Small Cap Value Report (2 Dec 2014) - TYR, GHH, MCLS, PKG, PLA

4th Dec '14 by Paul Scott

11 comments 19809 reads

Good morning. I am catching up with a late report, due to jet-lag earlier this week, so apologies for the delay.

TyraTech Inc (LON:TYR)

This £7m market cap company is developing & selling natural remedies for things like head lice. I've been keeping half an eye on it, as it sounded potentially interesting.

Trading update - this looks like a bad miss to me. Turnover is expected to be $4.8m (against forecast of $6.0m), but the net loss of $4.8m is hugely adrift of the $0.2m loss forecast by broker(s) for calendar 2014.

Forecast cash of $2.6m at the year end looks very tight to me, although the company says it is confident this is enough for its plans in 2015, but personally I'd be very sceptical about that. There's not enough headroom there for any disappointments, in my view, which could trigger another fundraising.

That said, the announcement is also full of details of retailers now stocking the company's products, including WalMart, Tesco, and SuperDrug. Although I wonder what margins are being made?

It looks too high risk for me, but potentially high reward too, if they can move into profit in 2015.

Gooch & Housego (LON:GHH)

Results for the year ended 30 Sep 2014 look sound. Adjusted EPS has come in a whisker ahead of broker forecast, at 35.6p, so at 685p the shares are on a PER of 19.2, which looks a fairly rich valuation to me, so it's not something that interests me.

The outlook statement sounds moderately upbeat.

As with so many small to mid cap shares at the moment, it's difficult to see where the upside is, for anyone buying at the current valuation?

McColl's Retail (LON:MCLS)

Trading update - says that results for the year ended 30 Nov 2014 will be "broadly in line with expectations" - i.e. a bit below expectations.

My opinion - the 5.6% divi yield (rising to 6.0% next year) looks attractive, but I'm not convinced by this company's business model of convenience stores & post offices. There's so much competition, and it only ekes out a wafer thin profit margin, so is there a long-term future for it? I'm not sure, so wouldn't risk it personally.

Park (LON:PKG)

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davids_h

4th Dec '14

Re Park Group, if their business activities are that questionable, I'm surprised that reputable retailers such as M&S and John Lewis accept their cards and put their names on gift cards supplied by them.

Looking at their T&Cs (paras 6,7 & 8) they do levy some charges, but most of these are made at the point a gift card expires or 12 months after it has expired, which are unlikely to be paid by many consumers given the lengthy expiry on most of these type of cards.

http://www.highstreetvouchers.com/L2S-Card-Purchas...

Surprisingly, even after they have expired, they allow customers to redeem the money on the card (albeit for a small fee - £8.90), which is something I've never encountered with paper vouchers, and seems actually quite generous.

It's not something I would invest in because of the balance sheet issues, but suggesting it is a slightly dodgy type of business seems a littlebit harsh based on these T&Cs.

Rgds

David

Boon

Park is interesting. Granted they do have net liabilities, but as alluded to above, in the gift card world there is always hidden fees, dormant balances, and expiring balances in the liabilities that will turn out to actually not need to be satisfied.

Net liability is dangerous, especially in a declining revenue/cashflow business. My research though is confirming what Park are claiming about increasing demand for their products this Christmas.... so happy to live with the net liability as its less of an issue when revenues are growing.

I won't be a LT holder though.

FREng

5th Jul '15

I see that John Lee is a long term holder of Park (LON:PKG)

Rusty2

Do you mean Lord Lee? If so not according to the article I read about him a few months ago. I just checked and he did not hold in March, 2014. He was a holder in Oct 2012 but must have sold them. Here is his March 2015 holdings: Anpario (Aim), Air Partner, BBA Aviation, Christie Group (Aim), Charles Taylor, Concurrent Technologies (Aim), Connect Group, Grafton, HML Holdings (Aim), Lok'N Store (Aim), Mccolls, Northbridge Industrial Services (Aim), Phoenix Group, PZ Cussons, Quarto, Treatt, Town Centre Securities, Vianet (Aim), VP, WMC retail (Aim)

Yes, Lord Lee. Where did you find his current holdings?

I was relying on his article in this weekend's FT Money, where he says

"How is it that of my 26 holdings, no less than 15 are Aim-quoted. The answer is that many, such as Christie Group, Gooch and Housego, Nichols, Park and FW Thorpe moved from the main market .... ".

It's a puzzle. Do you have his email address? If so, we might ask him.

I just got from several interviews or articles about him, the March 2015 was in the telegraph, the earlier ones were in FT. No I don't have his email. Maybe those articles did not include everything? In telegraph it says he has 20 holdings, now he has 26, so maybe he has bought Park back?

I would be interestd to know the other 5 as I set up a folio for his holdings.

Randval

Profile from House of Lords.

http://www.parliament.uk/biographies/lords/lord-lee-of-trafford/1132

Thanks, that does seem to have changed quite a bit from March.

But only 22, in FT he says 26?

In the past I have been told that House of Lords records should be kept up to date, but I don't know how true that is.
Regards
Randval.
P.S. Some time ago I wrote to Lord Lee at the House of Lords and he replied, so that may be worth a try.

Small Cap Value Report (2 Dec 2014) - TYR, GHH, MCLS, PKG, PLA

TyraTech Inc (LON:TYR)

Gooch & Housego (LON:GHH)

McColl's Retail (LON:MCLS)

Park (LON:PKG)

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Paul Scott

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