Small Cap Report (19 Feb) - SUN, SFR, PDG, VLX, SNX

Tuesday, Feb 19 2013 by
12

Pre 8 a.m. comments

It will be interesting to see how the market reacts to today's Trading Update for the year ended 31 Dec 2012 from Surgical Innovations (LON:SUN). SUN make equipment for minimally invasive surgery, and at 7.2p per share have a market cap of £29.2m.

Of the £5.6m orders intended for delivery in H2 of 2012, £1m slipped into the first week of 2013, due to capacity constraints at their Leeds factory, and a delay in US regulatory approval in Dec 2012. Those sound like valid reasons for 2012 falling short of expectations, so turnover will now be £7.6m, against forecast of £9.1m (according to Stockopedia's market consensus figure shown in the StockReport here).

The shortfall in 2012 will be a flying start to the 2013 figures of course, so given that we're in a bull market, this might be seen in a glass half full way? Gross margins have improved 3 points to 50.3%, which is positive. They only mention adjusted EBITDA, and not profit, which is slightly ahead of 2011 at £2.85m (versus £2.8m).

So at a 50% margin, £1m of sales would equate to delayed profit of £0.5m, and by my calculations that means they would have hit market consensus profit had it not been for the one week delay. So if I held these shares, I wouldn't be panicking over this.

Interestingly, they are increasing capacity, part funded by the award of a £5m RGF, which I think stands for Regional Growth Fund.

These shares had an amazing run from 2009 to 2011, ten-bagging from 1p to over 10p, but have since fallen back to 7p. With EPS having been fairly static for 3 years around 0.45p, which puts them on a PER of about 15, in my opinion they look fully priced. Also there is no dividend, which I see as a significant drawback. So this one's not for me at this price.

 

Structural steelwork company Severfield-Rowen (LON:SFR) got itself into a bad position by losing control of some contracts, warning on profit, and having issues with too much debt. The shares have got off lightly so far in my view, since a fall to 77p gives it a market cap of £70m, which given the uncertainty and likely losses for 2012 seemed generous.

It looks…

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As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested.


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Surgical Innovations Group plc is a United Kingdom-based holding company. The Company is involved in the design, development, manufacture and sale of devices for use in minimally invasive surgery (MIS) and precision engineering (PE) markets. The Company operates through three segments: SI Brand, OEM and PE. The SI Brand segment is engaged in the research, development, manufacture and distribution of SI branded minimally invasive devices. The OEM segment includes the research, development, manufacture and distribution of minimally invasive devices for third-party medical device companies through either own label or co-branding. The PE segment is engaged in the research, development, manufacture and sale of precision engineering applications. The Company sells branded products through independent healthcare distributors across the world and owns label products through original equipment manufacturer (OEM) relationships. more »

LSE Price
3.23p
Change
4.9%
Mkt Cap (£m)
15.0
P/E (fwd)
n/a
Yield (fwd)
n/a

Severfield plc is a structural steelwork company in the United Kingdom, which is engaged in construction contract business. The Company serves the construction and infrastructure markets. Its construction sectors consist of commercial offices, industrial and distribution, stadia and leisure, retail, and data centers and other. Its infrastructure sectors include transport, power and energy, and health and education. It has worked on over 120 projects, which include One Angel Court and Nova Victoria in London; Anfield Stadium; London Bridge Station; Nissan paintshop, Sunderland, and Dublin waste to energy facility. Its subsidiaries include Severfield (Design & Build) Limited, which designs, fabricates and constructs structural steelwork and portal frames for the warehouse, distribution and industrial sectors, and Severfield (NI) Limited, which delivers constructional steel products in the United Kingdom and Irish structural steel market. more »

LSE Price
73.5p
Change
-0.7%
Mkt Cap (£m)
220.2
P/E (fwd)
13.9
Yield (fwd)
2.8

Pendragon PLC is a United Kingdom-based automotive online retailer. The Company's principal market activities are the retailing of used and new vehicles and the service and repair of vehicles (aftersales). Its segments are Stratstone, which consists of its vehicles, truck and commercial vans brand, including the sale of new and used motor cars, motorbikes, trucks and vans, together with associated aftersales activities; Evans Halshaw, which consists of its volume brand, including the sale of new and used motor vehicles and commercial vans; California, which consists of its retail operations in California in the United States, including the sale of new and used motor cars; Leasing, which consists of its contract hire and leasing activities; Quickco, which consists of its wholesale parts distribution businesses; Pinewood, which consists of its activities as a dealer management systems provider, and Central, which represents its head office function and includes all central activities. more »

LSE Price
31.5p
Change
1.6%
Mkt Cap (£m)
446
P/E (fwd)
7.6
Yield (fwd)
4.8



  Is Surgical Innovations fundamentally strong or weak? Find out More »


14 Comments on this Article show/hide all

shanklin100 19th Feb '13 1 of 14
1

Hi Paul

I'm not too worried about whether you post before or after 8 a.m. The quality of your analysis, albeit I disagree with some of it, is why I read your daily reports.

What would be helpful is if the associated e-mails, alerting us to the fact you've posted arrived rather more promptly. Looking back over the last month, I have never received the e-mail before 15:00, which is unfortunate given the effort you put in to publish something before 10 a.m.

Best wishes, Martin

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Paul Scott 19th Feb '13 2 of 14
1

In reply to shanklin100, post #1

Hi Shanklin,

Many thanks for the feedback.
It's worth bearing in mind that I only have a few minutes to give a quick-fire opinion on each share, so it's only a snapshot, rather than detailed analysis.

That's a great point about the emails - at the moment it's my old email list from my Blog which sends out the link from Google at about 3:30pm. I'll speak to the guys at Stockopedia about whether we can get an email facility set up here to send out my morning report by email as soon as it's published.

Thanks for flagging up this issue, very helpful!

Regards, Paul.

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shanklin100 19th Feb '13 3 of 14
2

Hi Paul

No problem re the fact that its not detailed analysis.

Its always interesting to get other people's views as I DMOR.

Cheers, Martin

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MrContrarian 19th Feb '13 4 of 14
1

Entrée then pudding after 8am is a great idea.

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floorlord 19th Feb '13 5 of 14
1

"RGF, which I think stands for Regional Growth Fund" - correct. Can I have one? ;-)

Yet another good report, superb consistency. Like you say, a snapshot but a useful way to flag up what may have passed under my radar for further research. Many thanks. Totally in agreement on your comments re. the UK economy and gradually shifting market sentiment. There will be jittery times but I doubt they will signal anything too bearish.

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Gostevie 19th Feb '13 6 of 14
1

I really enjoy reading these reports and find them really helpful.

Personally I'm happy to wait until mid-late morning. Maybe just do a really early one occasionally if something particularly time-sensitive comes along.

Regards,

Steve

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Ramridge 19th Feb '13 7 of 14
1

Hi Paul
This two tier reporting sounds great and all for it. I will personally wait until the in depth analysis before acting. Who knows a nasty surprise such as a big pension deficit might be buried in accounting note 139 on page 35!
Regards, Ram

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extrader 19th Feb '13 8 of 14
2

Hi Pauly,

Never mind all this share gubbins.... tell us how your half-marathon went !!

ATB

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Edward Croft 19th Feb '13 9 of 14
1

In reply to paulypilot, post #2

Hi Paul - we are going to work on alerts and notifications in general a little later this year. We could though probably put out an email alert on your morning report to all who are following you/your column. Lets discuss.

Blog: Follow @edcroft on Twitter
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ericb 19th Feb '13 10 of 14
2

Paul, i always get the alert via twitter. i think the 2 tier can be useful in some circumstances but wouldnt want to put you under pressure to 'get something out' and choose which is the most important. often the market reaction is quite different to what might be expected to certain statements.
great to read your reports and see your analytic aspect from your accountant background, which is quite specific compared to some who write to impress rather than just simply state the facts as they see them.
I do hope that Stocko can develop an offering that will smash ADVFN with live prices, L2 / 3, decent portfolio management, alerts, alarms, watchlist and maybe even BBs.
UKInvestor

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Ramridge 19th Feb '13 11 of 14
1

In reply to ericb, post #10

Eric - I guess the boss, Edward, has some serious thinking to do. Should Stocko be a generalist website, offering everything but not as well as a niche player ( a la Debenhams), or concentrate on some features and not others? To have full breadth and depth and smash the competition to smithereens I guess is not possible or too costly. Or he can always throw the MBA stuff out of the window and simply react to what the users are demanding.
Regards, Ram

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Dinocras 19th Feb '13 12 of 14
2

Hi Paul - Always read your morning report - essential reading for me. The 8am starter is nice but not of great value to me; so if it takes a lot of extra effort I would say just focus on the main report. Keep up the good work.

| Link | Share | 1 reply
Paul Scott 19th Feb '13 13 of 14

In reply to shanklin100, post #1

Hi Shanklin,

I forgot to mention, I always Tweet immediately after publishing each report every weekday.
So to get notification of publication & a link to each article, just follow me on Twitter, @paulypilot should you wish to. But we'll try to get a better email list sorted out too.

Regards, Paul.

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Paul Scott 19th Feb '13 14 of 14

In reply to Dinocras, post #12

Hi Terry,
Thanks for the feedback. The pre-8 am report is dead easy to do - I just finish a paragraph, hit send, and then carry on writing for the full report. So I'll keep going with it I think. Negligible extra work, but might prove useful for some early birds!
Cheers, Paul.

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About Paul Scott

Paul Scott

I trained as an accountant with a Top 5 firm, but that was so boring that I spent too much time in the 1990s being a disco bunny, and busting moves on the dancefloor, and chilling out with mates back at either my house or theirs, and having a lot of fun!Then spent 8 years as FD for a ladieswear retail chain called "Pilot", leaving on great terms in 2002 - having been a key player in growing the business 10 fold. If the truth be told, I partied pretty hard at the weekends too, so bank reconciliations on Monday mornings were more luck than judgement!! But they were always correct.I got bored with that and decided to become a professional small caps investor in 2002. I made millions, but got too cocky, and lost the lot in 2008, due to excessive gearing. A miserable, wilderness period occurred from 2008-2012.Since then, the sun has begun to shine again! I am now utterly briliant again, and immerse myself in small caps, and am a walking encyclopedia on the subject. I love writing a daily report for Stockopedia.com on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »

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