Friday, August 17, 2012

Fri 17 Aug - recap, SAF

Good morning. Another quiet day for results - I must remember to go on holiday this time of year again in future years. Went on a boat trip to Fingal's Cave on the island of Staffa yesterday, which was well worth the trip - spectacular natural rock formations.

In fact, looking through the results for this morning I can't see anything at all that falls within my small cap remit! (non-resource, financials, investment trusts, foreign companies, and sub-£10m mkt cap, all of which are niches that I don't cover here).

Instead this might be a good time to point out just how well the stocks highlighted here have done! We've got off to a great start here at PSUKSC.

  • Trinity Mirror (TNI) is up about 50% from when reported on here
  • Home Retail Group (HOME) has zoomed up to 93p recently, on the back of stronger retail sales volumes.
  • Mecom (MEC) zoomed up about 35% within 2 days of being reported on here, although I've sold out as not sure how to value it after recent results.

So overall, so far so good! I remain of the view that detailed research on value situations, combined with patience & vigilance, is by far the best investing strategy in the long run.

It falls below my minimum mkt cap, but results from Safeland (SAF) might be worth a look if you go in for micro caps - the mkt cap is tiny compared with NAV. Their shares are up 29% at the time of writing.

I see that Mecom are up another 10% today to 79p, so I sold too early just below 70p a little while ago.

Am sitting tight with HOME, despite that having risen nicely from a recent low of 70p (it has tested that level 3 times in the past year, and bounced strongly each time), and is now 93p. I think it's still cheap, since the Balance Sheet contains so much surplus capital (cash and debtors), hence is a sitting duck for a takeover approach in my opinion.

Plus, it's looking increasingly likely that we've seen bottom of the cycle earnings for it, again just in my opinion. Inflation is the inevitable (and necessary) outcome from this long-running debt crisis, as that's the only way to bring down the gearing of over-indebted consumers & Govts.

Hence why things like decent divi paying retailers are much, much better places to park cash than massively over-priced Gilts with negative real yields - surely one of the worst places to be when entering a period of higher inflation?

That's it for now. I'll be back home by Monday, so will be aiming to do my usual 8am reports again from then on. This week I've been battling family members to get hold of a laptop each morning!

Chatting to locals here in the Hebrides yesterday, they told me how they have great problems attracting & retaining people to live on the islands, as families cannot afford the rents for the low wage jobs available. I replied that the same problem exists in the whole of the South of England too! That's the problem with low wages caused by EU membership & free movement of people from Eastern Europe, and massive over-population which has also resulted from letting in 3.5m+ people in the last 15 years without thinking about where we were going to house them. Somebody in Govt should have thought about these things, but didn't.

However, now they have internet, the Scottish islands would be an ideal place for investors/traders to live, or indeed anyone who does their work on the internet - they can live anywhere, and for people like me who don't particularly like hot weather, then Scotland is a nice place to be!

Thursday, August 16, 2012

Thu 16 Aug - PVCS, XAR

Good morning. Sorry I'm late again today - more technology-related mishaps. It's another windy, but gloriously sunny day here in the Hebrides. We're back on the island of Mull, in a terrific cottage we've rented for the week - only £650, and it comfortably sleeps 6, with new kitchen & bathrooms, superb & highly recommended - here's a link. With wifi, you can work anywhere these days!The most interesting results today for me are interims from PV Crystalox Solar (PVCS), which describes itself as, "one of the world's leading providers of photovoltaic ('PV') silicon wafers", which are the building blocks for solar panels.The results are pretty catastrophically bad, with turnover down by over 75%, and it has moved into heavy losses. 

This is a good example of why it's a bad idea to invest in any company that makes essentially a commodity product, as the Chinese have been dumping solar products on the market at below cost for some time now, which has resulted in massive over-supply and a collapse in spot prices.

PVCS has responded in the only way it can, by slashing production, and cutting costs. So they effectively don't have a business any more, but are in cash conservation mode, hoping for the situation to improve.

This is reflected in a share price which is now well below the company's own net cash, which stands at E122.4m (so roughly £100m) versus a mkt cap of only £35m. So it looks interesting as a potential special situation - i.e. it might pay for someone to come along and shut the company down, in order to return cash to shareholders.

They secured a massive (E90m) cash settlement with a customer, to terminate a long-term supply agreement which was no longer competitive for the customer. Interestingly, they note that negotiations are ongoing with 2 other customers to terminate agreement, although they note that one might not have the money to be able to settle.

So potentially interesting, I might look into this in more detail again, as a special situation. It really would get interesting if the shareholder register began to show activist funds accumulating shares, but no sign of that yet.

The other angle on PVCS is that they have enough cash to survive for a few years, which might be long enough for enough competitors to have gone bust to allow product prices to rise again? PVCS do note that a lot of competitors have either withdrawn from the market voluntarily, or gone bust. Interestingly also, Governments seem to be taking measures against China for dumping, through tariffs. So that could be another life line for PVCS. I am intrigued, so am putting it onto my memo pad here for future research when time permits.

Back in the TMT boom/bust era, one of my favourite shares was Xaar (XAR), a maker of industrial inkjet printing heads, with some very interesting technology. I don't hold the shares, but good to see them having succeeded, when so many of those tech shares have flopped since.

Their interims are good, but the price looks about right, with a PER in the low-mid 20's. Outlook sounds positive, with more growth to come. If you think there is the potential for explosive growth, then could be worth a look. I don't know the company well enough to make that judgment, so will pass on this one.

OK that's it for today, am off out in the sunshine. Have a good day!

Wednesday, August 15, 2012

Wed 15 Aug - ECK, HNT

Good morning! Slightly late again today, apologies. Bit of a sore head after wedding yesterday!

Automated phone call company Eckoh plc (ECK) have issued a positive trading update, with new contract wins coming from channel partnerships. They finish by saying;

"The Board therefore remains confident of continued growth in the current financial year and foreseeable future."
I used to hold Eckoh shares a few years back, and they went nowhere, with me finally selling in frustration, but knew it was a good company. They've risen nicely since then, and are now 14p - which according to advfn's data puts them on a mkt cap of £10.4m, and a PER of 11.

Got internet connection problems here on Iona, so am having to re-write this section. Interims from Huntsworth (HNT) look pretty good - so I've added them to a new page on this Blog called "Ideas to Research", so that's a memo pad for things that look good at first glance, where I don't have time to follow up immediately.

That's about it today for small caps that are within my remit. Off to enjoy the sunshine here on Iona, going to rent a bike & check out the rest of the island. Absolutely stunning place - here's a link.

Tuesday, August 14, 2012

Tue 14 Aug - TRB, MNZS, TNI, NWF

Good morning! I'm having great trouble cranking an old PC into action, here in the lobby of a small hotel on the tiny island of Iona, off the coast of Scotland. What an idyllic place! Here for my cousin's wedding, later today, but my dedication to the markets being such, have dragged myself out of bed to do my usual morning report!

Tribal (TRB) issues Interim results today, which look alright (turnover flat, operating profit slightly up, but profit before tax up more strongly at 28%. I can't get access to broker forecasts at the moment, so am not sure what the fwd PER is. They state that their year is H2-weighted. Therefore one could argue their Interims are not that significant, although they do reiterate that current trading is in line with fullyear forecasts, so all sounds fine there.

If I'd bought shares in John Menzies (MNZS) at the market bottom in 2009, I'd be very happy by now, as they've seriously multi-bagged. Results this morning are flat, with Interim EPS at 32p. So that puts them on a full year PER of about 10. They distribute newspapers and also have an aviation division.

People keep telling me that newspapers are dead, but interesting to note that John Menzies still distribute 5m of the things every day! (45% market share), so it's a funny product which is supposedly dead, yet overall sells over 10m units every day in the UK!

Also, why is a newspaper distributer on a PER of 10, whilst a newspaper itself (TNI) is on a PER of 1.5? Doesn't make sense to me. Hence why I think, despite its recent 60% rise, TNI is still extremely cheap.

Agricultural & oil distributor, NWF Group (NWF) puts out rather poor results for y/e 31 May 2012. Operating profit down from £9.3m to £6.3m, although the fall seems to be down to poor performance from their oil distriubtion division - due to exceptionally warm winter & high oil prices, they say.

Divi has been maintained at 4.5p though, so a decent yield with the shares at 102p.

Doesn't interest me though, I don't like low margin businesses, especially distributors, as they tend to get sucked into becoming a bank for their clients - i.e. providing extended credit. One bad debt, and your profit is gone.

Looks like a strong start this morning, with FTSE 100 futures up 30, always helpful when one is having a day off, so I shall be able to relax and enjoy my cousin's wedding today here on Iona.
It looks like a lot of you are also on holiday, as I noticed a sharp reduction in readers about a week ago - either that, or my reports are not enthralling enough!

I was thrilled to see that we have readers of this Blog all over the world. Mostly in the UK obviously, but also many from our friends in USA and Ireland, so a shout out to you! Also we have readers in France, Japan, even Kazhakstan! So wherever you are, have a lovely day.

Monday, August 13, 2012

Mon 13 Aug - HVN, IND

Am running a bit late this morning, apologies for that.

Trading statement from Harvey Nash (HVN) looks OK, the key bit being;
Strategically, the Group's focus on the growing digital, mobile and social media technology markets, and its unique outsourcing and offshoring offering has resulted in an excellent financial performance so far and positions the Group well going into the second half.
The mkt cap is only £38m, which looks good value to me, for a fwd PER of 6-7. The recruitment sector generally looks cheap, perhaps because there's not much sign of economic recovery. However, due to the minefield of employment laws & regulation, there seems a general shift towards companies preferring contract & temporary workers. So recruiters likely to remain busy on that, even if filling permanent positions is slow.

I am told that IndigoVision (IND), my largest holding, has been tipped in Small Company Share Watch newsletter over the weekend, which is helpful. It was also tipped in Investors Chronicle last week, with tipsters waking up to the fact that it is now likely to have around 100p a share in net cash alone, plus an outrageously strong balance sheet overall (relative to its size of course), and is now performing better after a poor year last year.

Still waiting for the big breakthrough with IND though, which remains elusive. The FD turned CEO is certainly trying though - I'm told by various sources that you couldn't wish to find a more motivated & driven CEO. I live in hope that some strong sales growth will happen at some point, and that lovely 60% gross margin will kick in with its leveraged effect on the bottom line.

Well, this is embarrassingly short, but there are no other results which fall into my remit (mkt cap between £10-200m, no resource or financials sector, no overseas companies with a secondary UK listing). Have a good day/week!