Small Cap Report (17 Apr) - SDY, SEPU, JD., CPP, INB, IGR, NWS, ANP

Pre 8 a.m. comments

Just a few relevant trading statements today, as it's mainly larger caps reporting today, including Tesco, Burberry, and Marston's.

Speedy Hire (LON:SDY) announce a positive year-end (31 Mar 2013) trading update, with the key sentence being that they expect to report profit before tax marginally ahead of their previous expectations. The outlook sounds cautiously optimistic.

At 49p the shares look fully valued, given broker consensus of 2.5p EPS, so that's a PER of almost 20 times 2012/13 earnings, falling to 15 times next year's forecast earnings. Not exactly bargain basement. The dividend yield is only just over 1%, again not good value in my opinion.

 

Sepura (LON:SEPU), a global leader in "TETRA" radios for the emergency services, issues a positive trading statement, with revenues and profits for the year ended 29 Mar 2013 expected to be ahead of market expectations. Sales are up 25% over prior year, which is pretty impressive, in the range E103-105, whereas Stockopedia shows E100.6m as the consensus forecast.

This should make the valuation less than the PER of 16.5 shown on Stockopedia for this year consensus forecast earnings, but it's not clear how much cheaper, at a guess it might bring the PER down to 14-15? So not cheap enough to spark my interest, although it does look a quality company.

 

It's more of a mid-cap really, but JD Sports Fashion (LON:JD.) issues its preliminary results for the 53 weeks ended 2 Feb 2013 (note the extra week, which is likely to slightly flatter results). EPS has come in bang on forecast, at 88.5p, putting the shares on a very reasonable PER of 8.4, which drops to 7.2 next year's forecast earnings.

There is also a healthy 4.2% dividend yield. I like the look of this, it always looks cheap & still does. Whereas most shares have shot up in the last year, this one hasn't, so could well be worth a look. There is a major shareholder with 57%, which creates issues - are minority shareholders' interests safe? Also it makes the shares very illiquid given the size of the company.

 

Post 8 a.m. comments

It looks as if the sorry chain of events at CPPGroup (LON:CPP) is going to end in an almost complete wipe-out for shareholders. A 1p per share bid looks the likely outcome, but even that is based on a series of pre-conditions, announced today. Very glad I deployed my bargepole on this one, it looked a disastrous situation some time ago, so I'm not sure why anyone would still be holding the shares.

 

Interbulk (LON:INB) has issued a profits warning for the six months to 31 Mar 2013, blaming various factors for H1 profits being "materially below" the comparable period last year. It's a very low margin business, with a lot of debt, so it doesn't interest me before or after the profits warning. Although to be fair, they do say that trading in H2 is expected to improve.

 

Another very low margin business with too much debt is International Greetings (LON:IGR), which issues a mixed statement today, detailing investment in new gift wrapping printing equipment, and confirming results "substantively in line" (i.e. slightly below) with expectations. The shares are down 8% this morning.

 

Interim results from Smiths News (LON:NWS) look pretty good, with underlying EPS up 15.7p to 10.3p for the six months. Assuming no seasonality, that would take them to almost 21p for the full year, so a PER of just over 9.

Whilst that appears good value at first, when you factor in £109.4m of net debt, and the complication of a pension deficit which is currently requiring annual overpayments of £6.3m (almost a third of pre-tax profits), it doesn't look quite so good.

Also, they are up against the constant head-wind of their core business (newspaper, book & magazine distribution) being in slow decline. So whilst they are targeting half of profits to come from other areas by 2016, risk/reward just doesn't look positive to me at all. The 5% dividend yield is great, but a declining core business loaded with debt & a pension fund, makes me wonder how long that can continue?

I would not consider investing at the current price.

 

Shares in Anpario (LON:ANP) are up 11% to 147p this morning on very good results for the year ended 31 Dec 2012.

There was a 44% increase in underlying EPS to 12.7p, so that looks like a reasonable multiple for that sort of growth. The final dividend is up 25% to 3p too.

The outlook statement sounds good too. Readers might want to take a deeper look at this one, it looks promising, based on my superficial glance at the headline figures. I'm too busy today to spend any more time on it, but I would welcome any reader's thoughts on it, if you have time to do some research on it. Could be a GARP share, if that growth is sustainable?

See you same time tomorrow!

Regards, Paul.

(of the shares mentioned today, Paul has no long or short positions)