Small Cap Report (3 May) - KBC, KENZ, SPGH, TCM

Friday, May 03 2013 by
5

Pre 8 a.m. comments

Good morning! Just one announcement from my portfolio & watch list, being a $16m software contract win (over 7 years) announced by KBC Advanced Technologies (LON:KBC). I've got mixed feelings about this company, and recently cut back on my long position in it, although I still hold some.

Whilst they have announced a series of positive contract wins & trading updates, there was unexpected bad news concerning a very high tax charge with the last set of results. Now arguably tax issues can be fixed, and it's the underlying performance of the business that matters more. On the other hand, they have net cash (although mostly up-front payments from customers), and intend to resume dividend payments in 2013.

As you can see from the massive screen shot below, KBC shows strong green bars (i.e. positive) on most valuation & growth measures. So if the broker forecasts turn out to be correct, then these shares should go up. However, I'm not convinced that broker forecasts are necessarily reliable, given KBC's tendency in the past to deliver nasty suprises.

Also note from the screen shot below how I'm using the "Notes" button to jot down my own thoughts on companies, which is a really handy way of keeping your info in one place & to hand, without having to keep separate spreadsheets, etc.

 

 

Kentz (LON:KENZ) is a much larger company than I usually look at, £465m market cap at 395p per share. However, it is looking interesting on several levels. Firstly, check out this superb track record, from the "Graphical History" section of the Stockopedia StockReport:

I really like the way profit & EPS are in a lovely smooth trend upwards, yet the valuation graphs actually show the PE range coming down, and the dividend yield range edging up. These graphs are a fabulous way of really quickly absorbing a company's track record & valuation in a couple of seconds.

NB. Please note that Kentz reports in US dollars, so the charts above are shown in dollars!

The forward PER of 8.9, and dividend yield of 2.8% look good value to me (these are correctly converted into sterling by the way!).

Their IMS this…

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Disclaimer:  

As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested. ?>


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7 Comments on this Article show/hide all

Delpher 3rd May '13 1 of 7
1

I agree Kenz's IMS is excellent but it's worth comparing it with Petrofac which I think is in a similar business albeit with a market cap 10 x bigger. PFC has lost 21% of its price since February for a variety of reasons principally to do with a reduction of up front payments resulting in a reduction in CF and difficulty in securing contracts.

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bobdouglas 3rd May '13 2 of 7

In reply to post #73023

Isn't that the difference between the two companies namely that Kentz has a good cashflow and is good at securing high margin contracts?

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Delpher 3rd May '13 3 of 7

In reply to post #73026

Yes you are probably right. I think that PFC's experience probably reflects caution in placing big orders in oil and gas whilst there is a current surplus. PFC are heavily involved in the middle east whereas it was not mentioned in the Kenz IMS.

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it_trader 3rd May '13 4 of 7

Kenz is a funny share and has been oscillating between support of 370 and resistance of 440 for a while now. I've been in and out of it twice now riding up both times I don't short so didn't ride the reversal ;)

I've got a feeling that with stop losses and buy limits the support/resistance range is becoming self fulfilling. I hope not tho this deserves to be higher and hope this time it breaks through.

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djpreston 3rd May '13 5 of 7

Kenz, with its good cash pile, is also a bit different from PFC in the types of contracts it takes on - well worth checking on the detail.

Disc - long Kenz

Fund Management: European Wealth
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SevenPillars 3rd May '13 6 of 7

Kenz does look undervalued compared to others in its sector, but it has been that way for a while. It is also quite volatile in that the share price can run up for a while and then it sells off, so depending on time frame for buying and expected holding period, don't be surprised if you get a few dips that make you wonder why the selling. I've followed it for a while and yet to see any real bad news stories around the company. Looks a good company.

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bobdouglas 3rd May '13 7 of 7

In reply to post #73028

Agree - can drive you crackers at times! Likeable company that falls into a few categories, as you say a trading share or a long term hold paying a decent dividend at a reasonable value - certainly if you like being on a bit of a rollercoaster this should suit.

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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 Stockopedia.com on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »

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