPI) is capable of faster earnings growth, and increasing momentum from recent capex programmes is a potential driver here. Demonstrating this would provide the next catalyst for share price progress in our view.