View from City Road: In the realms of adventure
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Your support makes all the difference.TIPHOOK'S policy of supplying reams of financial detail with its results is commendable but the benefits are slow to come through. The company has yet to recover from the jolt to its image earlier this year when its shares collapsed. When the transport leasing group announced its 1991/2 figures, the market churlishly repaid its openness by knocking the shares by 15 per cent.
Yesterday, by contrast, the share price rose 13p to 297p before closing at 294p. This was despite a 10 per cent fall in pre-tax profits to pounds 35.2m for the six months to the end of October. Earnings per share were 14 per cent lower at 22.4p, but an interim dividend increase of 11.4 per cent to 4.9p cheered the market.
Investors' nervousness stems from a general uneasiness about highly-geared leasing businesses (witness the GPA fiasco) and more specific worries about details such as Tiphook's phenomenally low tax charge of 11.4 per cent. It also has to work hard to shake off its image as a classic Eighties glamour stock that is now out of vogue.
These factors have contributed to a volatile share price that went as high as 567p barely more than a year ago but has languished below 250p lately, despite the market's rise in the same period.
Yesterday's closing price values the group at about five times this year's expected earnings, so a lot of the City's doubts are already discounted. Its supporters say that the company has now shown it is resilient to recession and can go on to make even greater strides than in its Eighties salad days once world trade picks up again.
Utilisation rates for its containers and trailers could be pushed higher if the good times roll. They are still a very respectable 85 per cent for containers, which is by far Tiphook's biggest business, and a less dazzling 57 per cent for trailers. The company is also seeing high growth in its markets in Asia, and predicts great opportunities from the deregulation of transport across Europe in the next few years. Set against this must be the deterioration in Germany, which is an important market for Tiphook.
Despite the company's openness, this stock is likely to remain one for the adventurous investor rather than the faint- hearted. It has yet to convince the sceptics.
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