Small Cap Report (22 Apr) - CRE, RGO, ZZZ, ABM

Monday, Apr 22 2013 by

Pre 8 a.m. comments

I sold my small position in Creston (LON:CRE) some time ago, as despite them looking very cheap on a PER and dividend yield basis, the shares have gone nowehere in the past six months, just gently undulating up & down. This seemed odd, given that we've been in a roaring bull market for small caps.

It is difficult to make sense of their trading statement today, which in itself is a worrying sign given that they call themselves an "insight and communications group". Surely issuing a clear RNS should be within their area of expertise? Doesn't seem to be.

The first bit is fine, where they state that revenue for the year ended 31 Mar 2013 is expected to be flat at £75m, and the headline profit before tax for that period will be in line with consensus forecast. Last time I looked at their results, I gave up because there were so many different measures of profit they became unintelligible - again not a good thing.

Stockopedia shows consensus forecast for y/e 31 Mar 2013 as 11p, so at 83p that puts the shares on a low PER of 7.5. The PER of 6.67 shown in the table on the left is always the forward PER, so based on current year forecast EPS of 12.4p.

So it must be loaded up with debt then? Actually no, they report a net cash position of £10m at the year end, which is a material figure for a £50m market cap company. Although this cash has mostly come about from an enormous "reverse premium and contribution to the agreed dilapidations obligation for the Group's new London office", of which they say £6.5m has been received.

This is an unusual situation, but agreed dilapidations are where remedial work is necessary to a building, so  in other words Creston will have to spend some of that money on repairs to the building at some point. A reverse premium is a financial incentive paid by a landlord to induce a new tenant into entering into a lease. There's no such thing as a free lunch, so if the landlord gives you a bung to take a lease, it's because the rent in that lease is higher than the market rent that…

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Creston plc is a marketing communications company delivering digital technology-based marketing solutions to a range of clients. The Company operates through two segments. The Communications & Insight segment's services include advertising, brand strategy, customer relationship marketing, digital and direct marketing, local marketing, market research using face-to-face, telephone and online data collection techniques, social media marketing and public relations. The Health segment provides integrated communications solutions to healthcare and pharmaceutical sector and offers services, which include advertising, advocacy, digital and direct marketing, public relations, issues and reputation management, and medical education. Its geographical segments include UK, Rest of Europe and Rest of the World (including US). Its subsidiaries include Colombus Communications Limited, Creston Connections Limited, Creston Unlimited Limited and Emery McLaven Orr Limited. more »

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MXC Capital Limited is a Guernsey-based merchant bank. The Company is engaged in investing in technology companies. The Company is a permanent capital vehicle that is responsible for its strategy, capital raising and investment decisions, as well as the supervision of its London-based merchant banking activities. The Company's segments include Capital Markets segment, Advisory segment and Central. The Capital Markets segment includes the Company's corporate finance and related services division. The Advisory segment includes the Company's advisory and consultancy division, responsible for originating and advising on investment opportunities and providing operational and strategic guidance to clients. The Central segment includes the provision of merchant banking services, including the management of the Company's investments. It focuses on investing in managed services, government and public sector, Internet of Things (IOT), robotics, security and Internet service providers (ISPs). more »

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Snoozebox Holdings plc is engaged in investing in the development of accommodation solutions for existing and new vertical markets. This includes investment in developing prototypes of new V1 type accommodation, V2 second generation accommodation together with developments for the medical and social housing markets. The Company's segments are Events and Semi-Permanent. The Events segment includes all activities providing short-term hotel accommodation at events and festivals. The Semi-Permanent segment includes all activities in relation to the provision of long-term managed hotel solutions. Its geographical segments include United Kingdom, Other European countries and Rest of the World - South Atlantic. It has possession of and access to approximately 570 V1 containerized rooms and over 18 V2 rooms on trailers for deployment to generate Semi-Permanent revenues. more »

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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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