Small Cap Value Report (Thu 11 May 2017) - LOOK, FLOW, SAL, PTCM, RBN, ASY, OTB

11th May '17 by Paul Scott

26 comments 15968 reads

Good morning, it's Paul here.

Today I am reporting on the following;

Lookers (LON:LOOK) - another car dealership reporting a positive Q1 performance (boosted by changed in excise duty)

Spaceandpeople (LON:SAL) - shares have soared 45% on a positive trading update

Flowgroup (LON:FLOW) - yet another blue sky company that has dismally failed. Major fundraising announced at just 1.5p.

On The Beach (LON:OTB) - Interim results

Robinson (LON:RBN) - trading update

Andrews Sykes (LON:ASY) - final results

Porta Communications (LON:PTCM) - final results

OnTheBeach (LON:OTB) - interim results

So that's quite a lot of work for me to plough through. I'll be taking my time, so will be updating this article throughout the afternoon. So (as usual) please refresh this page later for more sections added.

Lookers (LON:LOOK)

Share price: 122.5p (up 0.4% today)
No. shares: 396.6m
Market cap: £485.8m

Q1 trading update - covering Jan-Mar 2017.

This is a chain of car dealerships.

These figures look stunningly good. However, as was pointed out yesterday in an RNS from another car dealer, Vertu Motors (LON:VTU) , changes in vehicle tax rates were implemented from 1 April 2017. This triggered advanced purchasing to beat the 1 April deadline.

For this reason, I think the Q1 figures from Lookers are largely meaningless.

On new cars the LFL growth in gross profit was +9%

What I'm scratching my head over though, is that used car gross profit was +17% in the quarter, also on an LFL basis. I don't see that there would be any benefit from accelerating purchases of used cars, so this is a bit of mystery as to why used sales were so strong, and on good margins by the looks of it.

Outlook - overall the company says it is trading in line with expectations for the whole of 2017.

My opinion - another car dealership which appears to be in rude health. We had a good discussion yesterday about the…

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daveinthelakes

11th May '17

Impax Asset Management (LON:IPX) my best performing current holding reported for the half year today.

I confess to not being a fan of asset managers although the only other one I have ever owned Ameriprise Financial NYSE:AMP (funds include Columbia and Threadneedle) has performed okay. When I came upon Impax in November, valued at the time at £60M, I was dubious but when I spotted that they appear to be the only (as far as I know) manager who operates 100% on the theme of sustainability I got interested.

Subject to the usual caveat with this industry that when the market drops they bomb out because of the double whammy of their assets dropping in value and clients going to cash, then I consider Impax a no brainer-

A current and future big theme- Sustainability
Executives/employees own circa 34% and get paid nearly all their bonuses in shares but without dilution as they go into the market to buy the requisite number of shares to fund the bonus. This in fact underwrites the share price.
The second biggest shareholder, with about 25%, Banc BNP Parisbas, is their largest client. I don't think this is a financial investment by BNP but a strategic one, to stop any competitor buying the company.
Most managers are struggling to grow AUM due to the huge growth in ETFs but in 2016 Impax's AUM went from £2.5bn to £4.7bn and in the first two quarters of 17 to £5.7bn and as of today ( week 6 of Q3) £6bn. This is gobsmacking growth for this sector and of course as full income on new AUM only shows in the figures after 12 months, further growth in profits are nailed on.
All this growth required taking on four new staff last year and one so far this year.

Half year headlines from todays RNS-

· Revenue in first half of 2017 was £13.9 million (H1, 2016: £9.4 million)
Operating earnings2 were £3.2 million (H1, 2016: £1.6 million)
Profit before tax was £2.4 million (H1, 2016: £2.1 million)
Diluted earnings per share were 2.11 pence (H1, 2016: 1.35 pence)
Interim dividend increased by 40% to 0.7 pence per share

The share price has moved up 80% during the last 6 months but I believe the runway for this company is very long. Their fixed cost base moves up very little relative to the AUM growth, sure the Execs/Employees get a big share out of the profits but I am not complaining.

Dave

aiminvesting

thanks! Great insights from you, as always! Agree it is completely uninivestable at this stage!

DGW

Paul - any chance of comment re On the Beach Interims please?

Lennart

i fully agree with your comments about blue sky companies. I have had several similar experiences. Do not go there! If the story comes good buy later.

Lennart

FoolishBen

You make a convincing case Dave, Impax Asset Management (LON:IPX) certainly seem like a company that warrant further research. Given Asset Management is one of Graham's specialisms, I'd be very interested to hear his views......

rhomboid1

There was a useful results presentation today

https://www.impaxam.com/sites/default/files/H1%202017%20investor%20presentation%20FINAL_0.pdf

I hold a lot of these as I think they're in a virtuous circle sweetspot at the moment

Ramridge

Pity that Andrews Sykes (LON:ASY) hasn't been covered yet. IMO the results look really good and the company looks solid. Buying the shares is another story. Around 86% of the equity is held by the Sykes trust and the sp spread is on the high side. Generally a little illiquid, so may not be to everyone's taste.

ricky65

Sorry to put my two pence worth in but Titon Holdings (LON:TON) put out a great update imo. Net Revenue up 29%, Profit before Tax up 61%, EPS up 34%. Chart is a breakout on high volume. Looks like a winner to me.

The Phoenix

Hi Paul,

Out of interest what was your worst average down mine was Northern Petroleum in the days before I knew better. Avoid all small oil/mining companies these days and most blue sky allow myself a small gamble with 5% of the pot.

I'm also having far more joy buying stuff with high stock ranks rather than another rookie habit which normally goes wrong of bottom fishing (although to fair generally in the horror stories of my earlier days),

Think my 8k in Nop over 4 average downs is now worth £300 ish.

Lets here some stories folks there's (expensive) lessons to be learned here.

Regards

Andy

mcfly46

only 6 months into trading, but sirus -sxx could be my story to look back on and learn from.. haha

jonesj

Hi Paul,

I suppose the logic behind "blue sky" investing is they nearly always fail, but if 80% fail and 20% are 20 baggers, then, the investor is ahead. Without needing a 50% success rate.

However, in practice, as you imply, the odds are much much worse than 80:20. Maybe some people over estimate their ability to pick the winning blue sky stocks.

I also stay clear of them.

shipoffrogs

JJ - the biggest challenge is not picking the 20 baggers. Sooner or later you'll invest in one.
The much bigger challenge is still being in when it's gone up 20 fold.

jules2k6

My average down nightmare was Polo resources. Every time there was a positive comment in IC I bought some more of the losers. Finally gave them the boot last year. I saw Flow today and threw them out too, luckily I only had a small holding.

12th May '17

Ben,
I exchanged mail with Graham last night and hopefully he will be commenting on Impax today.

Dave

wildshot

I'm looking forward to your views on the Andrew Sykes Andrews Sykes (LON:ASY) results. Many thanks for all that you do Paul.

Excellent, thanks Dave

robarnold

1. Titon: I too wish that I'd taken a position in Titon Holdings (LON:TON) when it came up on a screen of mine. Hindsight and all that... FREng how did you know/find out that this is a Lord Lee favourite?

2. ProPhotonix (LON:PPIX): I was put off by the balance sheet - specifically the huge accumulated deficit. I assume that this is similar to the situation at Porta Communications (LON:PTCM) which Paul explains above, although I couldn't find any details in the accounts/report.

I wish I'd trained as an accountant - it would make reading these reports and accounts so much easier!

bestace

Thanks for the additional coverage Paul.

On Andrews Sykes (LON:ASY), I've been a happy holder since September. It's incredible how economical they are with their updates - just 3 RNSs released in the whole of 2016 and 18 in total since the beginning of 2013. Some companies release that many in a quarter!

My reading of the finals was that their dependence on extreme weather is reducing:

Our traditional businesses continue to be developed and supported by the expansion of non-weather dependent niche markets which benefit the performance of our specialist hire divisions. This year's result further demonstrates that with a diverse product range we are able to return a strong performance despite the absence of any significant extreme weather conditions.

In every year's finals going back to 2010 they've mentioned they were developing or expanding their non-weather dependent markets, but whereas previous reports have mentioned performance being adversely affected by 'temperate weather', the fact that they are now reporting improved performance despite the lack of extreme weather maybe indicates their efforts at diversifying are finally bearing fruit.

The free float is less than 10% so it is a ridiculously illiquid share. I wouldn't necessarily see that as a bad thing though as I have no intention of selling.

Rusty2

He has done several interviews in the last few years, also his holdings are declared on his House of Lords profile. I did have them all set up on a folio but have not kept up to date recently, his largest holding is in Treatt (LON:TET), around 40%. Actually I can't see him holding Titon Holdings (LON:TON).

weissdl

15th May '17

I assume you mean Sirius. Would be interested to know what you expect to learn.

Small Cap Value Report (Thu 11 May 2017) - LOOK, FLOW, SAL, PTCM, RBN, ASY, OTB

Lookers (LON:LOOK)

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Paul Scott

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