Small Cap Report (5 Feb) - ALL, ALU, LWB, HNT, GHT, LID, CRA, BAE

Tuesday, Feb 05 2013 by

Yesterday was an interesting day, with the FTSE 100 down 100 points, yet my portfolio of small cap value shares was actually up on the day, helped by a further rise in Amino Technologies (LON:AMO) and good results from Walker Greenbank (LON:WGB). Long may it continue, although I'm very mindful of the reality that this excellent run we're having at the moment can't carry on forever.

OK, let's look at some results! Firstly, Allocate Software (LON:ALL) releases its interims to 30 Nov 2012. They provide "workforce and compliance optimisation solutions", whatever that means?

I like the way they have presented the breakdown of turnover on the face of the Income Statement, that's a helpful initiative, giving a subtotal for recurring revenue, and then showing licence revenue, and service revenue separately too.

The numbers don't look good though. Whilst turnover is flat, costs have risen by about £1.1m, meaning that the highlighted EBITDA figure has fallen by two thirds to £562k. Amortisation & other charges take them to a basic EPS loss of 3.48p. I can't see anything in the figures or the narrative that excites me, especially as the £51m market cap seems pretty racy, given these lacklustre results.


Alumasc (LON:ALU) is a £35m market cap (at 99p a share) supplier of premium building & precision engineering products. Their shares are up over 50% from the low in July 2012, but still well below their recent peak in Jun 2011. The headline figures for their interim results to 31 Dec 2012 look pretty good - underlying EPS has more than doubled to 4.8p, and the interim dividend has doubled from 1p to 2p.

Whilst net debt has fallen sharply to £8.4m, that is expected to partially reverse in H2. They are on track to deliver on "previous expectations for underlying results for the full year". I'm not sure what the significance of "previous" is, in that sentence? Perhaps there has been a very recent broker upgrade which should be disregarded?

The forecast PER of 10.5 looks reasonable at first, but when you factor in a fair bit of debt, and the pension deficit, it stops looking good value, so to my mind this is probably fully priced…

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Allocate Software PLC (Allocate) is a United Kingdom-based company engaged in software and services business. The Company operates in the healthcare and defense sectors. The Company is a provider of specialist workforce optimization and assurance software and services as well as provides workforce optimization and compliance software applications. The Company’s client base includes healthcare, defense and maritime offshore oil and gas companies. The Company’s license revenue represents revenue from the sale of non-cancellable software license agreements. The Company’s subscription revenue is derived from the sale of software’s as a service product, allocate cloud and hosting revenues. The Company’s support and service revenue represents revenue from the provision of installation, consulting, training and product support. The Company’s subsidiaries include Time Care AB, Time Care Sverige AB, Allocate Software Inc, Allocate Software PTY Limited and Allocate Software Sendrian Berhad. more »

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The Alumasc Group plc is a building products, systems and solutions company. The Company's segments include, Solar Shading & Screening, Roofing & Walling, Water Management, and Housebuilding & Ancillary Products. The Solar Shading & Screening segment offers Levolux's architectural solutions, which are used to shade and screen buildings. The Company creates bespoke balcony and balustrading solutions. The Roofing & Walling segment provides waterproofing systems for flat roofs, roofing support services, exterior wall insulation systems and facade systems. The Water Management segment provides a range of industry solutions to help manage water originating inside or outside of the buildings and convey it in a controlled and safe way to discharge into water courses, sewers of the ground. The Housebuilding & Ancillary Products segment offers house building and ancillary products, such as ventilation products, cavity closers and trays, access panels, loft doors and dry roof verge products. more »

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Low & Bonar PLC is a United Kingdom-based company engaged in international manufacturing and supply of performance materials. The Company's segments include Building & Industrial, Civil Engineering, Coated Technical Textiles, and Interiors & Transportation. The Building & Industrial global business unit (GBU) supplies a range of technical textile solutions for applications in the building, roofing, air and water filtration and agricultural markets. The Civil Engineering GBU supplies woven and non-woven geotextiles and construction fibers used in infrastructure projects, including road and rail building, land reclamation and coastal defense. The Coated Technical Textiles GBU supplies a range of technical coated fabrics providing aesthetics and design, performance and protection. The Interiors & Transportation GBU supplies technical fabrics used in transportation, interior carpeting, resilient tiles and decorative products. more »

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  Is Allocate Software fundamentally strong or weak? Find out More »

15 Comments on this Article show/hide all

Asagi 5th Feb '13 1 of 15

Hi Paul - r.e. exuberance, see what happened to Northbridge Industrial Services (LON:NBI) yesterday following a Midas tip in the Mail on Sunday. Shares up something like 15%. The Stockopage for the company says they now have a market cap of £49m.

That's some rise for a paper tip! It isn't like the company was a £5m tiddler.

I can't help buy think those punters would not have rushed in if the markets had not been good - sick of seeing other people make gains. With a real twinge, I sold my shares in the company this morning.

I think that we have been in a bull market since the New Year.

Asagi (no position)

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Paul Scott 5th Feb '13 2 of 15

In reply to Asagi, post #1

Morning Asagi!

Interesting that you should mention shares rising strongly on newspaper tips, I've also noticed that (it happened with Staffline, helping to push them up from around 240p to 300p very quickly, so I banked the profit).

It suggests to me that equities are coming back into fashion with the general public perhaps? That could give a very different type of market from the one we're used to, with "story stocks" once again being pumped & dumped, etc. I don't relish that type of stuff at all, as you almost have to throw out the value rule book and just trade on sentiment.

It's 15 years since the TMT boom began, and the financial memory is supposedly 15 years, so perhaps this is the start of the next big bull market? Makes sense, since residential property is over-priced, savings accounts pay nothing, yields on Gilts are laughable, so where else can people put their money?

Regards, Paul.

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Ramridge 5th Feb '13 3 of 15

Hi Paul.
Re. Allocate Software, I see the volume of trading was just over 3m yesterday. Average volume is normally a few thousands which I would expect given their size. And the price hardly moved. What gives?
Regards, and good to see you at stockopedia, Ram

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ericb 5th Feb '13 4 of 15

Re ALL - 2 big trades of around 1.55m each. could have been some asset reallocation between holders, hence not affect share price.

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Ramridge 5th Feb '13 5 of 15

In reply to ericb, post #4

Plausible. Thanks, Eric.

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brigandchief 5th Feb '13 6 of 15

Dear PP
I read somewhere recently that someone thanked you for your tips, sugggestions or just plain commentary. I would like to thank you for your 'not to be too interested in' as this does show how to approach value stocks or perhaps how to sift through the dross to find the real possibilities. Only one issue however, when is Indigovision (LON:IND) going to show some performance. I know you love this one but will it turn good before I die?? And I hope Feb has brought a small glass of red!!
Cheers David

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Paul Scott 5th Feb '13 7 of 15

In reply to brigandchief, post #6

Hi David,
Thanks for your comments. I'm only ever giving an opinion on shares, and the nature of the game is that sometimes I'll be right, and sometimes wrong! Outsiders never really know what's going on inside any company, it's all just educated guesswork really.

For me the key things with Indigovision (LON:IND) was the change in CEO about a year ago. I met the new CEO & FD last autumn, and was very impressed with their turnaround strategy, which was focussed on putting in place the right people & processes in year 1, then a big push for sales growth in years 2 & 3. We're now in year 2 of their turnaround, so if it's going to happen, it will happen this year I think, or not at all.

They've certainly got a highly focussed, and hard-working new CEO, who is absolutely determined to prove himself (perhaps after many frustrating years as FD to an absentee CEO, who let the company drift, instead of leading from the front, as we now know).

I feel that IND giving away the cash pile to shareholders was a pretty bold move too, which wouldn't have happened unless they were reasonably confident of making it work. The last trading statement wasn't bad - sales up 6%, and order book up 10%. If that accelerates to market growth and beyond (20%+) then the bottom line could rocket, since they have considerable operational gearing at 60% gross margins.

I would love to exit IND on a high, as it's taken up far too much of my time & energy over the last 9 years! My assessment, rightly or wrongly, is that there's a good chance it could pay off this year, but no guarantees obviously, and it has let us down several times in the past, when growth has started, only to fizzle out.

Cheers, Paul.

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brigandchief 6th Feb '13 8 of 15

In reply to paulypilot, post #7

Thanks Paul, really do appreciate your effort to reach us all!!!
Cheers David

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Trebor Ebagum 8th Feb '13 9 of 15

Think you are missing a trick with GHT Paul. They have brought in FDM to help cope with future demand of their CTC offering. ANZ were used as a test bed, just wait till the really big boys jump on board!

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Ramridge 8th Feb '13 10 of 15

In reply to Trebor Ebagum, post #9

Hi Trebor. Having worked in the financial services sector and software services for many years GHT 's CTC product is IMHO a big bet for a small company. CTC is a new proprietary platform offering. Financial institutions have millions invested in their current systems. GHT have a number of hurdles to overcome before turning a prospect into a paying client. Compelling business case, proof of concept, trialling, migration of systems, training, cutover, adoption of new system. Larger the institution the longer the lead time and the upfront cost to Gresham. Typically 1.5 to 2years. As Paul often says, not one for me. Better pickings elsewhere.
Regards, Ram

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Trebor Ebagum 8th Feb '13 11 of 15

"FDM will provide our core implementation team with the scalability and global reach we will need to meet customer demand."
There is a queue forming ...... Wait and see!

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Trebor Ebagum 23rd May '13 12 of 15

Taken from the recent interim statement:
We have advanced a number of CTC opportunities with global financial institutions from proof of concepts to paid projects for the deployment of CTC in Asia Pacific and EMEA - we expect a number of these paid projects to proceed to full contractual engagements in due course, certain of which would be of significant value to the Group;
Looking good IMHO

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Trebor Ebagum 3rd Jun '13 13 of 15

3 June 2013

Gresham Computing plc

("Gresham" or "the Company" or "the Group")

CTC Contract Win

Gresham Computing plc, the specialist provider of software based solutions that enable customers to achieve real-time financial certainty in transaction and cash management, is pleased to announce the following contact win.

On 15 May 2013, we announced that the Group was engaged in a number of paid projects with global financial institutions for the deployment of CTC. The Board is pleased to announce that the first of these projects, with a major financial services company in the Asia Pacific region, has moved to signed contract for the purchase of CTC as a platform technology from which to complete a major intersystems reconciliation project.

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Trebor Ebagum 3rd Jun '13 14 of 15

particularly like "the first of these projects" in the RNS

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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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