Small Cap Value Report (15 Dec 2016 - Part 2) - XAR, HYNS, SUH

15th Dec '16 by Graham Neary

9 comments 10128 reads

Good morning,

Today I have Xaar (LON:XAR), Haynes Publishing (LON:HYNS) and Sutton Harbour Holding (LON:SUH) on the menu.

In Part 1, Paul is covering Impellam (LON:IPEL), Communisis (LON:CMS) and Parity (LON:PTY). Click here to read.

Onwards!

Xaar (LON:XAR)

Share price: 433p (-1%)
No. shares: 77.8m
Market cap: £337m

Scheduled Trading Statement

There has been a delayed reaction to this statement from the inkjet technology company, as the shares have been dropping and recovering as I've been typing!

The Board now expects total revenue in the second half of 2016 to be similar to the £44.5 million recorded in the first six months of the year, before taking account of revenue delivered by the acquired EPS business which contributed to the Group from 1 July 2016.

Checking back to the outlook at time of the H1 results:

In the shorter term, despite increased competition in the ceramic tile sector, the Board anticipates revenue growth in the second half of 2016 compared to the first six months of the year, before the addition of the newly acquired EPS business which contributes from 1 July 2016.

So the anticipated revenue growth in H2 has not materialised.

But, more important than sales, the company reassures us today that: "The Board's expectation for overall full year earnings remains unchanged."

The key element remains the Ceramics division:

"initial demand for Xaar's new 2001 and 2001+ printheads is strong following the launch of those products in September. Longer than expected customer printer re-designs and manufacturing ramp up, combined with the competitive pressures we have previously highlighted in this sector, are expected to result in lower Ceramics sales in the second half of 2016 than previously anticipated.

I'd give the company credit for acknowledging that it is finding the competition to be increasingly tough in ceramics. Too many companies pretend that events are entirely outside of their control, rather than admitting that they are finding it a challenge to compete with their peers.

Again, at H1, it said "this is an…

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Jeremy Rea

15th Dec '16

Graham, you made a typo, it's the 15th today ;-)

Graham Neary

Ta :)

Rusty2

Graham, thanks for the Xaar (LON:XAR) review. I have also been in and out of this share in last few years, price do change quickly for no apparent reason, has fallen from over 500p to 376p on no news in the last few weeks. Last year on results day it fell about 25% in early trading but ended the day up. I think buying on dips and selling around 500p is the thing to do with Xaar (LON:XAR).

Carcosa

Sutton Harbour Holding (LON:SUH) owns and operates Sutton Harbour in the Barbican, Plymouth’s historic old port. This includes a leisure marina, the second largest fresh fish market in England and an estate of investment properties around the harbour.

During the early 2000s, the company expanded into air transport, acquiring a long lease for Plymouth City Airport and operating airline routes through a new subsidiary, Air Southwest. The airline turned loss making and was sold in 2010. In 2011, Plymouth City Council agreed to the closure of the airport following an 'Armageddon' clause implemented by Sutton Harbour..

Crystal Amber, the activist fund had been invested in the company since 2010, by 2011, they were sufficiently dissatisfied with management that eventually lead to the departure of the CEO. Subsequently a 57% discounted £6 million fund raising was done, increasing the Fund’s shareholding to 25%. Subsequently this increased to 29.3%

Sutton harbour have not been particularly successful in addressing their net debt position as mentioned in today's interims (£22.7m compared to last years £22.2m). The company also continues to trade at a significant discount (~39%) to NAV (41.6p). In April 2016, Sutton Harbour appointed Rothschild to carry out a strategic review of the company, which could include a sale of the company. However there has been exceptionally slow progress to date; presumably because the status of the 113-acre site of Plymouth Airport is unknown. The Department for Transport have had over 18 months to produce a report over the future of the airport, in the meantime Sutton Harbour has published a masterplan to develop housing and offices on the 113-acre site but Plymouth City Council has provisionally protected the land for use as an airport in its Plymouth Plan. The Plan is subject to a public hearing in front of a planning inspector next year. Therefore it seems rather unlikely a final decision will be forthcoming within 12-24 months (don't you just love the typical British prevaricating over such issues?).

Crystal Ambers' average share price purchase is 25p. I can envisage that if Sutton harbour management have a realistic chance of growing NAV and basic profitability/debt reduction then Crystal Amber might be happy to wait a few more years but since that is not occurring then I do wonder if they will continue their activist activities and seek some sort of activity to allow an exit at a higher share price than the current 24p?

As a long term investor in Sutton Harbour, I would much prefer to see the company making better headway than these interims have shown whilst waiting for the eventual sale of the company; which may be a couple years down the line.

Hi herbie - yes, it's a volatile one alright! I'd recommend it to traders - lots of fast movements.

Thanks for adding that comment, Carcosa, excellent info.

Richard Goodwin

Thank you @Carcosa. This is a really helpful summary.

deucetoace

16th Dec '16

This evenings RNS for SUH might make for an interesting Monday morning. Looks positive.

19th Dec '16

Indeed deucetoace Sutton Harbour Holding (LON:SUH) up by 10% at time of writing. But still a LONG way from NAV (which itself may be raised significantly by the end of the year). Just a case of waiting for a while before realising my paper profits.

And since private shareholders get bored very quickly whilst waiting, today's share price increase could easily wind down over the forthcoming weeks.

Small Cap Value Report (15 Dec 2016 - Part 2) - XAR, HYNS, SUH

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Graham Neary

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