Small Cap Report (1 Feb) - BEG, ANP, IGP, EKT, ACL

Friday, Feb 01 2013 by

Begbies Traynor (LON:BEG) today issues the quarterly "Red Flag" report, which is always worth a read, since it gives an unbiased overview of the levels of corporate financial distress, and hence outlook for the economy overall. Today's report for Q4 2012 is striking in that it's remarkably upbeat, suggesting that companies which have survived this far are now recovering. Although consumer facing sectors are still in difficulties.

As regards the Stock Market, most of us are wondering how long this bull market can continue for? On the one hand the rises feel too far too fast (where have I heard that phrase before?!), but on the other hand markets have overall just gone sideways for the last 15 years or so. With small caps I'm finding plenty of reasonably priced companies (on PERs in the 8-12 range), but not many absolute bargains (PER below 8, with little debt).

That said, if you start factoring in increased earnings from an economic recovery, then many shares could end up looking very good value now with hindsight in a couple of years' time. So I'm inclined to stick with what I've got, and am fully invested at the moment.

Furthermore, there is also the hot topic of discussion at the moment about Bond investors starting to switch into equities, given the ultra-low yields on Treasuries. Anyone holding long-dated Treasuries is out of their mind in my opinion - not only have they got an artificially inflated (by QE) asset, but it's yielding virtually nothing, indeed has a negative real yield, plus we are probably heading for higher inflation as the inevitable result of money printing. So they are sitting on something that yields about 2%, yet could easily see 30% wiped off its capital value through higher interest rates. Surely at some point holders of those Gilts will wake up and smell the coffee, and rotate into equities? Arguably they need to feel pain from Gilts falling in value first, before they switch into equities. Maybe that is now happening?

Interestingly, I'm also seeing people reappear who have been out of the equities markets for years, drawn back in by this bull market (3 years too late!). So I suspect equities might surprise on the upside, as fresh money bids up prices, driven by poor returns elsewhere.


Anpario (LON:ANP) issues a trading statement which reports a successful year to 31 Dec 2012, "...with EBITDA and profit after tax in line with market expectations". They also report a good start to 2013, and net cash balances of £3.7m (almost 15% of the market cap of £25.1m at 128p a share).

These shares traded sideways for 3 years, but then rose about 50% in the last year. The forecast PER is 12 and the dividend yield 2% on forecast figures for 2012. So that looks reasonably priced. Might be worth a deeper look, if you like the company & its prospects. It doesn't jump out at me as a particular bargain, so I'll move on.


Intercede (LON:IGP) is an identity management software company, whose sales are mainly in the USA. They warn on profit today, blaming caution on Government spending decisions in the USA, triggered by the fiscal cliff problems.

They state that revenues are likely to be similar to last year (which were only £7m) and result in an operating loss. The blow is softened somewhat by cash balances which are expected to remain over £6m.

At £36m, the market cap (at 78p) looks like it's heading for a big fall today on the back of this statement. I'd be bracing myself for a c.20% drop if I were a holder. Although the final paragraph which speaks of a more positive sales pipeline might mitigate the fall?


Components manufacturer Elektron Technology (LON:EKT) also issues a profits warning, due to various factors which have resulted in lower sales, explained in a rather long-winded way.

The crux however is that they have a portfolio of old products, they need to restructure, and are operating at breakeven. They also have £6m in debt. I wouldn't touch it with a bargepole, and think the 7% fall in share price this morning is a good opportunity to exit from an unappealing investment.

They've only just introduced a dividend in 2012, but it's difficult to see how that could be maintained. New products in the pipeline provide some hope, but it looks unattractive to me, based on this morning's statement.

They do say something very interesting on a macro level, in that they mention China "is no longer regarded by the Group as a low cost location". Maybe that provides some hope for beleaugured European economies, as perhaps some production might return onshore?


Perhaps a shift away from China might help explain why European electronics distributor Acal (LON:ACL) is trading well? They issue an Interim Management Statement (IMS) today which has positive news on sales and book to bill ratio. They indicate that full year results to 31 March 2013 are on track to meet management expectations.

That puts it on a PER of 12.7 times forecast earnings, which is probably priced about right.


Well that's it for my first week of morning reports exclusively at Stockopedia. As they are now paying me to write these reports, I've been able to justify spending more time on them, so I hope you've found that useful.

Also, I'm not being asked to promote anything, and am free to write whatever I like, which is marvellous! Stockopedia just like my reports & want to publish useful content here for the investing community, which surely everyone will agree is a terrific approach.

Regards, Paul Scott.

(of the shares mentioned today, Paul has a long position in BEG only, and no short positions)

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Begbies Traynor Group plc is a United Kingdom-based professional services consultancy. The Company provides independent professional advice and solutions to businesses and banks in the areas of corporate recovery, restructuring, corporate finance, risk consulting and forensic investigations. The Company operates through two business segments: insolvency and restructuring, and global risk partners. Insolvency and restructuring segment is an independent business recovery practice which provides a partner-led service to stakeholders in troubled businesses. Global risk partners segment is engaged in providing specialist risk consulting and forensic investigation consultancy services. The Company’s subsidiaries include Begbies Traynor Limited, BTG Consulting Limited, Begbies Traynor International Limited, Begbies Traynor (Central) LLP, BTG Corporate Finance LLP, BTG Global Risk Partners Limited, BTG Financial Consulting LLP and BTG Risk LLP (formerly Begbies Traynor (South) LLP). more »

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Anpario plc is a United-Kingdom-based company engaged in the manufacturing and marketing of natural feed additives for global agricultural and aquaculture markets. The Company’s brands include Kiotechagil, Meriden, Vitrition and Optivite, trade in over 70 countries. Kiotechagil has a distribution network in over 55 countries and aims to be the lplayer in supplying high performance natural feed additives enhancing health, growth and sustainability in aquaculture and agriculture. Meriden has been provides natural and safe solutions. These solutions enhance the ability of food producers to increase production. Vitrition specializes in the production of bespoke organic diets designed to meet individual farm requirements. Optivite, controls pathogenic bacteria in feeds and feed ingredients. more »

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Intercede Group plc is a United Kingdom-based software and service company. The Company is engaged in developing and supplying of identity and credential management software. The Company provides MyID software, which is an identity and credential management system that enables organizations to create and assign trusted digital identities to employees, citizens and machines. Its MyID software protects the networks, facilities and intellectual property of Governments, agencies and other enterprise customers. In addition, it provides MyTAM, which is a cloud-based service that provides Android application developers and service providers to deploy trusted applications to the trusted execution environment (TEE) on mobile devices. It offers its solutions to various sectors, including aerospace and defense, finance and telecommunications; Governments and federal agencies, and mobile developers. The Company operates in the United States and the United Kingdom. more »

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8 Comments on this Article show/hide all

Death by Donut 1st Feb '13 1 of 8

Morning Paul ,
Just a comment to say that at the mo I agree with your no bargains around at the mo. I'm struggling to find anything I like at all at the moment as it all seems a little to good to be true tbh.
All this money printing is going to have a -ve effect in the end I think , no expert so I don't know what it will be but I'm guessing the little bloke will get shafted as usual?

Nothing under PE 10 is floating my boat .


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darlocst 1st Feb '13 2 of 8

Two shares on PEs of sub 8 & one just over:

MS International MS International (LON:MSI) - I wrote this when their interims were released last year:
IMS due out this month, they don't tend to issue it at normal 7am though.

Globo (LON:GBO) - I know Paul follows this one, house broker RBC eps forecast for 2013 is 5p, putting it on a fwd p/e of 6.75

Low and Bonar (LON:LWB) - Is trading on a fwd p/e of just over 8 currently, although it does have considerable debt. One to look out for, results out on Tueday.

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Death by Donut 1st Feb '13 3 of 8

Well for me and I only use DL for screening initially as I can't currently warrant a paid subscription given the amount I pay into my sipp each month.

MSI yield is too low
Globo doesnt have a yield
LWB too much debt.

I'm picky :0)

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Death by Donut 1st Feb '13 4 of 8

Can anyone remember the insolvency firm Paul wrote about recently? , gone right out me head.


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Paul Scott 1st Feb '13 5 of 8

In reply to Death by Donut, post #4

Hi DbD,

The only Listed insolvency practitioners is Begbies Traynor (BEG), as referred to in today's report.

Cheers, Paul.

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brigandchief 1st Feb '13 6 of 8

Well done Paul for your first week, go and have some nice red stuff! Continue to learn from you, many thanks for your comments that can be a good starting point to do some of one's own research!
Cheers David

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Paul Scott 1st Feb '13 7 of 8

In reply to brigandchief, post #6

Thanks David! My DryAthlon is complete now, and we raised £765 for Cancer Research (almost all of the money came from readers of this & my Blog, on top of all the sponsorship for the Half Marathon too!), so I'm really delighted with the outcome, and thanks again to everyone who donated. Also I've lost weight, and feel full of energy & sharper mentally after a month of not drinking, so even though I'm now allowed to have alcohol again (with it being February now), I don't actually want any!!

I'm glad you find the morning reports here a good starting point for research, that's the idea really, to flag up potentially good ideas, with a value leaning.

Cheers, Paul.

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CantEatValue 3rd Feb '13 8 of 8

"Interestingly, I'm also seeing people reappear who have been out of the equities markets for years, drawn back in by this bull market"

The logic of people who behave like this is totally nuts.

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About Paul Scott

Paul Scott

Paul trained as an accountant, then spent 8 years as FD for a ladieswear retail chain.He became a professional small caps investor in 2002 to date.Paul writes a small caps report for on weekday mornings. He joined Fundamental Asset Management Ltd as a research associate in 2014, as part of their Small Cap Value Portfolio team. more »


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