Small Cap Report (15 Apr) - NWKI

Pre 8 a.m. comments

Good morning. A fairly quiet morning today for results. I'm looking at reasonably good results from Networkers International (LON:NWKI), an AIM-Listed recruitment company. It looks good value to me. They have delivered 4.7p EPS for the year ended 31 Dec 2012, which is ahead of broker consensus forecast of 4.3p. It seems to have been higher gross margins that has driven the out-performance, up from 16% to 18%.

The market cap is £39.5m at 43.5p per share, plus there is £6.9m of net debt, although that relates to invoice discounting. With a net current asset position of £14.2m, the balance sheet looks fine, so seems to be a question of customers being a bit slow in paying, rather than there being any problem level of debt.

With a PER of 9 times 2012 earnings, and a dividend increased 25% to 1.25p (for a 2.8% yield) this looks reasonably priced, although there doesn't seem to be much growth in evidence. That could change in a recovering economy though, so in my view reasonably priced recruiters are a good place to invest right now. Most have re-rated in the last year, some substantially, whereas this one has only risen from a 12 month low of around 35p in Oct 2012 to 43.5p now. Hence could be more upside to be had here, possibly?

They mention upside from the roll-out of 4G networks.

 

Post 8 a.m. comments

As an aside, if you use MoneyAM for live streaming prices, as I do, then my friend MrContrarian has come up with a really neat innovation that lets you view twice as many share prices on one page, by presenting it in two panes. I find it very useful indeed, especially on a smaller screen, the URL to use this is: http://sharedata.mobi/moneyam2f/

Many thanks to MrC for sharing that useful facility with others.

 

It's becoming clearer by the day that Gold is anything but a safe haven, but is actually a volatile & highly sepculative bubble. The price has dropped about 10% in the last two trading days now. I will not be revisiting that, after my failed attempt at hedging my equities around the time of the Cyprus Eurozone crisis by going long of Gold. It didn't work, and I clearly don't have any expertise in that area, so am sticking to what I do understand, i.e. small cap value shares.

I'm uneasy that the forces which shook the financial system apart in 2008 are still out there - e.g. high frequency trading, vast speculative flows which dwarf the transactions actually related to real-world activities, and massive leverage. Everything seems to happen so fast now, you wonder how long it will be before the next financial crisis blows up? Policy makers don't seem to have even vaguely got to grips with the issues.

 

 I dropped into the UK Investor Show at the ExCel centre in London's Docklands on Saturday, for the afternoon session (I can't cope with a full day of talks!), and thoroughly enjoyed it. Good to catch up with some familiar faces there, and one or two readers from here said hello too, which was great.

There was a lot of interest in the Stockopedia stall too, which is pleasing, as the guys behind this site have worked really hard to create something useful for investors, and deserve our support.

I took detailed notes on Mark Slater's talk, he's always a good speaker with lots of share ideas, and incisive comment on the markets overall. You can read part one of my report on his talk here

 

Probability (LON:PBTY) announce that they have moved into profit for their Q4 (3 months to 31 Mar 2013).

It's an online gambling company. It's difficult to value these shares, as really it all hinges on growth continuing. Broker forecast for 2013/14 shows EPS of 10.9p, which would make the shares very good value on a PER of only 6. However, they haven't acheived anything like that level of profit so far, so you need to be very confident about the growth here to justifypaying a £19m market cap for a company that has only just reached breakeven.

 

I've looked at a few more results this morning, but there's nothing that interests me.

See you same time tomorrow, hopefully with a few more interesting results to report on, it was rather quiet today.

Regards, Paul.

(of the companies mentioned today, Paul has no long or short positions in any of them)