Small Cap Value Report (1 June 2017) - FLTA, HYNS, WJG, ALFA

Thursday, Jun 01 2017 by

Good morning!

Feel free to send in requests and I will cover what I can.




Filta Group (LON:FLTA)

  • Shares price: 100p (+8%)
  • No. of shares: 27 million
  • Market cap: £27 million

Trading Update

I'm flagging this up as it's new to me and is another fairly recent flotation (November 2016).

According to its website, the core product is FiltaFry, which enables 5,000 food establishments to recycle their cooking oil. Two other subsidiaries are involved in providing refrigeration door seals, and general maintenance of refrigerators and air conditioning units.

Sounds like a "boring" industry which Peter Lynch would approve of!

Unfortunately, the company generated a loss last year (£200k), on revenue of £10.1 million. Adding back finance costs, AIM admission costs, and "special bonuses" to shareholder-directors, gets you an "underlying" operating profit of £1.15 million.

Today's update is concise but encouraging:

"We have enjoyed a strong start to the year with revenues for the first 4 months, on a constant exchange rate basis, over 25% ahead of the same period last year, with all of our business lines, franchise development, fryer management services and Company-owned operations contributing to the growth. 

The statement mentions new customers secured last last year, who are going to provide a full-year contribution in 2017, and describes how most company revenue is recurring in nature.

Overall, looks to be the type of boring stock which can often turn out to be a good investment.

I can see a broker forecast from April suggesting that 5.9 EPS could be achieved this year. Perhaps that forecast will be revised upwards, and this might start to look decent value?

A few other small points worth mentioning: it fulfilled its promise to pay a dividend in the first half of this year, and has pledged to pay interim and full-year dividends going forward.

It operates a franchise model - that's something that always gets me interested, because it means potentially high returns on capital (if you can get the franchisees or banks to put up the capital to fund local operations).

The balance sheet is no fortress but it looks ok, equity of £3.4 million or £0.9 million excluding non-current assets. £4.4 million of cash offset by £1 million in bank loans.


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All my own views. I am not regulated by the FSA. No advice.

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Filta Group Holdings plc is a provider of various services to national and independent commercial kitchen operators and owners. The Company's principle service is FiltaFry, which is the micro-filtration of cooking oil, the vacuum-based cleaning of deep fryers and full Fryer Management. Its business operations are within the United Kingdom and the United States. The United States operations are operated as a franchise network, while the United Kingdom activities are operated under both franchise and direct sale business models. In addition to FiltaFry, Franchise Owners offer other fryer management services provided and managed by it, including waste cooking oil collection and removal (FiltaBio) and the supply of cooking oil (FiltaGold) and non-fryer related kitchen services, including the provision and servicing of moisture absorption panels for refrigeration units (FiltaCool). Its drain-related services include live bacteria drain dosing. The Company has over 180 Franchise Owners. more »

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Haynes Publishing Group P.L.C. is a United Kingdom-based company, which creates and supplies practical and informative content to consumers and professional mechanics in print and digital formats. The Company operates through two geographical segments: UK & Europe, and North America & Australia. The UK & Europe segment has subsidiaries in the Netherlands and Italy, among others. Its core business is the publication and supply of automotive repair and technical information to the professional automotive and do it yourself (DIY) aftermarkets in both a print and digital format. The North America & Australia segment publishes DIY repair manuals for cars and motorcycles in both a print and digital format. It publishes titles under the Haynes, Chilton and Clymer brands, in both English and Spanish. It has a branch operation in Sydney, Australia, which publishes various products under both the Haynes and Gregory's brands. Its consumer content is delivered via both print and digital channels. more »

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Watkin Jones plc is a United Kingdom-based construction and development company. The principal activities of the Company and its subsidiaries are those of property development and the management of properties for multiple residential occupation. The Company's segments include student accommodation development, residential development, student accommodation management and corporate. The Company's student accommodation development segment is engaged in building student accommodation developments. The Company's residential development segment is engaged in the development of traditional residential property. The Company's student accommodation management segment is engaged in managing student accommodation property. It builds properties ranging from executive and family homes to contemporary apartments. The Company operates across the entire development lifecycle from site procurement, planning and construction to scheme management. more »

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  Is LON:FLTA fundamentally strong or weak? Find out More »

47 Comments on this Article show/hide all

ganthorpe 1st Jun '17 28 of 47

On Watkin Jones - I agree with Wombat .
Although the nuber of student units is going to be slightly lower , The selling price forward is well up per unit and forward margin should be well over 20% if you do the maths .And there will be a modest and growing contribution from Fresh Living kicking in. And an interesting move into BTL with financial backing.
I am not sure about 14P EPS in the current year but over 12P looks well achievable .
I bought my initial holding after seeing Graham's original note when they were 117P and did some research and liked what I saw. (Thanks Graham). Having bought steadily on the way up I feel that I was due a sizeable top slice as I think WJG is high enough for now . Having said that , I think they have a good business model and forward prospects are excellent.

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JohnEustace 1st Jun '17 29 of 47

In reply to post #190629

I agree with this. It's the potential of using their development model in the wider rental market outside student accommodation that appeals to me. Having added to my initial holding I think I'll just sit still on it for a while.

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oaktree 1st Jun '17 30 of 47

Hi Graham, could you or Paul cover Haike please. I know it's a Chinese aim share which sounds terrible. But it's today released excellent results and a very upbeat current trading statement. Market cap is , even after today's rise of 30% , about £13m but it's expected to make 4.5m this current year. I get that number form today's announcement saying they have made 1.5m in first 4 months of this year. I've had them along time and really feel this one is the exception! Oh and they have little debt and increasing cash generation. It's a value play.

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Dieselhead2 2nd Jun '17 31 of 47

Hi Graham/Paul, any chance of you having a quick skim of the trading update for OPG Power Ventures (Indian power generation company). Trading update was 2 days ago I believe. The share price has come down an awful lot over the past few months.
Many thanks. DH2.

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jsatchwill1 2nd Jun '17 32 of 47

Hi Graham/Paul,
Is it possible to look at Telford Homes? The results came out on Wednesday and were looking pretty strong, dividend increasing by 10%ish. Stockopedia rating of 82 (as of 02/06/2017) but still 1 screen is recommending shorting?
Really enjoying the articles, very informative and good fun too.



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BH1991 2nd Jun '17 33 of 47

In reply to post #190804

Hi James

I held Telford Homes (LON:TEF) but sold shortly after reading the final year earnings report. I wasn't impressed with the outlook and I think their strategy is a bit wobbly given recent government action. Some quotes from their report:

Our strategic priority is to further increase our activity in the build to rent sector. 

Confidence in this area of the housing market has been shattered recently with government tax hikes and Brexit uncertainty.

The outlook statement looks pretty poor too:

We have, however, seen a reduction in the number of UK based individuals seeking to invest in buy-to-let properties.  These investors have been more sensitive than overseas buyers to the uncertainty resulting from the EU referendum, and have also been deterred by the increase in stamp duty and the reducing ability to benefit from tax relief on mortgage interest.

So they are looking to expand into a market with low investor confidence... I can appreciate the uncertainty will be temporary (2-3 years, until Brexit is sorted, maybe?) but given my investment time horizon, that's too long for me, so I've sold.

If confidence picks up in the buy-to-let market then I would be willing to re-invest because the valuation looks attractive at the moment.

As always, DYOR - this is not investment advice. Hope it helps!

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andrea34l 2nd Jun '17 34 of 47

In reply to post #190764

Dieselhead, thanks for mentioning OPG... I held these a little while ago before selling at a moderate profit, the sentiment was since affected largely by a big spike in coal prices, according to their more recent reports these prices are now on the decline for the foreseeable future. I wonder if there is some negative sentiment to their coal-fired plants based on climate-change concerns... but this is balanced by their solar developments.

Other factors were a lowered revenue guidance of around £6m due to a result of the effects of taking out of the system high denomination currency, the death of the Tamil Nadu Chief Minister and a cyclone in December.

However, with the interim EFS was 4.8p +41% and what seem to be positive updates since to me the price now seems staggeringly low.

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andrea34l 2nd Jun '17 35 of 47

For all GAW holders, there's a fab positive update announced just over an hour ago... oddly not at the usual 7.00.

Profit before tax expected to be "not less than 38m", which compares to 17m last year! Revenue up to 158m from 118 last year.

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tripuram02 3rd Jun '17 36 of 47

thanks Ed.and Carey

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aflash 3rd Jun '17 37 of 47

In reply to post #190379

Here is a third opinion:

ALY for me is a play on S.E. Asia and Singapore real estate. The Laura Ashley designs are popular with a rising middle class imitating developed world culture. Emerging markets are the place to be since Brexit and Donald Trump. Real Estate in Singapore may fluctuate short term but ultimately wil rise because the city is a business hub and the authorities make sure the streets are ultra-clean.
I have sold any holding related to London real estate because office occupancy is likely to decline when Brexit bites in a few years time. This may be compensated by foreign bargain hunters if the pound reaches parity with the dollar. The proximity of Singapore to China gives me more confidence.

Khoo Kay Peng, the dominant Malaysian shareholder is a plus for me 1) because he wants his dividend even if the company cannot afford it and 2) he wants a flagship building in Singapore.

By all accounts the U.K. Laura Ashley store offering is badly managed and over-priced. My jury is out on the hotel offering i.e. have not investigated it.

The share price decline, however, tells me a lot. No one has any confidence.
Khoo Kay Peng may have to sell assets to pay the settlement of 64m to his ex-wife.
The company is adrift.
Once instituional investors capitulate on high volume I shall buy some more.

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janebolacha 4th Jun '17 38 of 47

In reply to post #191044

Aflash, buy a Singapore property company direct if you want exposure to that market.
Or a trust of some kind with exposure to that market, there are quite a few of those.

Exactly what are Laura Ashley Holdings (LON:ALY) doing with that building? Using it all? Renting space out? To whom?
There certainly seems not to be any take-off of any scale in their own business in Asia.

Btw, re "proximity", Singapore to China is at least four hours by plane, it's not just round the corner.

Laura Ashley Holdings (LON:ALY) was analysed thoroughly on Stockopedia two years ago and its weaknesses fully exposed.
Nothing since then has indicated either improvement or any coherent and effective plan for change.

Tan Sri Khoo Kay Peng is a "plus" to Laura Ashley? I'm very surprised you say that.
My knowledge of Malaysia and of his track record would lead me to quite the opposite conclusion.

His personal situation complicates things even more, the possible consequences of his divorce,
perhaps also whether there could be some other complication in the future ownership of Laura Ashley Holdings (LON:ALY) from Tan Sri's eventual disposal of his assets (although that is pure speculation on my part, please note).

Yes, everything has a price. Yes, the brand name ought to be worth something.
Perhaps there may be value here, once Tan Sri and MUIB are fully out of the picture.

Edit:  This property "investment" has probably lost value (as was entirely foreseeable, given the parameters of the Singapore property market, as was pointed out two years ago):


Office market at a glance:


Prices and Rentals

Prices of office space decreased by 4.0% in 1st Quarter 2017, compared with the 0.6% decline in the previous quarter (see Annex A-1). Rentals of office space fell by 3.4% in 1st Quarter 2017, compared with the decline of 1.8% in the previous quarter (see Annexes A-3 & A-5).

Property Price Index of office space


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aflash 4th Jun '17 39 of 47

In reply to post #191064

Aha! Some one is alert!

As I wrote my comment I convinced myself of the opposite!

Il valait mieux attendre les réactions cependant, surtout celle de la qualité de notre Jane Bolacha!

En effet demain je replace mes ordres,
Tomorrow I shall renew my orders for:

Keppel REIT Singapore market cap 2 356 278 $ (singapore $ or US$?)


Suntec REIT Singapore market cap 3 056 936 $

These I found a few months ago but was trying to buy them a little cheaper.

Both are over the counter in New York under the symbols KREVF and SURVF. 

It is a bit of a Crowded Trade, however, the price is up with events.

So the cheap and unloved Laura Ashley ALY still has a place in my portfolio but only for a Short Covering bounce once it falls off a cliff.

Saludos cordiales
Hasta la proxima

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janebolacha 4th Jun '17 40 of 47

In reply to post #191079


Oui, voilà, bien triste, n'est-ce pas, passer les dimanche après-midis sur Stocko?

Bonne chance, suerte, boa sorte, good luck!

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aflash 4th Jun '17 41 of 47

In reply to post #191084

come on now, Jane, Stockopedia provides hope.

It is better than:

arguing with your family
mowing the lawn
sitting in a traffic jam
waiting for a plane/train/bus
going through airport security
being in a doctor's waiting room
getting drunk
drinking coffee in the afternoon
wasting time in front of a television
using a balayeuse
going through old papers trying to decide what to throw out

Amy other suggestions?

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janebolacha 4th Jun '17 42 of 47

Sólo te estaba tomando el pelo, nada más!

But pretty good list there, for sure.

Bonne soirée.

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gus 1065 4th Jun '17 43 of 47

In reply to post #191089

Just compiled and submitted my 2017 tax return online .... now that was a waste of a sunny afternoon!


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aflash 4th Jun '17 44 of 47

In reply to post #191099

Not if it included a reveiw of stock market profits and capital gains exemptions. Anyway the sun can cause skin cancer.

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matylda 9th Jun '17 45 of 47

Any chance of Paul or Graham giving some Broker forecast info on this as there is no data on Stockopedia - Looks like a great Short.

Blog: Briefed Up
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gus 1065 1st Jun '18 46 of 47

Who was it said history doesn’t repeat, but it sometimes rhymes? (Mark Twain, I think).

Same day (June 1st) but a year on, Alfa Financial Software Holdings (LON:ALFA) came out with a mid afternoon profit warning today taking the shares down over 40% to 185p. Seems like several major contracts are delayed (but obviously not the company management’s fault).

Reading the original commentary from Graham and the following thread, we can’t say we weren’t warned.


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Edward John Canham 1st Jun '18 47 of 47

Based on a quick look at the parameters ALFA still looks pricey at 185p given the presumed analyst forecast revisions to come - you really need to believe the story here.


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 Are LON:FLTA's fundamentals sound as an investment? Find out More »

About Graham Neary

Graham Neary

Full-time investor and independent analyst. Prior to this, I spent seven years in the financial markets as an analyst and institutional fund manager. I'm CFA-qualified, also holding the Investment Management Certificate and the STA Diploma in Technical Analysis.Away from finance, my main interests are recreational poker and everything to do with China, especially Mandarin Chinese. more »


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