http://www.fayrewood.co.uk

Current price = 125p
Historic PE Ratio = 10.8
Forecast PE Ratio = 7.8 (dropping to 6.75)

What They Do:

Fayrewood is a distributor of both hardware and software, and it trades across Europe principally through its 51%-owned subsidiary ComputerLinks. It distributes computers and computer peripherals, concentrating on a small number of non-competing lines, so as not to confuse the customer. Its vendor partners are the likes of Kodak, Epson, Palm, Acer and, especially, IBM. In the software field, it focuses on one of the fastest-growing applications - e-security. And it offers other key e-business solutions such as internet traffic management and content management. On this side of its business its most important vendors are Nokia, Check Point, Citrix, Trend Micro and Symantec.

IT distributors do a lot more than just shift boxes from manufacturer to customer. They offer product information, training, project co-ordination, servicing, delivery of spare parts, and hotline technical support. They play a crucial role in the technology supply chain.

Where They're Going:

Fayrewood are geared to the changes in demand for IT products/services. This is because they have a high fixed cost base meaning that as revenues increase, margins increase. Broker Arbuthnot has estimated that an extra 2.5% of sales will translate into an extra 10% on earnings.

If you’re investing in Fayrewood, you must believe that IT demand in Europe (and especially Spain) is not going to retract over the next year or two. I am in this camp and think that as new technologies such as broadband, wireless and Voice-over-IP become essential household utilities, demand for PCs and peripherals to use these new services will thrive. Fayrewood is targeting Spain and Eastern Europe as it’s primary drivers for growth over the next few years and they are behind in the technology cycle and set to catch up fast.
In the UK, Fayrewood has admitted that it’s main growth driver has been the success of IBM in taking market share from it’s competitors. Well, this is set to continue with IBM announcing today (12/8/04) that they are set to hire an additional 18,800 staff before the end of the year (up from a higher estimate of 15,000). These are not the actions of a company at the top of its industry’s growth cycle!

The Numbers:

On 5th August, Fayrewood announced interim results that beat already upgraded broker EPS forecasts by 37%. Due to strong growth in market share, Fayrewood is boosting sales at several times the market rate. Turnover jumped 19% in the first six months and Fayrewood is generating amoung the highest margins in European IT distribution.

Broker Arbuthnot forecasts a ‘conservative’ 16.1p EPS this year and 18.5p in 2005.

>>>> Arbuthnot Research Note - 6th August 2004 <<<<

The balance sheet has a high level of debtors and creditors, but this is normal for a distribution business. Creditors are higher than cash & debtors, which would normally cause alarm due to cash-flow worries, but in Fayrewood’s case the situation is explained by the fact that they pay their suppliers in advance to obtain greater discounts (and therefore higher margins).

Net Tangible Assets stand at £17.7m (35p/share) after subtracting minority interests (so there’s no net debt to distort the valuation)

The broker has a target of 185p (a 2005 forward PER of 10x)

Technically, the stock has resistance at 143p and has pulled back from this on profit taking after a rise into an overbought position after results. The stock is approaching an oversold position and should find support at the 120-125p level from prior support/resistance levels and from the 100 day ema. (No investment advice is intended, shares can go down as well as up).

Mentioned in the Sunday Telegraph:

Still taking a big hit from profit-takers, hmmm....

SB :S

Apparently just been tipped by Hemscott Analyst - anyone know what they say?

SB ;-?

Fayrewood (FWY) - buy at 123.25p
Software distributor Fayrewood was one of our first recommendations back in November 2000 and looks even better now. We sold out reluctantly in December 2000 because of weakness in the share price, but that is not a problem now. Both divisions are performing well and the shares look good value.

Bull points:
• Low rating
• Both divisions performing well
• Expanding across Europe
• Growing use of internet

Bear features:
• Small dividend
• Caution among investors about sector
• Above average gearing


Fundamental analysis by Ian Forrest


Key Statistics

EPIC: FWY
Mkt. Cap: £63m



Prospective PER: 7
Prosp. EPS growth: 14%
Prospective yield: 0.7%




Next Results:
Finals in March 2005







--------------------------------------------------------------------------------

Our advice to sell out in December 2000 proved wise because 2001 and 2002 proved to be difficult years for the company. Profits fell due to a slowdown in the European technology market and the shares fell steadily down to a low of 19p in September 2002. In the past two years business has picked up again and profits last year were up 70%. Over the past 12 months the shares have recovered strongly and have stayed resolutely above the psychologically important 100p level, even during the recent market wobbles. Since our initial recommendation Fayrewood has expanded its operations into Europe both organically and by acquistion.

The growth in commercial transactions over the internet and the increasing demand for security software to protect companies from hackers has benefited Fayrewood enormously. The company has also carefully developed relationships with some of the world's biggest IT manufacturers, both hardware and software, and focused on improving its margins.

Interim results at the beginning of August underlined the progress that Fayrewood has made in recent times. Pre-tax profits were up 42% to £7.0m on sales of £229m, up 19%. Both of these figures far exceeded the market's expectations. Such is the company's confidence that it even increased its interim dividend to 0.3p, remarkable for a company that has always been very modest with its dividends.

Both main divisions performed well but the niche distribution business, which accounts for 70% of turnover, was the the more impressive with sales up 18% and operating profits up 65%. This division has subsidiaries in the UK, Spain and France which distribute a wide range of hardware and software from well-known names like IBM, Canon and Samsung. The Spanish operation, UMD, was acquired in 2002 for £17.4m and has shown healthy growth right from the start. This year it is forecast to produce profits equal to 50% of its acquisition price.

The other division, Computerlinks, operates mainly in its home country of Germany but also has operations in the UK and France. The company is quoted on the Frankfurt Stock Exchange but Fayrewood owns just 51% of the stock as its holding has been diluted by a series of acquisitions paid for with shares. Computerlinks sells internet security and commercial software from a range of manufacturers and grew its sales in the first half by 22% and its operating profits by 6%.

The strategy appears to be to continue to grow both organically and by small acquisitions. The balance sheet is certainly strong enough to sustain this with net debt of £16m and cash also of £16m. Gearing of 47% may seem high but interest payments are covered almost 10 times by operating profits.

Both the brokers covering Fayrewood have upgraded their forecasts following the interim results. The consensus is for full-year profits of £15.3m with earnings of 15p, with £17.3m and 17.1p pencilled in for next year. However, both make the point that since Fayrewood derives around 35% of its operating profits from the fourth quarter there may well be further upgrades ahead of the final results next year.

The chairman, Pierce Casey, certainly sounded bullish in his comments on the prospects for the second half at the time of the interims. With a forward PER of 7, compared to a sector average of 19, and all parts of the company performing well these shares look seriously undervalued.

Thanks Everhopeful!

Not much to comment on really. It states the obvious:

"these shares look seriously undervalued"

And they struggle to come up with any Bear Points:

"Small dividend" - so what? This is a growing company, the smaller the better - they can use the cash in a more prfitable way than I can!

"Caution among investors about sector" - hence the buying opportunity for the savvy investors.

"Above average gearing" - It's called good money management.

SB :-)

Again tipped by Momentum Investor this weekend. They've been telling readers to buy for the last 9 months, and this week update readers since results and conclude with:

"The share price performance has been drowned out by the malaise in the IT sector. However, on a prospective PE of 7.6, falling to just 6.6, the shares are in bargain basement territory, for a company expected to increase its earnings by nearly 60% over the next 2 years. The shares are still an excellent buy."

Ncipher announce breaking into operating profitability:

"Prospects

We have experienced modest growth in our revenues over the last three quarters
and we are receiving encouraging feedback from our customers about their
spending plans for the next twelve months. Recent media attention given to the
problems of IT security, including online fraud, 'phishing' and other personal
privacy issues drives interest in our products and solutions. We are optimistic
about this trend continuing in the second half of 2004."

For those wondering, Computerlinks are the main distributor for Ncipher (I believe, from memory, DYOR)

I was asked on ADVFN 3 questions.

a) Why does the share price drift for months when the fundamentals are so good.
b) Why I thought the SP would be substantially higher in 6 months time
c) Why shouldn't the broker be replaced with one who is far more active.

This was my reply:



SB

An excellent post from Paul Scott on the Mike Walters BB:

The trade sizes are getting bigger - 75,000 most recent trade, good sign!

SB

http://www.citywire.co.uk/instrument/defau...sp&PageNumber=2

* Arbuthnot Securities reiterates its buy rating for Fayrewood

sb

i bought into fwy this week.

lot of research done

fa = excellent

tried to analyse cht but difficult to interpret. lot of r at approx 130 / 143
s= approx 120

agree should be at higher rating.

in profit so far

jl

jl,

Check the FWY chart against the sector - I reckon that explains the resistance. Every time FWY was about to break out, the tech (IT Hardware) sector took a dive...

Welcome aboard the FWY express (or should that be sloth, I dunno!)

SB

Fayrewood expands operations:



SB

At this rate, northamber (NAR) are going to catch them! :S How long can FWY tread water?

Come on baby, just one final push...

http://www.sharesforum.co.uk/index.php?showtopic=287

"Elsewhere, he has bought into IT product distributors Computacenter and Fayrewood "

h+ s forming?

cant fit image onto screen - look at cht for 6mths

realise that period = <1mth but still possible

vols appear to fit with defn

interested 2 see what u think

jl


added - 22.11.2004

if sp breaks below approx 134 then sht term target approx 129-130

IBM today announce agreement with Lenovo. Here's my take on it:



SB

See the FWY boys and girls in action here at the Spanish division:

http://www2.umd.es/umd/umd_3.wmv

SB

Latest KBC Peel Hunt Research:

http://www.kbcpeelhunt.com/pdfs/Fayrewood13Jan05.pdf

SB

Thanks SB.

Edmond Jackson, who writes a column every Sunday in The Telegraph, has written about FWY this afternoon:



I can't access the rest cos it's subscription only

Above article in full,

For what it's worth thanks to a NAR tip in the IC, it has now got through 100p. FWY is a much superior company imo. We should see the full rerating occuring in the run up to the 10th March.

From sector pier Northambar today:

For first time in ages, the market appears to favour the sellers (i.e. can sell large quantities at a premium to the bid, whereas it's tricky to buy in size.)

SB

Powerfull result:
--------
Fayrewood FY pretax adjusted pretax 16.3 mln stg vs 12.8 mln
LONDON (AFX) - Fayrewood PLC (LSE: FWY.L - news) year to December 31 2004
Sales - 506.67 mln stg vs 434.13 mln
Adjusted pretax profit - 16.3 mln stg vs 12.8 mln
Pretax profit - 15.10 mln stg vs 11.81 mln
Adjusted EPS - 16.82 pence vs 11.75
EPS - 15.51 pence vs 10.05
Final div - 0.4 pence
--------

KBC Note:

http://www.kbcpeelhunt.com/pdfs/mmeetings/...wood10Mar05.pdf

Tipped in GCI

I think these results were pretty much about what i expected - nice long term growth ahead.

What I like about the stock is that there really is little downside whilst the IT market remains strong, which I believe it wil do in the medium term.

The one thing that concerns me is what the trigger will be that will initiate the re-rating. Maybe a breakout on the Nasdaq will get people buying low PE tech stocks like FWY and a breakout in FWY will encourage TA buyers and the re-rating will take place. We may have a wait, but as I say with little downside risk, imho, I'm happy to hold and wait and you never know when a takeover approach/rumour might come along.

SB

I think the concern is related to the sub 10% industry growth rate which is likley to see increased competition in order to gain market share. An IT Disti/Var have little (or none) leverage relate to pricing on IT goods and hence brokers think margins will be thinner go forward. However I still think there is upside to the growth (many Corps have lots of cash on balancesheet) with VOIP and Security being the main drivers.

Only time will tell.

Discussion on Motley fool, re debt position amongst other things:

http://boards.fool.co.uk/Message.asp?mid=9...t=whole#9166831

[More of a bookmark to myself, but interesting all the same!]

New note:

http://www.kbcpeelhunt.com/pdfs/Fayrewood18Mar05.pdf

xdavid, highlighted another research note at

http://www.edisoninvestmentresearch.co.uk/

(PM me if you can't be bothered to register).

RNS Number:8585K
Fayrewood PLC
08 April 2005


Immediate Release 8 April 2005


FAYREWOOD plc

APPOINTMENT OF CHAIRMAN


Fayrewood plc ("Fayrewood", "Company" or "the Group"), the pan-European computer
distributor, announces that David Kleeman has been appointed Non-Executive
Chairman. David Kleeman was a founding director of Fayrewood and has been a
Non-executive director since that time. David Kleeman will replace Pierce Casey,
the Company's current Chairman.

Due to Pierce Casey's resignation from the board, the Company has released him
from his share lock-in and Fayrewood's Broker, KBC Peel Hunt, has placed his
total remaining shareholding of 2,500,000 ordinary shares representing 4.94% of
the Company's issued shares capital with institutions and other investors at a
price of 122 pence per share. On flotation Pierce Casey held 46% of the share
capital of Fayrewood.

Fayrewood also announces that preliminary indications for the first quarter of
the new financial year confirm that trading is in line with management's
expectations. A further update will be given at the Company's Annual General
Meeting due to be held in late May.

Commenting on this announcement, David Kleeman, incoming Chairman of Fayerwood
said: "I would like to thank Pierce Casey for his outstanding contribution as
founder, Chairman and visionary for Fayrewood through an important chapter in
the Group's development. During his time as Chairman, Group turnover grew from
#3 million in 1997 to #507 million in 2004. The Board appreciates that Pierce's
primary commercial interest lies within the private equity arena and that he now
wishes to commit his energies to the development of his other business interests
including a number of other public and private companies that he has founded.

Those of us who have had the privilege of working with Pierce know of the huge
contribution he has made to the growth of the Company and warmly acknowledge the
debt of gratitude we owe him."


- Ends -

If can bounce of support I may be in

Another update from KBC:

http://www.kbcpeelhunt.com/pdfs/Fayrewood12May05.pdf

Elsewhere a few weeks ago I highlighted the similarities between the OYS and FWY charts. Got lots of puzzled questions from people asking what on earth the relationship was between the two. Basically, they are both small cap distributors operating in Europe. One deals in plumbing supplies the other in computer parts, but essentially they are operating in the same market place with similar characteristics regarding the shares (i.e. underperforming growth companies with similar market caps & management issues)



The reason I'm highlighting it again now is because Edmond Jackson on Citywire has just written an article comparing the two:

Edmond Jackson: Fayrewood and Oystertec highlight dilemmas:
In recent days Fayrewood and Oystertec have provided examples of the dilemmas involved in interpreting smaller companies at a tricky time in the economic cycle. Read :: premium ::
09:05 Fri 27 May 2005

http://www.citywire.co.uk/News/NewsArticle...nuKey=News.Home

Broker, Insinger de Beaufort, comments on the AGM statement:

We note that the tone of today’s AGM statement from the pan -European computer hardware distributor is more cautious than the outlook that accompanied the prelims in March......

The shares are not expensive, on an earnings basis, however the limited visibility implied by today’s statement is likely to leave the recent recovery in the share price short-lived.

Risks continue to remain on the downside.

for info:

http://www.kbcpeelhunt.com/pdfs/Fayrewood9June05.pdf

Cheers taylor!

From the figures in the note above:

2006 Profit (before Amortisation) £10.7m
Tax= (£3.3m)

Earnings = £7.4m

Multiple of 8x = £59.2m
Value of CPX = £15.5m (@14 Euro per share)
Net Debt = (£17.7m)

Total Value = £57m or 112p per share

The above assumes FWYs distribution business valued at 8x '06 Earnings.

In above I should really add back interest into the profit figure since I am deducting net debt. This increases Earnings to £8m and adds £5.4m to value of business, taking it up to 123/124p per share

Chart looking weak despite strong looking fundamentals. Feels like it's been on my watchlist longer than I been watching!

Your May 27th chart shows OYS have gone out of business.

Got taken over by an outfit called AFC, I believe!

For reference. Effects of Lenovo-IBM deal:

http://www.crn.com/sections/breakingnews/d...icleId=54800265

BEIJING, Dec. 22 /Xinhua-PRNewswire/ -- Analysys International, a leading Internet-based business information service
provider, says that Lenovo's replacement of its CEO shows its strategy of further business consolidation and
development of global expansion plans.

News Background:

Lenovo Group Limited, the world's third-biggest PC maker, announced on December 20, 2005 that its Board of Directors
had appointed William J. Amelio the new President and Chief Executive Officer, replacing Stephen Ward. Amelio was
previously Senior Vice President of Dell Inc. and President of Dell Asia- Pacific and Japan. Stephen M. Ward, Jr. will
act as consultant and assist in this transition.

Quick Analysis:

Analysys International thinks that there are five objectives for this action:

1. To cater to the need of further business consolidation: Lenovo has finished its initial consolidation for phase one,
but they still need to deepen the campaign. William Amelio's operation experience and understanding of both mature
markets and emerging markets will help drive the further consolidation.

2. To improve the operation efficiency of Lenovo: Amelio served in senior executive positions in Dell and IBM for many
years, his rich operation experience and strong executive capability in promoting operation efficiency will help the
new Lenovo to achieve profitable growth objectives in overseas markets.

3. To meet the demand of Lenovo's mixed marketing model and boost its direct marketing capability: After announcing its
mixed marketing model, Lenovo earnestly hopes it can expand the marketing model worldwide. Although channel marketing
is Lenovo's strength, how to expand the coverage of the direct marketing model and combine it seamlessly into the whole
marketing strategy is a pressing challenge for Lenovo. Amelio used to act as president of Dell Asia Pacific, so his
deep understanding of direct marketing and strong executive capability are what Lenovo want to utilize to enhance its
direct marketing capability and spread its mixed marketing model throughout the world.

4. Lenovo made this decision after careful considerations to meet the timely demand of its focus transition: Ward
mostly shouldered a transitional role to stabilize former IBM PC employees and clients. He has successfully completed
his task for phase one of the acquisition, and now it's time for Lenovo to start its new phase of seeking a more
aggressive and profitable expansion.

5. Amelio's working background in the Asia-Pacific region and his understanding of Oriental culture make it easy for
him to understand and communicate well with the current senior management team of Lenovo, which would be an advantage
in the deepened consolidation of Lenovo and execution of expansion strategies.

Analysys' Position:

Analysys International believes that Lenovo's replacement of their CEO is to cater to the need of further business
consolidation, as well as acting as a new start for the execution of its expansion strategy.

In the future, Lenovo will expand more aggressively both in the Asia- Pacific region and throughout the world. Amelio's
rich experience in sales and operations can help Lenovo achieve this goal. The new appointment of Amelio shows Lenovo's
strategy adjustment at this turning point from stabilization to expansion.

Additional information is available in Analysys International's website: http://english.analysys.com.cn/