Small Cap Report (29 Apr) - SPRP, RIC, CAMB, BRY, WOR

Pre 8 a.m. comments

Good morning. There are lots of trading and results statements issued this morning, but most are either resources sector, or large caps, so not a great deal for me to cover today.

There is a 90p cash offer for Sprue Aegis (OFEX:SPRP), an ISDX-Listed company which is the market leader is fire detection devices. Pity, as I looked at these shares recently, when they were around 60p and thought they looked cheap.

It looks like an existing 29.9% shareholder is bidding for the rest of the company, and it looks a bit messy - the Board of Sprue Aegis has not recommended the bid, and there seem to be a couple of thinly veiled threats in the narrative from the bidder, concerning liquidity, and what would happen if the bid is not accepted. If I were a shareholder, this announcement would very much raise my hackles & I'd be inclined to tell them to stuff it. There's nothing worse than a takeover offer with threats - that just means that the bidder is under-paying for it, in my opinion.

 

I was impressed with results last week from small restaurant group Tasty (LON:TAST). This morning another small restaurant group, Richoux (LON:RIC) has also impressed with some excellent-looking headline figures. Turnover is up 10% to almost £10m, and operating profit before one-offs looks to be around £750k, so that's a fairly respectable profit margin for a small operation. Solid balance sheet too, so they are well placed to open new outlets - and now is the time to be expanding, as such good deals are available on leasehold property right now. Bizarrely, despite operating only 14 restaurants, Richoux has no less than 4 different brands.

At a £10.6m market cap, it looks pretty good value, so worth a further look I think. If there's a convincing roll-out story here, then money could be made potentially.

 

Post 8 a.m. comments

Interims from Cambria Automobiles (LON:CAMB) are a reminder that there's not really much profit margin to be made in this sector, about 1%. 

 

Brady (LON:BRY) is starting to look potentially interesting. The shares have looked rather expensive to me in the past, but they've dropped about 30% in recent months (unusual, as practically everything else has gone up 30%!). They've issued a positive-sounding AGM statement this morning, although it's light on specifics - there's no mention of the all-important profit against expectations, so I am not able to form a view on whether the shares are cheap or not, as there is insufficient information from the company.

 

I don't recall having looked at World Careers Network (LON:WOR) before, but their results this morning look interesting. Interim figures for the six months to 31 Jan 2013 show turnover up 10% to £3.86m, but profits flat at £1.07m.

The outlook statement doesn't sound too great though, with them saying H2 is not likely to meet last year's figures. So it's difficult to value. However, the balance sheet looks terrific, with net cash of around half the market cap, and little in the way of creditors. So if they do something useful with that cash, i.e. either give it to shareholders, or make a sensible acquisition, then things could look good.

 

See you same time tomorrow.

Regards, Paul.

(of the shares mentioned today, Paul has no long or short positions)