The Investment Column: Northamber blip should not deter
Tuesday 10 February 1998
Yesterday's 10p fall in the share price, to 245p, should be seen in that context. After a strong run, investors clearly thought this was the time to lock in some profits. But Northamber shares still don't look expensive. On yesterday's results, which showed a 14.5 per cent increase in pre-tax profits to pounds 4.26m, the shares trade on a historical earnings multiple of just 14.
Clearly, Northamber is subject to the vagaries of the PC industry, even though it sells to more stable business customers, rather than in the cut-throat consumer market. The comment that it had increased its bad debt provisions following the collapse of several computer assembly companies would be enough to give any investor the jitters. But in some ways the inclusion of the provision, which Northamber would not disclose but described as "prudent", only makes its results more impressive.
Then there's channel assembly - the business of putting parts into computers at the last possible minute before they are sold to the customer - which Northamber does for Hewlett Packard and IBM. Competition from direct sales companies such as Dell has forced others to increasingly customise their product to make sure customers get the parts they want. Channel Assembly currently accounts for one-fifth of Northamber's business, and is growing quickly.
So Northamber's growth, though not without its risk, is set to continue for several years. Add to that the possibility that chairman and majority shareholder, David Phillips, might sell out to a larger bidder, and investors have every reason to hold on to their Northamber shares.
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