Uk Stock Writeups

Three quarters of turnover arises from newspaper delivery, a business in secular decline, one quarter from aviation services. The former saw profits fall by around 25%, the latter an increase of about the same; the restructuring programme - from newspapers to aviation - has been handled reasonably well and the price responded accordingly, leaving little wriggle-room for either exogenous shocks or a slowdown in either division, hence the sale.

Menzies (John) has two distinct business lines. The newspaper/magazine distribution arm, which together with WH Smith and Dawson Holdings dominates the UK newspaper distribution market, generates around two-thirds of profits and, like the other players, is suffering from lower volumes and a lack of pricing power. Cost-cutting is alleviating some of the pain, but nevertheless we expect profits to fall further before bottoming - it remains highly cash generative however. The remaining one-third of profits comes from the global aviation handling/logistics business which, in contrast, is in rude health. It is winning share in a highly fragmented market and management has been pruning underperforming units. The cash from the newspaper distribution business is allowing the company to invest and grow the aviation/logistics division further, with the profits from here growing and offsetting weakness in newspaper distribution. Using conservative, below-consensus forecasts, we still find that the company has an attractive 8.8% free cashflow yield, which provides a large cushion for the 4.1% dividend yield. On such modest valuations, we feel there is a sufficient margin of safety to cover the risks to earnings.

Sedol	Type	Price	Date
0579005	Sell	£ 5.444	26/06/2007
0579005	Buy	£ 4.533	15/06/2006
0579005	Buy	£ 5.46	18/05/2006
0579005	Buy	£ 5.488	17/05/2006
0579005	Buy	£ 5.495	16/05/2006
0579005	Buy	£ 5.497	15/05/2006
0579005	Buy	£ 5.477	10/05/2006
0579005	Buy	£ 5.393	09/05/2006
0579005	Buy	£ 5.444	08/05/2006
0579005	Buy	£ 5.447	05/05/2006
0579005	Buy	£ 5.36	05/05/2006
0579005	Buy	£ 5.35	04/05/2006
0579005	Buy	£ 5.40	04/05/2006
0579005	Buy	£ 5.176	13/04/2006

Despite our desire to hold 7-9% of most portfolios in good quality gold shares as an offset to excessive monetary growth, a paper bid from Yamana and Northern Orion Resources resulted in the sale after a decent run; we always suspect paper bids, preferring cash. The proceeds are being invested in other gold companies.

Meridian Gold is a Canadian, US listed gold miner whose principal operations are in Chile but who also has development and exploration interests elsewhere in South America and in Nevada (in a JV with Barrick). The company is un-hedged and its main mine in Chile is one of the lowest cost producers in the world, with significant silver and zinc by-products. This mine has significant expansion potential which the company is actively aiming to exploit, and we expect reserve and resource upgrades in the coming 6 months. Elsewhere the company spent $100m in July on another mine in Chile - the value of this is not yet incorporated into the share price as the company has not yet announced its reserve and resource estimates to the market. The company's strong development track record suggests there will be positive risks to the company's valuation from extended drilling at these two mines in Chile, plus there are other exploration projects ongoing elsewhere which represent potential upside when results are announced in 2007. Overall, a large-sized producer with a strong development pipeline and positive catalysts in the coming 6 months. Being un-hedged it is highly geared to the gold price, and based on our 2007 gold price assumption of $650/oz we see sufficient upside value to make this a BUY.

Sedol	Type	Price	Date
2424318	Sell	USD 29.355	25/07/2007
2424318	Buy	USD 29.043	22/11/2006
2424318	Buy	USD 28.139	16/11/2006

Primarily a provider and designer of computer software packages, the company has considerable exposure to the banking and financial sectors, whose capital expenditure and expansion plans may well go into reverse as a result of the credit crunch. This would seriously impact earnings. With a growing lack of visibility over the company's growth prospects, it was sold.

Misys has two software divisions that are global leaders in their respective industries (banking and healthcare). However, the share price has suffered in recent years as margins have fallen to historic lows. We believe that the margin decline does not reflect any problems with the company's products or market position, or any structural issues in the markets it operates in. Instead, the earnings slump has largely reflected mismanagement. The catalyst for our purchase is the removal of a founding director of the company after his abortive attempt to take it private earlier this year. The incoming CEO has a strong reputation within the software industry and a track record of turning around poorly performing companies such as Siebel. Over the next few years we expect the company to produce margin improvements, and given what should remain firm markets for their products, this should provide the backdrop to positive earnings momentum. The share price has yet to reflect this turnaround potential, so we see value at current levels.

Sedol	Type	Price	Date
0385785	Sell	£ 1.831	03/01/2008
0385785	Buy	£ 2.499	07/02/2007
0385785	Buy	£ 2.145	19/12/2006
0385785	Buy	£ 2.161	10/11/2006