Small Cap Value Report (16 Aug) - PGB, VLX, OPM, TNO, SUN, AVON

Friday, Aug 16 2013 by

Good morning! It's a very quiet day for results, but there are a few trading statements that I'll take a look at.

Markets overall had a much-needed correction yesterday - the tone in small caps has become far too bullish, even slightly frenzied in some areas, and it's becoming very hard to find value now. Just look at the extraordinary bull run in the FTSE Small Cap Index XIT (FTSE:SMXX) below. Some of that rise is due to increased earnings, and also the marking up of prices to factor in economic recovery, but surely a more meaningful correction is only a matter of time? Hence why I'm selling things that look fully valued (I sold Pilat Media Global (LON:PGB) yesterday at 62p for example on a big spike up following positive contract announcements, and a magazine tip).

The opportunities now are probably going to come from sitting in cash, and picking up bargains when the next big market sell-off occurs. This sometimes hits small caps hard, providing good opportunities, e.g. yesterday Volex (LON:VLX) suddenly spiked down 10% on thin volume, and no news, as a clumsy seller hit the Bid hard - which you see a lot of these days, as Spread Betting companies close out over-geared clients, and don't really care what price they get.

Such spikes are one person's pain, but our opportunity. Hence why I think having some cash on the sidelines is vital right now, and it doesn't matter at all that you get no return on the cash in the meantime, as simply having it ready will provide a much bigger opportunity when the market suddenly throws a bargain in your direction. That's how I see it anyway.

Opportunities are also coming on an individual company level from profit warnings. I've not measured it, but the market seems to be forgiving good companies for profit warnings more quickly than in the past. Subjectively, it seemed to be at least six months for sentiment to recover on a company that disappointed, whereas now I've observed it can be as little as a fortnight, or more typically about two months. As long as it's a good company, that has just hit a temporary bump in…

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Volex plc (Volex) is a supplier of power and data cabling solutions servicing a range of markets, including consumer electronics, telecommunications, data centers, medical equipment and the automotive industry. The Company operates through two divisions, which include Power and Data. Through the Power division, the Company designs and manufactures power cords that are sold to the manufacturers of a range of electrical and electronic devices and appliances. Volex products are used in laptops, personal computers and tablets, printers, televisions, games consoles, power tools, kitchen appliances and vacuum cleaners. Through the Data division, Volex designs and manufactures a range of cables and connectors that transfer electronic, radio-frequency and optical data. Volex products are used in a range of applications, including telecommunication systems, data centers, mobile computing devices, medical equipment, robots, vehicles and alternative energy generation. more »

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Sintecmedia Global Ltd, formerly Pilat Media Global plc, is engaged in development, marketing and support of software for the global multi-channel broadcasting market. The Company’s flagship Integrated Broadcast Management System, (IBMS), is an enterprise-class solution for managing content, media operations, airtime programming and advertising sales. IBMS scales to handle new content, service offerings and delivery platforms to integrate multi-platform, non-linear and targeted services within broadcaster's business operations. IBMS Express offers broadcasters a modular and flexible entry-level business management system distilled from the robust and proven IBMS platform. Effective April 2, 2014, an investor group comprised of Sintecmedia Ltd and its wholly owned subsidiary Sintec Media Software Ltd acquired the remaining 77.260% interest in Pilat Media Global PLC (Pilat). more »

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1pm plc is a United Kingdom-based company engaged in providing financial services to the United Kingdom businesses. The Company is a specialist independent provider of finance to the United Kingdom small and medium enterprises (SME) sector. The Company's leasing portfolio consists of a mixture of sectors and assets, such as garages, cleaners, fish and chip shops, and beauty salons. The Company offers equipment finance for beauty equipment, cleaning equipment, manufacturing equipment, medical equipment, gym equipment, furniture, security systems, construction equipment and telecom equipment, among others. The Company offers hire purchase finance to buy business equipment. The Company also offers online finance broker system. 1pm (UK) Limited is a wholly owned subsidiary of the Company. more »

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  Is Volex fundamentally strong or weak? Find out More »

2 Comments on this Article show/hide all

cig 16th Aug '13 1 of 2

I'm not sure I'd call the Volex case a "spike down", given it's just a reversal of a similar "spike up" a few days previous.

My guess is that whoever has been keeping the price stuck at £1 since January was asleep at the wheel and will put it back there (see how similar escape attempts at the beginning of the year were crushed). We'll know over the next few weeks. At least the escape attempts are towards the upside, so seems more like a big seller than a big buyer.

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Paul Scott 17th Aug '13 2 of 2

Hi cig,

"I'm not sure I'd call the Volex case a "spike down", given it's just a reversal of a similar "spike up" a few days previous."

Fair point!

Cheers, Paul.

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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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