Small Cap Report (19 Mar) - MGR, HYD, XAR, PEN, NXR

19th Mar '13 by Paul Scott

4 comments 15323 reads

Pre 8 a.m. comments

What an excellent evening, seeing many friends at the monthly Mello investor evening in Beckenham last night. It was very well attended, must have been approaching 100 of us there for dinner, and a very interesting talk from Gervais Williams, the guest speaker from Miton (LON:MGR) - I must look again at their results from yesterday, even though financials are normally off my radar. An experienced and successful small cap fund manager, keen to grow assets under management, strikes me as a pretty good place to start.

I was most encouraged by his value message, and his belief that reasonable value small caps, and steadily increasing dividends are the way to go, which very much validates my approach of eschewing investing fads and focusing on decent fundamentals.

Quite a few results this morning, so I shall report back shortly. Apologies for the slow start this morning, slightly muzzy head!

Post 8 a.m. comments

I am looking firstly at results from Hydro International (LON:HYD), which is a company making niche products for the management of waste and storm water. The shares have opened down 7p at 92/95p, so looks like results have not impressed.

Adjusted EPS is reported down 1% at 12.7p, it has net cash of £2.9m and a maintained dividend of 3.6p, so at sub-100p that looks interesting to me. The big problem is in the Outlook statement, where they reiterate previous comments that, due to the ending of large contracts, "revenue & profitability for 2013 will be materially lower than 2012 levels".

So, it's really very difficult to value, and a PER basis on historic figures which are not going to be repeated, is not valid.

dotDigital (LON:DOTD) has been on my radar for a while, although I've not properly looked into it yet. The shares have come off 6% this morning on an announcement that they are winding down part of the business (their services division). However they do say that, "the core SaaS business continues to perform very strongly and we are optimistic about the outlook for the year". Sounds encouraging. If anyone has the time & inclination, do let me know what you think about DOTD.

I see that shares in

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cig

19th Mar '13

Re dotDigital don't they fall through your rules against evil companies? as far as I can tell they're selling services to enable spammers to clog your inbox, and have your web browsing experience ruined by survey popups.

Re Cyprus haircut on cash pushing people to invest. I think it might actually do a bit of that, but that's comical if you think about it, given that then governments can also haircut brokerage accounts in their jurisdiction if they wish to: the Treasury could order a CREST tax where 10% of shares in issues of all companies on CREST are moved from existing accounts to the Treasury's account with CREST (and similarly at the registrar level if they want to catch certificated holdings).

dubeye

Cig, do you receive emails from Stockopedia, or Amazon? It's a valid form of marketing in honest hands, prone to misuse of course.

I have traded DOTD a bit. They used to have a much broader offering, including SEO, but they are consolidating to Email Marketing. Will this company still exist in 5 years? It's out of their hands IMO. The SEM industry is prone to disruption. Eg changes made to SEO by Google essentially shut down their search arm. Something comparable could happen to email marketing.

They want to expand overseas. But there is equivilent risk of more US competitors entering the UK market.

Fair value is 15p

kenobi

XAAR that's a blast from the past !!! I remember you tipping them at about 75p years and years ago, I sold them for more than double that, so made a good profit, good PP call !!

K

woodcutter

21st Mar '13

Not really a comment on the company just a small point on Norcross products, in particular Triton showers. I recently had to replace a shower in a rental property. The original shower was a triton aspirante, cost new about £200 so i would not entirely agree with you pp that there products are good value. Bought replacement shower at Wickes £89. less than half the price. Open up the box took off the shower cover and guess what.............yeh exactly the same internals as in the Triton Aspirante, same layout, position of water connection, electrics everything the same.Only difference the quality of the shower head support rail was not as good with the Wickes model.

I wonder do Norcross do branded products for the general diy trade like wickes, if so i think they may have it covered.

Woody

Small Cap Report (19 Mar) - MGR, HYD, XAR, PEN, NXR

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Paul Scott

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