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

Graham Neary 1st Jun '17 8 of 47

In reply to post #190324

Hi Tony, covered it.



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Graham Neary 1st Jun '17 9 of 47

In reply to post #190359

Hi Ben, I'm also a holder of IGG but it's not really in my remit here. I will see if I can cover it elsewhere.


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ap8889again 1st Jun '17 10 of 47

Would love to get a second opinion on Laura Ashley ( Laura Ashley Holdings (LON:ALY) )

It keeps getting cheaper and cheaper without much news flow.

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drvodkaquickstep 1st Jun '17 11 of 47

Hi Graham. Thanks for the Haynes Publishing (LON:HYNS) coverage and the link to my write up. Very pleased with Trading Statement and expect further good progresss.

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Lion Tamer 1st Jun '17 12 of 47

In reply to post #190309

I'm also interesting in Watchstone (LON:WTG) if you have time Graham. The SP today suggests the market is unimpressed, but the results look sound to me, and the balance sheet solid. I guess the cash flow might be the problem. This seems to be due to a Decrease in trade and other payables (note 9) but looking at the balance sheet it seems this is broadly similar to what happened last year. The narrative confirms. I can't see what else might dampen enthusiasm, so at the moment remain bullish. However I'd like to hear your view (and any comments from the usual expert contributors in the comments). Thanks.
(I've a modest holding. Might top up sometime).

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ricky65 1st Jun '17 13 of 47

Thanks for flagging up £FLTA

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FoolishBen 1st Jun '17 14 of 47

In reply to post #190374

Fair play, it would be stretching the definition of small cap somewhat. The fact you also hold is reassuring enough. It's only a relatively minor, opportunistic holding for me anyway.

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Graham Neary 1st Jun '17 15 of 47

In reply to post #190309

Covered it, John



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andrea34l 1st Jun '17 16 of 47

In reply to post #190379

Re ALY, considering the following statement back in February, it may be that the market is figuring that there may be further bad news:

Trading conditions have been demanding during the first six months of the year ending 30 June 2017. The Board have reviewed the first half results and forecasts for the remainder of the year to 30th June 2017 and, given the continued market challenges, feels that net pre-tax profit for the year will fall below market expectations.

So given already a profit warning and demanding trading conditions, things hardly look great. I'm no accountant, but the cashflow in the interims looks appalling and doesn't even cover the dividends.

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Cragside 1st Jun '17 17 of 47

Hi Graham

What about your comments on PPIX. Is it good value?

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Lion Tamer 1st Jun '17 18 of 47

In reply to post #190434

Thanks Graham for your thoughts on Watchstone (LON:WTG).

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andrea34l 1st Jun '17 19 of 47

In reply to post #190429

I had a quick look at IGG... they look pretty subdued growth-wise, albeit with a reasonable dividend...?

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FoolishBen 1st Jun '17 20 of 47

In reply to post #190499

I thought 7% revenue growth wasn't too bad given the relatively modest valuation but I appreciate the effect of new regulation has not come into play yet. To be honest I did only buy them after the big CFD crash as I felt the risk/reward was very favourable. I'm sitting on a 20% profit now so contemplating cashing in my chips as it's probably not a company that would have interested me much if it weren't for the unique circumstances at the time. Selling is not my strong point however, almost everything I have sold in the last year has continued to go up, Laura Ashley Holdings (LON:ALY) aside. I guess that's par for the course in a raging bull market.

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Graham Neary 1st Jun '17 21 of 47

In reply to post #190304

Can only agree, covered it now Ram.


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tripuram02 1st Jun '17 22 of 47

Hi Graham, Would be interested to know about Hydrodec (HYR).. Its a micro-cap and results were published few weeks ago...

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Ramridge 1st Jun '17 23 of 47

In reply to post #190529

Hi Graham - re. Alfa Financial Software Holdings (LON:ALFA) many thanks for covering it and I am glad to see that you agree.
Looking over my notes, management took massive share-based payments in the last financial year totalling £16m which is about 50% of pre-tax profits.
Even after assuming this to be a one-off exceptional, then on current share price, PE = 56, Price/Sales = 18 ; EV/ EBITDA = 73.
And there are people buying these shares today...

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ajbowden 1st Jun '17 24 of 47

Anyone know any reason for the drop in Taptica International (LON:TAP) today, down 8% today?

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Carey Blunt 1st Jun '17 26 of 47

In reply to post #190549

Hydrodec - long history of disappointing. I did hold at one time many years ago and lost a bit as a result. Looking at the stock report it doesn't seem to have got any better.
There are better places for your money IMHO

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WDWombat 1st Jun '17 27 of 47

I believe (and hope) that you underestimate the strength of the business model of Watkin Jones. They are not taking development risk in the usual RE sense though if one of their backers went bust then they would be at risk. i.e. they are non-speculative specialist student accommodation developers who effectively propose/start developments and pre-sell them to financial (institutional) funds. They do have a growing build to rent business largely on the same model which is beginning to support most of the growth. Half of their 31 sites under development are forward sold with another 9 in legals. They should make around 14 pence this year I believe and that is only the year to September 2017. Unless things go badly wrong (Labour winning and university incomes being badly squeezed perhaps) there should be more to come for September 2018. And the balance sheet is strong. I feel this is a really high quality company in a niche business with competitive advantages. If they continue to deliver, as I think and hope they will, there is plenty of upside left. (holder)

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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. Editor at Cube.Investments, small-cap writer at Stockopedia. Previously a fixed income analyst in the City and institutional fund manager. I'm a CFA charterholder and have the Investment Management Certificate and STA Diploma in Technical Analysis for good measure. When I'm not talking about finance, I enjoy recreational poker, chess and Mandarin Chinese. more »


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