Small Cap Report (29 May) - MBH, QPP, TRK, NBL, IDOX, DGB

Wednesday, May 29 2013 by

Pre 8 a.m. comments

Firstly, just on a house-keeping matter, I'd like to flag up a free Webinar that Stockopedia are holding today - i.e. an online tutorial in how to get the best out of Stockopedia. It's at 12:30 today! I've signed up for it, as there are so many great features buried in this website, that you might never find unless you are shown them. There are only a few places left, so if you're free at 12:30 then I encourage you to sign up here.


Michelmersh Brick Holdings (LON:MBH) announce the sale of a 15 acre site in Telford for £4.6m in cash, with £3m deferred for 1-2 years. That will put a bit of a dent in their £18.4m net debt. There looks to be a lot more property on the balance sheet too. I remember meeting the management some time ago, and thinking they had a pretty marginal business on the brick-making side of things, but who knows it might pick up if & when we finally start to build enough affordable houses in this country for the number of people who actually live here now!

So Michelmersh is really a special situation based more around its property assets than its operating business.


Quindell Portfolio (LON:QPP) have announced a 3-year deal with Honda. As usual, it's all couched in language which obscures what the deal actually is. But from what I can make out, it's based around the low margin business of supplying credit hire cars through Ai, which provides the bulk of Quindell's turnover, yet only £3.5m p.a. profit. The rest of Quindell's profit comes from mysterious software revenues that have apparently sprung from nowhere.

Accident Exchange and Helphire also provided similar deals (I recall ACE having one with Audi). Quindell claim that they manage a much broader range of services, and co-operate with insurers, as opposed to trying to fleece them with excessive charges, which was arguably the business model of other operators in this sector in the past.

Quindell also claim to have a, "continued focus on an ethical approach for the industry"! Well it's a pity they don't seem to have adopted an ethical approach towards their stock market announcements, since they blatantly misled the market over the true…

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Michelmersh Brick Holdings Plc is a United Kingdom-based company, which is engaged in the manufacture of clay bricks, tiles and pavers. The principal activity of the Company is the management and administration of its subsidiary companies. The Company's segments are Building materials and Landfill. The Company's Building materials segment is engaged in the manufacture of bricks, tiles and building products being principally facing bricks and clay paviors at Blockleys, which is based in Telford, Shropshire; Charnwood, which is based in Shepshed, Leicestershire; Freshfield Lane, which is based in Danehill, West Sussex, and Michelmersh, which is based in Romsey, Hampshire. The Company's Landfill segment is engaged in landfill operations, through New Acres Limited, which is based in Telford, Shropshire. The Company's brands include Blockleys, Charnwood, Freshfield Lane, Michelmersh and Hathern Terra Cotta. Its Blockleys brand manufactures a range of standard special shaped bricks. more »

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Watchstone Group plc, formerly Quindell Plc, is a United Kingdom-based technology company. The Company is engaged in the provision of software, consulting and other services, or technology enabled business process outsourcing services. The Company is focused on serving the insurance sector. The Company delivers technology solutions or utilizes technology in providing services. The Company operates through two divisions, which include Solutions and Services. The Company's Solutions division provides software, business and technology consulting services, white labelled solutions, e-commerce, software as a service (SaaS) solutions, telematics services, insurance broking services and other services. The Company's Services division provides healthcare and property services. In the United Kingdom and North America, it offers insurance technology solutions. In Canada, the Company provides physiotherapy and rehabilitation services. more »

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Torotrak plc is a United Kingdom-based company, which develops, licenses and sells low carbon technologies, for application in a range of automotive sectors and vehicle types. The Company's operating segments include license agreements, engineering services and development activities, which include research and the creation of intellectual property. The Company's technologies include Flybrid kinetic energy recovery system (KERS), V-Charge and Main Drive Transmissions. Flybrid technology consists of Flybrid passenger car KERS, Flybrid KERS composite flywheel, Flybrid clutched flywheel transmission (CFT) and Flybrid Volvo testing at Silverstone. V-Charge is a variable drive supercharger for gasoline and diesel engines, which allows downsized engines to maintain their emissions levels. The Company's main drive infinitely variable transmissions (IVTs) combine toroidal traction drives variator with other conventional transmission components. more »

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  Is Michelmersh Brick Holdings fundamentally strong or weak? Find out More »

22 Comments on this Article show/hide all

shanklin100 29th May '13 1 of 22

Hi Paul

Re MBH, there are a lot of land assets and I essentially agree with your analysis.

In terms of operating profitability and cash flow from the brick business, I understand the depreciation is considerably greater then the investment needed to maintain these assets so, even at marginal profitability, there is enough incoming cash to service their debt and gradually pay it down, as is reflected in the last FY results..

Cash from property sales will help with this.

Cheers, Martin

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Paul Scott 29th May '13 2 of 22

In reply to shanklin100, post #1

Good points Martin, thanks.

I noticed the cashflow looked pretty positive in the last set of results from Michelmersh Brick Holdings (LON:MBH) .
Also, I like the niche market approach that MBH have taken, going for more up-market housing developments (e.g. self-build).

Once tax on land disposals is taken into account, and the very likely long timescales, and therefore the opportunity cost of tying up one's money in the shares for years, with no divis, I'm struggling to find much exciting upside in it. Although I note that Stockopedia broker consensus shows commencement of a 0.5p divi in 2014.

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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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