Thought it about time I posted some of my own research as I have done on other BBs. Needless to say I hold and, therefore DYOR because I am probably very biased. This is my interpretation only of company information available in the public domain, forecasts and supporting documentation from Teather and Greenwood, and REFS information made available through the company website. It is not an invitation to buy shares in the company but an analysis carried out for my own benefit and made available through these boards for interest only.

From a technical perspective (albeit rather basic stuff) the long-term uptrend is still intact, just, with 137p looking to be a key point. It also looks to be a key support area with other support on the7s at 127p 117p and 107p.

With the fundamentals, though, I would be surprised to see these tested given strong growth forecasts for the future from house brokers T&G.

The downsides that I can see are:

1) War and general market sentiment
2) Gearing
3) Integration of Llewellyn happening less fluently than hoped.

However, the war discount is probably just about in the price of everything at the moment. General market sentiment is probably nearing some sort of bottom with a lot of companies expecting to see some sort of growth in Q2, Q3 albeit from a lower level. My instinct is to believe that this could coincide with the uncertainty of the Iraq issue being removed.

The debt of a company must be helped further by a drop in interest rates and further drops believed possible (The Times was suggesting 3% could be on the cards). The gearing issue has already been dealt with by ROK with the disposal of properties and assets from Llewellyn which were believed to be non-enhancing.

This latter point suggests to me that not only has debt been reduced but that ROKs management were shrewd with the purchase and knew what they wanted and what was surplus. They acted quickly with their disposals and appeared to know where they were going with Llewellyn. So the integration matter is satisfactory to my mind and confirmed by recent company updates.

That leaves a lot of positives.

The gearing has been reduced from 70% to 21% (according to REFS) available from the company website:
http://www.rokgroup.com/irelations.htm
http://www.hemscott.com/internet/custom/rok/refsframe.htm

The sale of non-core assets and disposals announced in the trading statement in January demonstrated effective management:

The Board announced the following disposals, all at a premium to valuation: Completion of the disposal of 4.5m (27%) of Llewellyn's property portfolio, including the development at Jevington Gardens and the Devonshire Baths' site; Exchange of contracts for the disposal of a further 1.1m (7%) of the portfolio, including the Llewellyn premises in South Street, Eastbourne, in respect of which completion will take place during the first quarter of 2003; Completion of the disposal of the assets and trade of the timber engineering activities previously carried out by Llewellyn.

The fact that they were all disposed of at a PREMIUM demonstrates management acumen and the fact that it was done so swiftly adds to the confidence.

The rest of the trading update was optimistic with a forward order book in excess of 250m for RokBuild and confidence that the market expectations would be met. In real terms that suggests little growth this year with T&G forecasting 21.3p EPS but with a current dividend yield of about 4.3% (about two-thirds of that to be paid shortly after the next results) and a HISTORIC PER of only 7 the rating is attractive.
Where the valuation becomes far too cheap to ignore is with the future growth factored in according T&G forecasts which were created after the Llewellyn deal was announced (but before the sell-off of the assets).

http://www.rokgroup.com/reports/TG_Sept2002.pdf

The growth is expected to be about 50% next year and a further 25% in 2004 with dividends increasing 10%pa. That implies an eventual dividend of 6.5p, which at todays price of 138.5p yields 4.7%. However, ROK has been increasing dividend cover from around an average of just over 2 to about 3.5. Even if this is pegged to a cover level of 4 times in the future it is not inconceivable that the dividend could rise to something nearer 10p by 2004. Even at five times covered, if targets are met or beaten, it would be realistic to assume 8p. That increases the dividend yield at todays price to something between 5.75% and 7.25%.

T&G made ROK a buy on Sept 12th 2002 at a price of 168p. With forward PERs of only 4.6 and 3.66 and consequently PEGS of 0.09 and 0.15 ROK could prove to be the real bargain of the year. An average PER of 8 has been achieved over the last five years so applying this to the forecast EPS of 30 and 37.8 a price of 240p rising to 302p does not appear to be an unrealistic target. It is quite possible that with continued growth a re-rating of the PE would come about also. Even if the PE got stuck at 5.6 (the lowest average PE in the last five years) the price would still be around 200p.

The management is strong with a good past record and, under Garvis Snook, proving to be shrewd in its management for the future. The shareholder is kept abreast of what is happening and the website offers a good array of investor information. In my opinion the share price does not truly reflect the future prospects of the company and, although it may drop lower in the short-term, todays price may well prove to be an absolute bargain. Even at 107p support levels the downside from here is 22% but upside a very promising 75% (or higher further into the future) giving a minimum risk/reward ratio of 1 to 3.5.

Interesting links on:

http://www.twst.com/notes/articles/lws046.html (Snook looking for 1bn turnover in the next five years. If achieved what price ROK then?
"It will be a truly national business so our sales will be approaching the billion pounds per annum mark")

Looks like ROK is climbing again on good results.

dikytree.

Sitting on an apex of a triangle formation. Results out tomorrow.
Altium Securities has issued a BUY note and 700p target.