Small Cap Report - ZYT, CPR, ASC, IGR, BEG

Tuesday, Dec 11 2012 by

Prelims from Zytronic (LON:ZYT) are released today. They are a maker of touch sensors, with a mkt cap of £51m at 347p/share. Their results look pretty good, with PBT up 17% from £3.6m to £4.2m, and EPS up 21% to 22.2p. That puts the shares on a fairly warm PER of 15.6, although they do have net cash of £2.3m, and the divis are up 10% to 8.5p (a yield of 2.4%).

The short term outlook looks a bit wobbly - with current trading below the equivalent buoyant period last year, as expected they say. The interesting bit is that there are some "very interesting & substantial projects for major customers under development".

I've been invited to meet management later today, so am looking forward to hearing more about the company's growth plans. Their 20% operating profit margin indicates that they have pricing power, something that appeals to me. If decent growth is in the pipeline too, then could be interesting. I see that ZYT shares have sold off 11% in early trading, so the results must have disappointed some holders.

Carpetright (LON:CPR) shares have maintained an impressive feat of levitation for many years now, nobody seems to have any idea why the company has such a stratospheric valuation. Shorters have attacked it again & again, and every time it rebounds. At 666p (a sign? lol!) it's valued at £470m. Their H1 performance in the UK was improved a bit, from breakeven last year's H1, to a £5.2m operating profit this year. Europe (a much smaller part of the group) went the other way, with operating profit falling from £2.9m to breakeven. There is no dividend.

It does own a property portfolio worth £82.6m. The average net debt in H1 was £27m, down from £79.6m in the previous H1), a large reduction, driven by the sale & leaseback of freehold shops.

The valuation remains completely unfathomable, one assumes because investors are looking back to 2006-7 when it made £40m+ profit p.a.. Someone ought to point out to them that those figures were on the back of an unsustainable consumer credit boom that is not going to be repeated.
At some point the bubble here will burst, and the shares will come down to fair value, which I reckon is probably 200-300p/share, if that.

ASOS (LON:ASC) really is a remarkable business, and for me very much "the one that got away" - I sold my half million shares in it for the princely price of 9p each, pleased at having more than doubled my money quite a few years ago. They are now 2446p per share. Hmmmmm.

Their Q1 trading statement today shows sales up 30% overall, with the UK still strong at 24%, but International now 63% of total retail sales, and up 34%. So they seem to be doing what so many UK retailers fail at - namely expansion abroad. The valuation still looks absurdly high at £2bn, but it is a very special business. I cannot help think though, at some point, there will be a sharp correction.

Had a quick look at results for International Greetings (IGR), but the extremely high level of debt puts me off, even allowing for the fact that it's a seasonal peak (stocking up for Xmas).

Tomorrow I am up in London again to see the Directors of Begbies Traynor (LON:BEG), presenting their interims to 31 Oct. This is one of my favourite value shares, with a low PER and high divi yield. Business is likely to remain somewhat depressed, due to the lenience of Banks & HMRC, under political pressure not to push zombie companies into insolvency. But that is a temporary factor, which will unwind once the economy begins improving. So that could bring a multi-year boom in business for BEG. Given that the shares are cheap in a quiet period, then they might look ultra-cheap once business is improving.

I don't normally like ambulance-chasing businesses, but insolvency practitioners are a necessary part of the process for orderly and legal resolution of insolvent companies, however harrowing the process might be for the people involved.

That's it for today. Tomorrow's report might be in the afternoon, as I have to get across London to the Begbies meeting for 10am.

Regards, Paul.


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Zytronic plc, based in the United Kingdom, is a developer and manufacturer of a range of touch sensor products. Its products incorporate an embedded array of metallic micro-sensing electrodes. It offers Projected Capacitive Technologies (PCT) and Mutual Projected Capacitive (MPCT) technologies. It is also engaged in development and manufacture of customized optical filters to enhance electronic display performance, and production of specialized and transparent laminates. The Company’s products are used for application uses in information and financial kiosks, digital signage, ticketing, gaming and vending machines, as well as telematics and medical devices. Its subsidiaries include Zytronic Displays Limited, Intasolve Limited and Zytronic Glass Products Limited. Zytronic Displays Limited is engaged in the manufacturing of transparent composites, including touch sensors. more »

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Carpetright plc is a United Kingdom-based retailer of floor coverings and beds. The Company operates through segments, including UK and Rest of Europe (comprising Belgium, the Netherlands and Republic of Ireland). The Company offers a free home estimating service. Its sample service also enables customers to look at the different options. The Company trades from 478 stores and concessions in the United Kingdom, as well as 142 stores across Holland, Belgium and the Republic of Ireland. The Company's product range includes mattresses, divans and bed frames, with a range of headboards and finishes. The Company's product range in Europe includes laminate, vinyl and rugs. The Company operates through around 94 stores in the Netherlands, 23 in Belgium and 22 in the Republic of Ireland. more »

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ASOS Plc is a United Kingdom-based global online fashion destination .The Company sell cutting-edge fast fashion and offers a variety offashion-related content, making the hub of a thriving fashion community. It sell 75,000 branded and own-brand products through localized mobile and web experiences, delivering from United Kingdom(UK) hub to almost every country in the world. It tailors the mix of own-label, global and local brands sold through each of nine local language websites: UK, United States, France, Germany, Spain, Italy, Australia, Russia and China. It sell Womenswear products in sizes 2 to 28 and Menswear in sizes XXXS to XXXL, and have introduced an increased range of men’s waist, leg-length and shoe sizes. more »

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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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