Small Cap Value Report (11 Dec) - BEG, ZZZ, SID, VLK, OPM, CRU

11th Dec '13 by Paul Scott

15 comments 23139 reads

Good morning! I'm back home again after a few days in London for various company meetings, so am looking forward to having a few more leisurely days, not charging around on the tube or Boris Bikes! Yesterday I had a very pleasant lunch at Buchanan Communications with Zytronic (LON:ZYT) who delivered their results presentation. So I'll do a write-up on that meeting here on Stockopedia when time permits, probably later today.

It's quiet for results today. The only Listed insolvency practitioner Begbies Traynor (LON:BEG) has issued interim results to 31 Oct 2013. They're not very good - turnover down 14.6% to £22.3m for the six months, and adjusted profit before tax is down 34% to £2.1m. This equates to adjusted diluted EPS down 28% to 1.8p, or 1.7p is you ignore adjustments. However, this is not a surprise, as broker consensus was expecting a decline in profitability this year, since slow insolvency market conditions has been a known factor for several years now. So broker forecast for this year is a reduction to 4.3p.

These interim results look to be in line with expectations at 1.8p, since H2 is traditionally stronger than H1, therefore the company seems on track to meet the full year forecast of 4.3p. Note how the business has been shrinking in recent years:

As you can see, turnover & profits have been declining for four years now. However, also note how the PER has been low for several years, and the dividend yield has been getting stronger, and now stands at a very attractive 5.8% forecast for this year (assuming the 2.2p p.a. total payout is maintained).

The interim dividend has been maintained, at 0.6p, which is encouraging. So Begbies has managed down its costs to reflect quiet corporate insolvency market conditions, and is still generating enough profit in tough market conditions to pay a generous dividend. I quite like that.

At some point in the future, there should be an increase in corporate insolvencies, probably when interest rates rise, and the Banks balance sheets are strong enough to make full provisions against zombie company debts - i.e. companies which can service the interest on their debt at ultra-low interest rates, but which have little prospect of being able to cope with…

Unlock with Email

Unlock with Google

Already have an account?
Login here

oaktree

11th Dec '13

Good Morning Paul, have you seen 1PM trading update (ticker OPM) thats just come out this morning? Its a leasing type company thats doing very well in the space left from the Banks (which aren't lending so much nowadays). Its a tiny company though but will soon get on peoples radar as it grows.

Yantomawr

Hi Paul, are you aware of any reason(s) why Vislink's share price continues to mis-behave? (down 6-7% this morning though now improving slightly)

Gostevie

I'm reasonably happy with the Begbies Traynor (LON:BEG) results but do have one small niggle. Payment of the dividend isn't until 9th May. Five months between declaration and payment does seem a bit excessive to me. The xd date isn't until April either. Maybe it's the company's way of discouraging any potential sellers between now and then.

Pantheon

Hi Paul,

Yes your thought on Vislink would be helpful. Do you think the sp is continuing its decrease simply because the previous announcement to list with AIM and do you think it will recover?

Ramridge

re. 1 PM. Yes, got interested too. But be careful, spread is between 8 - 12%.

CliveBorg

Yantomawr: It could be that Vislink's price is showing volatility because of its move to AIM. Share chat rooms are full of opinion on the pros and cons of this. Regards, Clive

bsharman

Hi Paul, I know that you have covered CRE (Creston) before on here and would be interested to hear your thoughts on the current weakness in the share price. It's a company I have held before and the share depreciation of the past few weeks looks like a potentially good entry point. They certainly seem to be good value on lots of metrics and one would have thought that as the economy improves and prospers there will be increased demand for marketing services.. I know that this is a company held by many on Stockopedia and probably on many watchlists so I'm sure many people would be interested in your thoughts. I'm very tempted to buy at this level but it may get cheaper still?! Thanks again for your reports.

cycle

I, too, have seen quite a lot of discussion on other boards about Vislink claiming that the Director John Hawkins is pursuing his own financial interests with the move to AIM and that there was some problem with excessive bonuses in his previous role at Anite. I know you have met with him a few times Paul, so you must be satisfied that this isn't the motivation - are you able to give some insight into that history?
Thanks as ever for the invaluable research and commentary you provide Paul.

Paul Scott

Hi,

I've now updated the main article today to include comments on Vislink (LON:VLK)

Cheers, Paul.

Hi cycle,

Some people on Bulletin Boards just like to be ultra-cynical about everything, but it goes too far sometimes in my view.

In the case of Vislink (LON:VLK), they explained their rationale for wanting to move from a full listing to AIM, and it makes complete sense - it's a small company, only about £46m market cap at 41p per share, so AIM is more suitable.
Also, their stated strategy is to make bolt-on acquisitions, so the lighter rules on AIM over acquisitions, again suits them perfectly.

I don't think there is any evidence at all to suggest management want to move to AIM to feather their own nests. They already have bonus & share option arrangements, which as mgt stress are all linked to them achieving financial targets in line with broker forecasts. Personally I don't mind management getting a slice of the action if they create shareholder value.

All this kind of stuff is just background noise, and is one of the reasons I don't monitor bulletin boards as much as I used to - because there's so much drivel on them, that you can end up soaking up a negative (or positive) mood, and that then clouding your judgement.
I WANT to be buying when others are irrationally selling - that's how you make money!

Cheers, Paul.

boothbym

Jon Hawkins CEO Vislink Bought 65k at 45.5 2nd Dec 2013

Funderstruck

Paul;
VLK,Beg, etc ...BLASH can become BLAST (BLASweat Together) until the £££'s role in.

Hi bsharman,

Indeed, Creston (LON:CRE) has been twitching away on my watch list recently, as it's back down to levels where it looks pretty good value on Stockopedia valuation measures:

As you correctly, say, the PER is now low, and I particularly like the decent dividend yield.

My most recent review of the interim results was here.

There's clearly a seller in the market, so it's the usual worry about whether they know something we don't, or whether it's a buying opportunity?

Really appreciate your sound advice Paul - many thanks.

Hi cycle,

It's just personal opinion, never advice! Remember that the key concept here is DYOR ;-)

Cheers, Paul.

Small Cap Value Report (11 Dec) - BEG, ZZZ, SID, VLK, OPM, CRU

Unlock the rest of this article with a 14 day trial

About the Author

Paul Scott

15 comments

Unlock the metrics for all these stocks and more...

Unlock the metrics for all these stocks and more...