Small Cap Value Report (29 Jan 2016) - ENTU, RTC

Good morning!

Entu (UK) (LON:ENTU)

Share price: 62p (up 10.7% today)
No. shares: 65.6m
Market cap: £40.7m

(at the time of writing, I hold a long position in this share)

Final results, y/e 31 Oct 2015 - everyone keeps telling me what a terrible company this is, and how silly I was to buy shares in it, but the results today actually look quite good, considering how low expectations have sunk.

Operating profit before exceptionals is in line with guidance, at £8m. We already knew that the feed-in tariff changes by Govt had killed off the group's solar division, so nothing new there.

Divis have been lowered, but a 2.67p final divi is announced.

Adjusted continuing ops EPS is flat against last year at 10.7p, so clearly the PER of 5.8 looks very cheap.

Outlook - Directorspeak sounds cautious, but given the lowly valuation this is probably bullish for the share price in my view, because the market seems to be discounting something far worse;

"The closure of the solar business and the required investment in infrastructure has undoubtedly affected the profit potential of the Group over the next couple of years. Accordingly, the Group is now taking a more prudent view on the outcome for the year than it had previously. The Board currently expects that the results for the year ended 31 October 2016 will be marginally below those reported for the year ended 31 October 2015 for continuing operations.

Balance sheet - looks OK, with a small net cash position. The only item which causes me a little concern is the £4m increase in debtors, which note 16 shows is due to the appearance of £3.5m accrued income, which was nil last year. Also prepayments have jumped, so I'd like a little more colour on what those items are. Overall though, debtors looks a reasonable figure in relation to the size of the business.

My opinion - it's not a share I particularly like, and sentiment around it is still very poor, after the company warned on profits not long after listing - something the market punishes hard, and takes time to forget.

That said, the business has historically been a cash cow, and that looks likely to continue, so at a single digit PER, and paying nice divis, there are worse things out there.

RTC (LON:RTC)

Share price: 80p (up 8.8% today)
No. shares: 14.3m
Market cap: £11.4m

Trading update - in line with expectations for 2015.

I can't see any forecasts, so am not sure what expectations are, therefore cannot really comment meaningfully on valuation.

There are a few other bits & bobs today, but nothing particularly interesting, so I'm going to down tools now & head into the city for a nice working lunch, then a CEO meeting. Will report back if anything interesting crops up.

Have a lovely weekend.

Regards, Paul.