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

Tuesday, Dec 11 2012 by
2

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 is a developer and manufacturer of a range of touch sensor products. These products employ an embedded sensing element and are based on projected capacitative technology (PCT). It is also engaged in development and manufacture of customized optical filters to enhance electronic display performance, and production of specialized and transparent laminates for niche markets. The range of applications for its touch sensors includes use in automated teller machines, petrol pumps, ticketing machines, information displays, gaming machines, food retailing, jukeboxes, medical equipment, keypads, diagnostic engineering equipment and helicopter simulation machines. It has four product groups: ZYTOUCH touch sensors and keypads; ZYPOS, and its derivative ZYBRID, touch sensors; ZYSWITCH touch-switch sensors, and ZYFILM and ZYPROFILM plastic-based touch sensors. ZYTOUCH, ZYPOS and ZYBRID touch sensors are designed to work in front of liquid crystal display or other electronic devices. more »

Share Price (AIM)
255p
Change
0.0  0.0%
P/E (fwd)
12.7
Yield (fwd)
4.1
Mkt Cap (£m)
38.7

Carpetright plc is a specialist floor covering retailer, selling a range of carpets, rugs, vinyls and laminates together with associated accessories. The Company has extended its product offering to include beds. The Company trades from over 650 stores organized and managed in two geographical segments: United Kingdom and the Rest of Europe (consisting of the Netherlands, Belgium and the Republic of Ireland). The Company is a national carpet-retailing brand in the United Kingdom with over 470 stores. In addition it has over 140 stores in Holland, Belgium and the Republic of Ireland. Carpetright Europe operates from approximately 100 stores in the Netherlands and a further 26 in Belgium and 21 in the Republic of Ireland. more »

Share Price (Full)
443p
Change
2.0  0.5%
P/E (fwd)
36.2
Yield (fwd)
1.1
Mkt Cap (£m)
299

ASOS Plc is a holding company. The principal activity of its subsidiary is Internet retailing. The Company’s geographical business segments include United Kingdom, United States, European Union and Rest of World. The Company offers a wide variety of fashion-related content. The Company sells over 65,000 branded and own-brand products through localized mobile and Web experiences. The Company’s products include its own brand plus around 800 brands ranging from big names to up-and-coming designers. Each week up to 2,500 new styles go live, whilst ASOS Marketplace offers a further 145,000 products. more »

Share Price (AIM)
2065p
Change
-115.0  -5.3%
P/E (fwd)
39.3
Yield (fwd)
n/a
Mkt Cap (£m)
1,819



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Paul Scott

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Paul trained as a chartered accountant with Price Waterhouse. He then spent 8 years as FD for a clothing retail chain. "Retired" in 2002 to become an independent investor & analyst. more »



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