Good morning. 1pm (LON:OPM 41p) has issued a trading update which sounds positive, saying that trading in Q1 has been "very encouraging", with "sales achieved in each month surpassing expectations". I've come close to buying these shares several times, but missed the big move up in price a few months back as I dithered too long, and then baulked at paying a higher price once they had begun moving up - clearly a mistake.
1pm is a small provider of lease asset finance to SMEs, so it has neatly filled a market gap left by the Banks, and typically raises money from HNW (high net worth) individuals and companies at about 8% p.a., then lends it on to SMEs for asset purchases, at just over double that rate. So a very simple business model. It has sensible underwriting & lending policies, which mean that risks are minimised, and it just looks like a good business, with plenty of demand from customers in an area where the traditional Banks still fear to tread.
Another Block Discounting Facility has been arranged for £1m, to allow them to write more business, and they also refer to increasing demand. The share price is currently 41p (which needs to be divided by 146.67 to adjust it to the pre-share consolidation price, of 0.28p). I first turned down these shares when the idea was put to me at 0.14p, so turned away a doubler. What to pay for them now? It's difficult to say. Profits look set to be approaching £1m this year perhaps, and growing strongly, so at £12m market cap maybe it's not expensive on a 2-year view? I shall have to ponder this a bit more, but it's certainly on my watch list as something to buy on a dip, if the opportunity arises.
It's difficult to see anything attractive about the interim results to 30 Jun 2013 from Michelmersh Brick Holdings (LON:MBH 39p). As I've mentioned before, it's a special situation where the operating business making bricks is largely irrelevant, as it doesn't make any sustainable profit, so the value is in the group's property holdings, which will be gradually sold to repay debt, which is still considerable at £18.7m. What if the Bank just decide to pull the plug & force a liquidation, in order to get their money back? Shareholders could be left high & dry if assets are sold off on the cheap by an Administrator, but the Bank won't care, as long as they get their money back.
I just don't like it, as it looks a very inefficient use of capital, tying up £32.6m in net tangible assets, to run a brick business that is only likely to breakeven in 2013, and that's before £2.2m in exceptional restructuring costs. So in conclusion, the upside looks too long term, and too uncertain. Whilst the risks from the Bank pulling out are too high. Plus I would put little to no value on the brick making operating business. So I'm not interested in these shares.
The UK market is set to open in a few minutes at 8 a.m., and the Futures are currently indicating a strong open, with the FTSE 100 Index (FTSE:UKX) set to open up 43 points at 6,455. Factors driving this are said to be improved PMI reported in China, buoying up hopes that the world's 2nd largest econony is firing on all cylinders again. Also the US pulling back from immediate air strikes on Syria has helped perhaps.
In my own portfolio, I'll be looking closely at Norcros (LON:NXR 17p), which was tipped in the Midas column in the Mail on Sunday yesterday. Newspaper tips seem to be having an increasing effect these days - a sign that more new investors are entering the market perhaps, as we probably all started by buying newspaper tips, and then realising it wasn't a terribly good way to make any money.
Also, an explosive re-rating is going on at Zanaga Iron Ore Co (LON:ZIOC 22p) I am pleased to see, now that Blackrock are gone (their relentless selling crushed the share price), and with Zanaga's world-class iron ore project in Africa starting to look viable again, given how the iron ore price has defied expectations of a slump, and has remained in reasonably good health. Plus of course the world's largest consumer of iron ore, China, is growing strongly again, and looking for projects in Africa to obtain its own supplies of resources. It's highly speculative, but a very interesting situation that I've looked into in some depth, including a visit to the company's offices a while back with a group of investors. This one certainly needs a lot of research, so the usual disclaimers are especially pertinent with this one. So please be sure to DYOR.
I've done a quick review of results from Coms (LON:COMS 4.25p), but don't understand/like them. See the comments section below, as it was in answer to a reader query.
A share I wrote about last week, Sweett (LON:CSG 44p) has issued a contract win announcement today. However, there are no financial details given, so it's not possible to determine how material the project is. It sounds impressive though, being for a new 2km submerged cross harbour rail tunnel in Hong Kong, and runs to 2020.
All pretty quiet apart from that, so I'll sign off for the day.
US markets are closed today for Labor Day apparently, which usually makes things quiet in the UK too, but no sign of that today with the FTSE 100 up 91 points at 6,504 at the time of writing (10:22)
Have a good day, and see you tomorrow.
(of the companies mentioned today, Paul has long positions in NXR, CSG, and ZIOC.
A Fund to which Paul provides research services also has long positions in NXR and ZIOC)