Good morning! I've invested in a new computer for my London accommodation, so will be able to insert graphics into reports now, even when staying up in town. Am using it for the first time today, so will blame any typos today on the new keyboard!

 

 

Dillistone (LON:DSG)

This is a small software group, serving the niche for software specifically targeting head hunter employment agencies. I had a pleasant lunch with the Directors last year, who made a good impression as the type of people I like to back - i.e. straightforward people who are just getting on with the job of growing the business. Niche software businesses are intrinsically attractive as investments, since they usually provide mission-critical software, and have a very good stream of recurring revenues, as Dillistone does.

Also in this internet age, it's fairly easy to rummage through Google to find third party evidence of whether a software product is any good. Decent software should leave a pretty clear trail on the internet, from user groups discussing it, reviews, etc. If there is virtually no evidence of software even existing on the internet, then you need to question why.

Even though it's small, Dillistone software (which operates under several different brands) is highly regarded by its users, based on the discussions which I've monitored online via a user group. Decent software will also usually feed through into decent financial figures. That is the case here, with a positive trading update for the year ended 31 Dec 2013 issued this morning.

Various detail is given, but the key sentence is this;

 

... for the year ended 31 December 2013 it expects its performance to be in line with market expectations.

 

Turning to valuation, the Stockopedia graphics show good value, with a modest PER, and a very good dividend yield.

Particularly of note are the high scoring green bars in the Quality section, with a strong operating profit margin, and strong return on equity and capital.

The downside factors are more short term considerations - that the share is illiquid, and has a rather wide bid/offer spread.

I don''t think this share will be a multibagger any time soon, but it does look like a nice quality small business, on a modest valuation.

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