Small Cap Value Report (10 Sep) - SDM, NPT, ZZZ, SAL

Tuesday, Sep 10 2013 by
13

Good morning! Stadium (LON:SDM) reports its interim results to 30 Jun 2013. It's a small electronics group, with a market cap of £12.6m at the current share price of 42p. Checking our archive here, I see they issued an H1 profits warning on 3 Jul 2013, at which time I commented that on balance the shares looked cheap at 30.5p, but didn't buy any because the market Bid/Offer spread was too wide.

Looking at the H1 figures announced today, they are not good. Turnover is up 2% to £21.4m, but adjusted profit before tax is down 50% to £0.37m, for a wafer thin profit margin of only 1.7%. Adjusted EPS is 1.0p (vs. 1.9p in H1 2012). So not good at all. However, what is interesting is the outlook statement, which suggests an improved performance in H2 (my bolding):

 

The closure of the Rugby site was completed in August 2013, the other re-organisation activities in Head Office and Asia are substantially complete, and the expected benefits will be realised in the second half of this year.

 

 We expect a strong second half performance built on a solid order book within the interface and displays business and the book-to-bill ratio within the power products business supports a much improved second half performance, which will be further enhanced by our e-commerce platform and a broader commercial offering of power products. Within the iEMS business, we have secured a number of contracts with new customers, albeit at lower margins, reflecting the on-going pricing pressures prevalent in this market.

 The Board remains committed to the growth strategy of investing in our businesses both organically and through acquisition, and will continue to explore opportunities to drive this strategy forward. Whilst trading conditions during 2013 have remained challenging, the Group is now firmly on a path to deliver improved operating performance. The Board is confident of delivering second half profits in line with current expectations, and has an increasing optimism towards 2014 performance and beyond.

 

 

So I read that as a positive outlook overall, with a few caveats about pricing pressures. Although personally I'm careful about buying into situations where H1 has been weak, but all sorts of reasons are given why H2 is going to be better, as it doesn't always pan…

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Stadium Group plc is a provider of integrated electronic technologies. The Company operates through two divisions, including Technology Products, which incorporates wireless, interface and displays, power and stontronics, and integrated Electronic Manufacturing Services (iEMS) provided through design and manufacturing operations in the United Kingdom and Asia. It offers various services, such as design (electronic, mechanical and software), prototype, new product introduction (NPI), global procurement, in house tooling and molding, printed circuit board (PCB) assembly, box build and test, packaging and global logistics. It provides wireless machine-to-machine (M2M) connectivity solutions for original equipment manufacturer (OEM) devices in vehicle tracking, telematics, fleet management, smart metering, asset tracking, wearable technology, handheld devices, infotainment and security systems. It serves various manufacturers in the marine, aviation, medical and broadcast industries. more »

LSE Price
121p
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n/a
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NetPlay TV plc is a United Kingdom-based online gaming company. The Company operates various interactive gaming services under an Alderney gaming license. The Company operates through two segments: Business-to-Customer (B2C) and Business-to-Business (B2B). B2C consists of various online products and ancillary income. The brands operated in this division are Supercasino.com, Jackpot247.com and Vernons.com. These brands operate online gaming and betting products. B2B relates to the online marketing, product development and technology business. The Company allows its customers to interact with its games on various platforms, such as television, Internet, mobile and tablet from a common integrated wallet. Its SuperCasino offers slot machine games, live dealer blackjack and baccarat, card games, a selection of casino table games, video poker and instant-win arcade games. Its Jackpot247 hosts games in the Playtech Latvian studio and their online casino games. more »

LSE Price
8.88p
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n/a
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Snoozebox Holdings plc is engaged in investing in the development of accommodation solutions for existing and new vertical markets. This includes investment in developing prototypes of new V1 type accommodation, V2 second generation accommodation together with developments for the medical and social housing markets. The Company's segments are Events and Semi-Permanent. The Events segment includes all activities providing short-term hotel accommodation at events and festivals. The Semi-Permanent segment includes all activities in relation to the provision of long-term managed hotel solutions. Its geographical segments include United Kingdom, Other European countries and Rest of the World - South Atlantic. It has possession of and access to approximately 570 V1 containerized rooms and over 18 V2 rooms on trailers for deployment to generate Semi-Permanent revenues. more »

LSE Price
0.36p
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  Is LON:SDM fundamentally strong or weak? Find out More »


5 Comments on this Article show/hide all

Camtab 10th Sep '13 1 of 5
2

Paul,
I appreciate you are quite conservative in your approach, a sentiment I echo incidentally and therefore pension deficits are important. I thought however it may be worth mentioning that with recent increases in yields on Govt stock the pressure on companies with pension deficits will decrease. It may also be true that those companies with higher cash holding will benefit as rates rise, therefore supporting your focus on balance sheets (we saw this play with GEC all those years ago and Weinstocks insistance on holding a billion in cash).
hope all is well with you.
Guy

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Paul Scott 10th Sep '13 2 of 5
1

In reply to post #77065

Morning Guy,

Absolutely, I agree on both points. Pension deficits are a lot less of a worry now that Gilt yields are rising, a point that I've made here many times this year.

Very good point also about interest on cash balances. That should certainly give an extra boost to cash rich companies over the next few years, and worsen results for highly geared companies, if they don't have fixed rate arrangements.

Cheers, Paul.

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kenobi 10th Sep '13 3 of 5

The Gilt point is interesting, but surely it depends on the situation of the fund, if they already own gilts, higher yields just mean lower prices if they need to sell them surely ? so in a company with many employees, relatively young, with high commitments for the future but few pensioners now this helps. If however you have a relatively small base now, and the money coming in is the same or less that what is going out to fund commitments, then higher yields just means you have to sell more bonds to meet those commitments as the price is lower. I'm not saying I know which camp this company falls into, while I see generally higher yields are good for pension funds, and perhaps more money will flow that way when yields are in the 4-5% range, until they are buying cheaper gilts, not sure it really helps much.

This is probably just showing how little I know about bonds !

cheers K

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kevanp 10th Sep '13 4 of 5

Paul, interesting to see you've overcome your aversion to online gaming shares (see your comments on 8 May, in a review of GVC Holdings (LON:GVC) ). GVC's interims are due c.23 Sep. I hope you have time to review them. Their balance sheet is perhaps not as strong as NPT's, but their forecast PER, EPS growth, and dividend yield are stonking. Their price, 315p, is currently only 10% above what it was on 8 May. I'm hoping the interims will indicate how the Sportingbet integration is going.

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Cisk 10th Sep '13 5 of 5
1

Paul, if time allows upon your return from London, would welcome you view on the interims from Deltex Medical (LON:DEMG), announced this morning - I know you held a few of these a while back.

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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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