Small Cap Report - DXNS, API, LTHM

Thursday, Nov 29 2012 by
Small Cap Report  DXNS API LTHM

It was good to get a dose of Warren Buffett on CNBC yesterday, he's still firing on all cylinders, and full of common sense as usual. He's ignoring the fiscal cliff in the US, as he just said that it's irrelevant to long-term investors. I absolutely agree, to a certain extent the same is true of the Eurozone crisis - these are issues that have to be fixed, and will be fixed, one way or another.

I rarely watch CNBC these days, as the discussion is so trivial - endless commentators lining up to talk about whether today is a "risk-on, or risk-off day!", which to a longer term investor like me is just meaningless background noise.

It's not a small cap, but I had a quick look at results from Dixons Retail (LON:DXNS). It looks wildly over-priced to me, at almost £1bn mkt cap. Stripping out intangibles from their Balance Sheet gives net tangible assets to overnegative £500m! Since most of their fixed assets are worthless too, then knock those off, and you've got a Bal Sheet knocking on the door of £1bn in the red!

The P&L doesn't look too great either - huge turnover, but negligible profits. It does generate pretty good operating cashflow though, but how long for? Electrical retail is surely one of the worst possible areas to be in, since the homogenous product is ideal for sale on the internet. I can't see how Dixons will survive in the long run with massive High Street overheads against leaner internet competitors, although the demise of Comet will undoubtedly have been behind the strong share price performance recently.

Home Retail Group is vastly better value in this sector I think, with its astonishingly strong Balance Sheet, and wider diversity of product offering.

API Group (LON:API) is an interesting situation - a nice business, on a low valuation, that has been formally up for sale for quite some time now. Part of me thinks that if it were likely to be sold, it would have happened by now, but perhaps their pension deficit (not huge, at £7.2m) has complicated things?

They state today that "a number of indicative offers have…

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James Latham plc is a timber and panel products distributor. The Company is engaged in timber importing and distribution, carried out in approximately 10 locations. The Company offers a range of wood-based panel products, natural acrylic stone, hardwoods, high grade softwoods, flooring, cladding, decking and plastics. The Company also supplies commodity and specialist products to timber and builders' merchants. The Company offers a range of product categories, such as panels, solid surface, door blanks, hardwoods, softwoods, engineered timber, flooring, decking, cladding, modified timber and panels, fire retardant panels and technical panels. The Company caters to door and kitchen manufacturers, shop fitters and other market sectors. The Company's subsidiaries include Lathams Limited and James Latham Trustee Limited. Lathams Limited is engaged in importing and distribution of timber and panel products. James Latham Trustee Limited is a corporate trustee company. 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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