Small Cap Value Report (11 Dec 2014) - VLX, LWB, MOSB, PTCM

Thursday, Dec 11 2014 by

Good morning!

Volex (LON:VLX)

The FD has resigned after just 18 months, which makes you wonder if the much vaunted recovery in trading is actually happening? I remain very sceptical.

The company couldn't resist the opportunity to include a little ramp for the shares, as it invariably does, saying;


That's exactly the same wording used in the outlook statement given on 13 Nov 2014 with the interim results, where the company was marginally profitable (just $3.5m profit on $221m turnover).

This company needs to stop the PR talk, and just deliver some decent results. Maybe the FD agrees with me that the future is unexciting for Volex, so is seeking pastures new?

Low & Bonar (LON:LWB)

Share price: 47.5p
No. shares: 327.8m
Market Cap: £155.7m

As you can see from the chart below, shares in this building materials company have really come down a lot recently, so I'm wondering if it might be worth picking up a few?


Checking my notes here, the company warned on profits on 5 Sep 2014.

Trading update - today seems to pretty much confirm what was said in Sep 2014;


Checking back, the company reported 6.2p adjusted EPS last year, so assuming the same this year, then that puts it on an attractively low PER of 7.7. However, net debt of £88m is very high, and that works out at 26.8p per share, giving an Enterprise Value of 74.3p per share. So earnings of 6.2p puts that on a PER of about 12. I've not adjusted out the net interest cost, so the actual PER would be a bit lower than 12, but it gives a rough idea.

Balance Sheet - I've had another look, and I just cannot get comfortable with such a high level of net debt.

My opinion - I'm very tempted to have a little dabble here, as there could be upside from a European recovery in due course. But it would only ever be a very small position, as the company has too much net debt for me to be comfortable taking a position of any significant size in my portfolio. That said, I imagine there might be some potential upside from the current share price, perhaps? The divi yield looks good, at about 6%, if that is sustainable?

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Volex plc is a supplier of power cords and cable assembly solutions servicing a range of markets, including consumer electronics, telecommunications, data centers, medical equipment and the automotive industry. The Company's segments include Power Cords, Cable Assemblies and Central. The Power Cords segment is engaged in the sale and manufacture of electrical power products to manufacturers of electrical/electronic devices and appliances. These include laptop/desktop computers, printers, televisions, power tools and floor cleaning equipment. The Cable Assemblies segment is engaged in the sale and manufacture of cables permitting the transfer of electronic, radio frequency and optical data. These cables range from universal serial bus (USB) cables to high-speed cable assemblies, and are used in a range of devices, including medical equipment, data centers, telecoms networks and the automotive industry. It is also engaged in contract manufacturing service and product development. 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 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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Moss Bros Group PLC is engaged in retailing and hiring formal wear for men. The Company operates through Moss Bros branded mainstream stores. The Company's segments include Retail and Hire. The Company offers various types of suits, skirts, jackets, trousers, coats, casualwear, ties, shoes and accessories. The Company offers clothing and accessories for various occasions, including weddings, prom, race day suit, tuxedo and black tie, interview attire and graduation. The Company also trades through Savoy Taylors Guild fascia. It has approximately 100 Moss Bros and Savoy Taylors Guild branded stores and over 20 Moss Bros outlet stores, which trade Moss Bros own brands and selected third-party brands, including Hugo Boss, Canali, Ted Baker, DKNY and French Connection. The Company has approximately 120 Moss Bros Hire outlets, which are contained within Moss Bros Retail and Savoy Taylors Guild Stores. The Company's sub brands consist of Moss London, Moss 1851 and Moss Esq. more »

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

3 Comments on this Article show/hide all

AnonymousUser39518 11th Dec '14 1 of 3

ptcms acquisition value depends entirely on the structure of the profit so I will get in touch to ask. I suspect that publicasity profit is either very volatile or down to a few lucrative contracts, hence the low purchase price. if not, quids in but need to check

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Yantomawr 11th Dec '14 2 of 3

Hi Paul,

apologies for going off on a bit of a tangent, but I recall that the one exception you have made to avoiding resource shares was that of Zanaga Iron Ore (ZIOC). The share price has fallen from about 25p to about 6.5p over the past 6 months, which even by the recent resource demise, is severe (to say the least)!

Do you still have an interest in Zanaga, and if so, do you have a view/comment?

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Paul Scott 12th Dec '14 3 of 3

In reply to post #88720

Hi Yantomawr,

No, I sold out of Zanaga Iron Ore (LON:ZIOC) some time ago, after noting the plunge in the iron ore price, and press reports that the big, low-cost producers were further increasing production, such that a considerable glut of supply was likely to persist for several years. That seemed to me to make it highly unlikely that the Zanaga project would go ahead.

We discussed this a few months ago here in the comments section to a previous article.

Regards, Paul.

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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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