Small Cap Report (20 Mar) - INL, TFW, OPTS, JPR

Wednesday, Mar 20 2013 by

Pre 8 a.m. comments

It's Budget day today, so hopefully we might see some measures to stimulate small cap investing. The removal of Stamp Duty on AIM shares (or indeed all shares) would be a positive measure, and removal of the restriction from putting AIM shares in ISAs could also be in the pipeline. I won't be doing any in-depth coverage of the Budget here, since you can get chapter & verse on it easily elsewhere.

Cyprus also continues to be a major worry, since their Government has rejected the appalling bail-out deal which involved direct theft of depositor bank balances by the Government, a measure which is precisely the opposite of what is needed when investors have fragile confidence in the banking system generally, to loosely quote Alastair Darling - who I have a lot of time for, since he usually talks sense, and very unusually for a politician, is generally fairly truthful and direct in what he says, in my opinion. Incidentally, Darling's memoirs of the financial crisis, "Back from the Brink", is a must-read for people interested in finance.

I remain long of Gold, and am surprised it has not risen more, given that the irreversible Euro project may be about to lose its first member. How much longer then, will it be before the populace of Greece and Spain demand a Euro exit too? You can't keep enforcing austerity and 6% p.a. (compounded) GDP contraction on people, as has been the case with Greece. Eventually they snap, and a revolution of some kind occurs, which I believe is the most likely outcome for Greece, and maybe Spain.


Turning to company results, Inland Homes (LON:INL) announces half yearly results to 31 Dec 2012. Inland has a very poor track record in my view, originally raising and investing money at the top of the market just before the credit crunch, almost going bust, then failing to generate much shareholder value since, whilst Directors have lined their own pockets with salaries that are completely disconnected with their poor performance. The FD in particular is (inexplicably) paid more than most AIM CEOs.

That said, figures today look encouraging, with net asset value having risen a bit to 28.24p per share, and there is also over 5p (post tax) off balance sheet net asset value relating to one project at…

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Inland Homes plc is a United Kingdom-based company, which is principally engaged in acquiring residential and mixed-use sites and seeks planning consent for development. The Company develops a number of the plots for private sale and sells consented plots to house builders. The Company's segments include Land, House Building, Contracting, Hotel, Investments, Investment property and others. The Company is a developer of urban regeneration projects around Southern England, with a particular emphasis on residentially led mixed-use schemes on brownfield sites. The Company's land portfolio consists of approximately 6,680 plots with the majority in the South and South East of England. The Company's portfolio consists of both brownfield and strategic sites. The Company's projects include Wilton Park, Beaconsfield, Meridian Waterside Southampton and Buckinghamshire. The Company's land portfolio includes Famborough, Woolwich and Bushey. more »

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FW Thorpe Plc is a United Kingdom-based company, which specializes in designing, manufacturing and supplying of professional lighting equipment. The Company operates in eight business segments based on the products and customer base in the lighting market. These segments include Thorlux, Lightronics Participaties B.V., Compact Lighting Limited, Philip Payne Limited, Solite Europe Limited, Portland Lighting Limited, TRT Lighting Limited and Thorlux Lighting LLC. The Company's business segments operate in four geographical areas: the United Kingdom, the Netherlands, the rest of Europe and the rest of the World. The Company's subsidiaries include Compact Lighting Limited, which designs and manufactures lighting solutions for retail applications; Philip Payne Limited, which designs and manufactures illuminated signs; Solite Europe Limited, which designs and manufactures cleanroom lighting equipment, and Portland Lighting Limited, which designs and manufactures lighting for signs. more »

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  Is LON:INL fundamentally strong or weak? Find out More »

19 Comments on this Article show/hide all

MrContrarian 20th Mar '13 1 of 19

>[Inland] FD in particular is (inexplicably) paid more than most AIM CEOs.

At the AGM the CE justified this by saying he and Nishith Malde run Inland as a team so they deserve the same pay. Obviously they did not set their pay at the average of AIM CE + FD but at the higher of the two.

The FD runs another AIM company as well, but he had an explanation for why that doesn't impact on his time and commitment to Inland too!
I sold most of mine at 25p into a spike when the IC picked it for the Bargain Shares portfolio. The rest wait for the next financial year for CGT reasons.

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Edward Croft 20th Mar '13 2 of 19

I guess ASOS (LON:ASC) is too large cap for you to cover these days Paul ! I note more monster sales growth in the trading statement today.

It's a fascinating one... so expensive, but still got such strong financials. It's almost the perfect glamour stock - one that is in that quadrant that fund managers love... strong momentum in price, fundamentals, quality, no debt, internet... at some point the valuation is going to take a slide just like it did a couple of years back but the company has to deliver bad news first and that doesn't seem to be happening.

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garbetklb 20th Mar '13 3 of 19

Hi Paul
Curious as to where you spotted Lo-Q's contract win - cannot see a RNS, nor can I see anything on their website.
As you say, momentum is great. Until......

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SevenPillars 20th Mar '13 4 of 19

Some observations today from these results.

Inland seems to have fallen back after the initial euphoria, their report looks pretty good and optimistic going forward, but it's interesting to get your view on the directors.

Optos always seems to be quite volatile, so anyone thinking of an investment needs to accept that you may be in for a bumpy ride.

ASOS, market cap now more than Debenhams and Home Retail put together. With the change left over you could throw in Mothercare, Laura Ashley and French Connection.

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ericb 20th Mar '13 5 of 19

Paul - TFW is already a SETS stock, so MMs take a back seat and allow other participants to draw together at the touch. One of the problems with SETS stocks is they are very easily manipulated by robot / black box trading, especially smaller cap or less liquid. This morning no one wanted to trade TFW so the spread was v wide. You could have shoved a buy or order on the book at £10.50

Also if there were no MMs in small SEAQ stocks there could be wild price fluctuations between when people want stock or when they want to get rid of it. The function of the MMs is to stabilise the smaller stocks. it does work to an extent but i agree that MMs take the pi55 quite often.

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Blackthorn Focus 20th Mar '13 6 of 19

There was a statement from technical and management consultancy WYG (LON:WYG) this morning.

the Board is confident that Group operating profit for the full year will be 10 per cent. ahead of market expectations, underpinning a better than anticipated return to profit at the adjusted pre-tax level despite anticipated lower revenues....

Having announced the Group's return to operating profit on 29 November, we are very pleased to see that the positive progress in the half year has continued in the second half, enabling us to report on another milestone for the Group: an expected return to profit at the pre-tax level.

In the last six months, shares in WYG have increased approximately 50% as this recovery has become apparent.

WYG will be presenting at the forthcoming AIM Investor Focus 2013 event. This is a Blackthorn Focus forum for AIM-listed companies and their investors. Other participating companies are Judges Scientific (LON:JDG), Mattioli Woods (LON:MTW), Portmeirion (LON:PMP) and RWS Holdings (LON:RWS).

The event is free for private investors. If you would like to hear from the management of these five AIM-listed companies, register your interest here:

David O'Hara, Blackthorn Focus

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StrollingMolby 20th Mar '13 7 of 19

In reply to post #71784

Andy, the LOQ announcement was issued as an RNS-Non (so presumably not material...) but distributed by Investegate in the normal way this AM

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Paul Scott 20th Mar '13 8 of 19

In reply to post #71784

Hi garbetlb,

The LOQ announcement today cropped up on my MoneyAM monitor list.
The announcement can be read here:

Regards, Paul.

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Paul Scott 20th Mar '13 9 of 19

In reply to post #71790

Hi EricB,

Thanks for correcting me on TFW - I should have checked whether it was already a SETS stock, but as there were just MM quotes showing, and I was in a hurry, I jumped to the conclusion that it was a SEAQ stock. Apologies for this error.

As regards small & micro caps, I'm not suggesting that there should be NO market makers. The solution is to extend what used to be called SETSmm to all shares - so that in addition to MM quotes, the rest of us can place orders directly on the order book. We need DMA to become more widely available too.

Regards, Paul.

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schober 20th Mar '13 10 of 19

besides the wide spread there is also the nms - 250 for TFW , amounting to £2750 worth of shares!
if you want to sell more than the nms then the spread can become even larger
its a pity the sharemark system has not taken off

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dangersimpson 20th Mar '13 11 of 19

In reply to post #71782

Re: ASOS (LON:ASC) using the Graham formula and last year's EPS of 36p then you see that the market is pricing in c70% annual medium term growth. Operating margins are fairly low as you'd expect from a retailer so I don't see much operating gearing so this would require sales to grow from £500m to c.£7bn in 5 years. Is there really £7bn of extra online clothes to sell - this would be double Next's current total sales! Even their current great growth has average 60% so are we expecting sales to accelerate as they get bigger?

With these situations I usually look for director sales as the key to when short term sales momentum will decline: e.g. ARM Holdings (LON:ARM) where directors were consistently selling in size around 950p after the run up from 600p. For ASOS (LON:ASC) this is clouded by the exercise of options from a much lower price so although there have been significant sales they have mostly been associated with option exercise. The time to short is when the directors start to sell beyond option exercise or consistently sell all their exercised options or exercise long before expiry and sell.

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Paul Scott 20th Mar '13 12 of 19

In reply to post #71801

Hi schober,

As my broker mentioned to me the other day, IG Index are actually becoming the (effectively) biggest Market Maker, as they have so many Spread Bet clients that they offset buys & sells within their own book. So a lot of trades these days don't even get reported for that reason.

Cheers, Paul.

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Edward Croft 20th Mar '13 13 of 19

In reply to post #71802

Obviously ASOS (LON:ASC) has tonnes of momentum and I expect any pullback to be well supported by institutions even at these lofty levels. I do think they are an acquisition candidate for someone like Amazon and we all know what their paper is worth. It's v. hard to fight this kind of glamour/momentum play - and shorting something like this I think is terribly dangerous... !

What might be more productive is to figure out where the next buy point is - I did write this piece about ASC using the Graham formula a couple of years back... should probably revisit...

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ericb 20th Mar '13 14 of 19

In reply to post #71800

SETSqx it is now as you know im sure - but you can only put your order on the book and hope its included in the twice daily auction (which MMs control) so most of the time it is pointless.

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brigandchief 20th Mar '13 15 of 19

Hi Paul
I was having the same view as you on the Inland scene, doesn't sound as if mgt have the right mind set, better off with a Barratts or Perssimon if you want to be in the building scene. I like Howden Joinery!
BUT the main reason for a reply is to say, Tell your masters at Stockopedia that I have signed up for a paying service, I like their site too!! That should get you a pat on the back (and I am glad you have got rid of that awful picture!)
Thanks Paul
Cheers David

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marben100 21st Mar '13 16 of 19

In reply to post #71806

Just to correct/clarify: SETSqx auctions are held 4x daily: at the open (8am); at 11am; at 3pm and at the close (4:30pm).

Anyone with DMA can post an order for execution in those auctions at whatever price they chose (or at best - a "market order"). Whether it gets filled or not and the price will depend on all bidders in the auction, not just MMs.



PS broadening access to DMA & educating potential users is key.

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ericb 21st Mar '13 17 of 19

cheers Mark - i spose i was referring to the 2 intra day auctions really. ive not really had much success with those auctions.

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Edward Croft 21st Mar '13 18 of 19

In reply to post #71811

Hey Brigandchief - great to have you on board - please do spread the word if you like what you find here and let me know personally what you think we are missing or whatever you find confusing etc ... we are quite nimble & responsive at the moment !

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OpeningBat 3rd Apr '13 19 of 19

Apologies for resurrecting an old thread, and (possible) apologies for the formatting of this post but I think this is the first post I've made on Stockopedia. Anyway, Paul said

"I would like to look deeper into FW Thorpe (LON:TFW), but there's no point with a 10% spread, it's a waste of time even looking at it."

I too was looking at TFW on the day of their interims and the spread put me off. Now, 2 weeks later when the dust has settled, the quoted spread was 1010-1040 and today I bought at 1030. So now the spread is 1%-2% which I think is reasonable for AIM stocks.

I can only assume that on the day of disappointing results, the market makers quoted a big spread to prevent a possible exodus from trigger happy PI's who may have wanted to sell TFW (and possibly cause a big lurch down in share price as "hot money" headed to the exit with few buyers to support the share price in a thinly traded stock. I haven't been keeping an eye on the spread over the last 2 weeks, but I wouldn't be surprised if the spread has been gradually narrowing from the 10% on the day or the interims down to the acceptable 1-2% today.

I for one wasn't tempted to buy at 1100 on the day of the interims, but today at 1030, I decided to bite.


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About Paul Scott

Paul Scott

I trained as an accountant with a Top 5 firm, but that was so boring that I spent too much time in the 1990s being a disco bunny, and busting moves on the dancefloor, and chilling out with mates back at either my house or theirs, and having a lot of fun!Then spent 8 years as FD for a ladieswear retail chain called "Pilot", leaving on great terms in 2002 - having been a key player in growing the business 10 fold. If the truth be told, I partied pretty hard at the weekends too, so bank reconciliations on Monday mornings were more luck than judgement!! But they were always correct.I got bored with that and decided to become a professional small caps investor in 2002. I made millions, but got too cocky, and lost the lot in 2008, due to excessive gearing. A miserable, wilderness period occurred from 2008-2012.Since then, the sun has begun to shine again! I am now utterly briliant again, and immerse myself in small caps, and am a walking encyclopedia on the subject. I love writing a daily report for on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »


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