Small Cap Report (29 May) - MBH, QPP, TRK, NBL, IDOX, DGB

Wednesday, May 29 2013 by

Pre 8 a.m. comments

Firstly, just on a house-keeping matter, I'd like to flag up a free Webinar that Stockopedia are holding today - i.e. an online tutorial in how to get the best out of Stockopedia. It's at 12:30 today! I've signed up for it, as there are so many great features buried in this website, that you might never find unless you are shown them. There are only a few places left, so if you're free at 12:30 then I encourage you to sign up here.


Michelmersh Brick Holdings (LON:MBH) announce the sale of a 15 acre site in Telford for £4.6m in cash, with £3m deferred for 1-2 years. That will put a bit of a dent in their £18.4m net debt. There looks to be a lot more property on the balance sheet too. I remember meeting the management some time ago, and thinking they had a pretty marginal business on the brick-making side of things, but who knows it might pick up if & when we finally start to build enough affordable houses in this country for the number of people who actually live here now!

So Michelmersh is really a special situation based more around its property assets than its operating business.


Quindell Portfolio (LON:QPP) have announced a 3-year deal with Honda. As usual, it's all couched in language which obscures what the deal actually is. But from what I can make out, it's based around the low margin business of supplying credit hire cars through Ai, which provides the bulk of Quindell's turnover, yet only £3.5m p.a. profit. The rest of Quindell's profit comes from mysterious software revenues that have apparently sprung from nowhere.

Accident Exchange and Helphire also provided similar deals (I recall ACE having one with Audi). Quindell claim that they manage a much broader range of services, and co-operate with insurers, as opposed to trying to fleece them with excessive charges, which was arguably the business model of other operators in this sector in the past.

Quindell also claim to have a, "continued focus on an ethical approach for the industry"! Well it's a pity they don't seem to have adopted an ethical approach towards their stock market announcements, since they blatantly misled the market over the true…

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Michelmersh Brick Holdings Plc is a United Kingdom-based company, which is engaged in the manufacture of clay bricks, tiles and pavers. The principal activity of the Company is the management and administration of its subsidiary companies. The Company's segments are Building materials and Landfill. The Company's Building materials segment is engaged in the manufacture of bricks, tiles and building products being principally facing bricks and clay paviors at Blockleys, which is based in Telford, Shropshire; Charnwood, which is based in Shepshed, Leicestershire; Freshfield Lane, which is based in Danehill, West Sussex, and Michelmersh, which is based in Romsey, Hampshire. The Company's Landfill segment is engaged in landfill operations, through New Acres Limited, which is based in Telford, Shropshire. The Company's brands include Blockleys, Charnwood, Freshfield Lane, Michelmersh and Hathern Terra Cotta. Its Blockleys brand manufactures a range of standard special shaped bricks. more »

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Watchstone Group plc offers technology solutions to the insurance, automotive and healthcare industries. Its segments include Hubio, Healthcare (pt Health and InnoCare), and ingenie. Hubio provides integrated solutions to help organizations in the insurance and automotive sectors to build customer engagement and enable usage-based personalization. Healthcare includes ptHealth, a national healthcare company that owns and operates physical rehabilitation clinics across Canada, and InnoCare, a clinic management software platform and call center and customer service operation based in Canada. Its ingenie is an insurance broker. Using telematics technology, ingenie gives its community feedback, advice and discounts to help young drivers improve their driving skills. more »

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Torotrak plc is a United Kingdom-based technology development company. The Company designs, develops and delivers technologies focused on products, such as Gearless traction drive transmissions (Torotrak), Variable drive superchargers (V-Charge) and Mechanical kinetic energy recovery systems (Flybrid). The Company's segments include licence agreements, engineering services, and development activities, including research and the creation of new intellectual property. The Flybrid technology relates to design, development, manufacture and control of high-speed flywheels for use in moving vehicles. Its V-Charge is a variable drive supercharger for gasoline and diesel engines. The V-Charge allows downsized engines to maintain their emissions levels. The Company's infinitely variable transmissions (IVTs) combine its full toroidal traction drive variator with other conventional transmission components. more »

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  Is Michelmersh Brick Holdings fundamentally strong or weak? Find out More »

22 Comments on this Article show/hide all

shanklin100 29th May '13 1 of 22

Hi Paul

Re MBH, there are a lot of land assets and I essentially agree with your analysis.

In terms of operating profitability and cash flow from the brick business, I understand the depreciation is considerably greater then the investment needed to maintain these assets so, even at marginal profitability, there is enough incoming cash to service their debt and gradually pay it down, as is reflected in the last FY results..

Cash from property sales will help with this.

Cheers, Martin

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Paul Scott 29th May '13 2 of 22

In reply to shanklin100, post #1

Good points Martin, thanks.

I noticed the cashflow looked pretty positive in the last set of results from Michelmersh Brick Holdings (LON:MBH) .
Also, I like the niche market approach that MBH have taken, going for more up-market housing developments (e.g. self-build).

Once tax on land disposals is taken into account, and the very likely long timescales, and therefore the opportunity cost of tying up one's money in the shares for years, with no divis, I'm struggling to find much exciting upside in it. Although I note that Stockopedia broker consensus shows commencement of a 0.5p divi in 2014.

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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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