An AIM-listed company with 'China' in its name that is also a value hunter's favourite is a rare find.
Churchill China
(LSE: CHH)
has been something of a value hunters' favourite around The Fool for a while, mainly due to the somewhat unfashionable nature of its business, strong balance sheet and asset backing. Many of us have been in and out at a handsome profit assisted by discussion threads like these.
Anyone buying in following that thread will be feeling very smug indeed having seen a better than 40% profit in the last 12 months.
Keeping it in the Family
There were earlier investors, though. Appropriately based in the Potteries, Churchill can trace its development back to the establishment of one of its constituent companies, Sampson Bridgwood, in 1795 -- as the website tells us here.
A family company for many years, Churchill floated in 1994, but the Roper family still hold over 40% of the business -- another factor that is good news for value seekers. Family-controlled companies generally look after their own interests carefully and usually like to reward their own efforts with a healthy dividend.
But does this crockery-maker and supplier to the catering trade still offer value?
Downside Protection
The company's finals today -- "slightly above market expectations" -- certainly look strong for those still invested. Profit before exceptional items and tax is up from £2.6m in 2005 to £3.1m last year on a slightly higher turnover of £47.8m. At the increased mid price of 263.5p, the group is valued at £28.7m, which looks about right on adjusted earnings of 20.4p. But it's the balance sheet that attracts those interested in protecting the downside. Warren Buffet said that "the first rule of investing is not to lose money." And "the second rule is not to forget the fist rule." On that basis, CHH still looks to be a sound long term investment.
Net current assets stand at over £17m, though most of this is accounted for by debtors and stocks, with tangible assets at £10.8m. The pension liability is £2.76m. However, the £6.4m in cash is enough to warm the cockles of the value seeker's heart -- as is the strong cash generation of £5.7m and generally optimistic outlook:
- "We expect that the steady growth in revenue from our Hospitality business will continue..."
- "Our Retail operation begins the year in its strongest position for some time..."
- "We are reviewing a number of options to accelerate growth across the markets we serve..."
- "...pleased to report that trading in the early months of 2007 has been encouraging..."
Meanwhile, the final planned dividend payout of 8.1p brings the year's total to 12p, representing a very respectable yield of around 4.6%, and enough to pay for the occasional meal out for happy investors.
