Small Cap Value Report (12 Sep 2016) - RST, BRY, GAH, SSTY, CTG

Monday, Sep 12 2016 by

Good morning!

Groan, it's one of those days where the RNS only lists results & trading updates from companies which I find of no interest to me whatsoever. So I can't cherry-pick the interesting ones, as there aren't any.

We seem to be having something of a correction at the moment. Not before time, as the post-Brexit boom really has been remarkable, and maybe got a bit excessive perhaps?

Whenever the market goes wobbly, I have a standard procedure now - I chuck out some of my low conviction positions (especially if they've risen a lot, and look fully priced). Then I also open up some short positions on over-valued US large caps, and/or indices. That tends to act as a good shock absorber for any downturn in the rest of my portfolio.

Then when the sell-off seems to have run out of steam, I buy back the shorts, and that usually provides a little pot of extra money to grab some bargains on the long side, at or near the lows. Obviously that's all a lot easier said than done. However, it's worked for me a few times now, and as my guru says to me - "Just do more of whatever works". Some of the best advice is the simplest.

ShareSoc Brighton evening

Is tomorrow! I'm very much looking forward to this, which we're hoping to make into a monthly event. It's ShareSoc's event, but I'm just an enthusiastic helper! There are a few places left, so if you fancy coming along for what should be a fun evening, here is the booking form.

The company presenting is Palace Capital (LON:PCA) . Also, I'll be giving a 30 minute presentation on my best small cap stock ideas from the last month's reports, and which shares I've been buying/selling personally. If people like this slot, then it may become a regular monthly thing.

Of course one of the best things about these events is that we also have the whole evening to chat to each other about shares we think look interesting. So there's always a lively & friendly discussion until closing time. Everyone has a shared interest, so conversation flows easily right from the start - so nobody should ever feel intimidated or shy about coming along to investor events.

Restore (LON:RST)

Share price: 356.6p (up…

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Restore plc is a United Kingdom-based support services company. The Company is engaged in providing services to offices and workplaces in the private and public sectors. It operates in two segments: Document Management and Relocation. Document management includes business streams, such asRecords Management, Restore Shred and Restore Scan. The Restore Shred offers secure shredding and recycling, and operates from over 10 sites. Restore Scan is its document scanning business, which transforms document related processes to manage customers' access to information. Relocation includes various business streams, such as Harrow Green, Relocom, IT Efficient and ITP Group. Harrow Green is engaged in the United Kingdom workplace relocations. Relocom specializes in desktop information technology and trading desk relocation, among others. IT Efficient provides secure data destruction and hardware disposal services. ITP Group collects cartridges from various premises across the United Kingdom. more »

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Brady plc is a United Kingdom-based provider of trading and risk management software to the global commodity and energy markets. The Company combines integrated and complete solutions supporting the commodity trading operation, from capture of financial and physical trading, through risk management, handling of physical operations, to back office financials and treasury settlement for energy, refined, unrefined and scrap metals, soft commodities and agriculture. The Company's business units are Commodities and Energy. Its clients include various financial institutions, trading companies, miners, refiners and producers, scrap processors, tier one banks, various London Metal Exchange (LME) Category 1, 2 clearing members, and other European energy generators, traders and consumers. It offers commodities solutions, energy solutions, credit risk, cloud services, and client services and support. more »

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25 Comments on this Article show/hide all

Raldridge 12th Sep '16 6 of 25

Hi Paul, long time reader who thoroughly enjoys your reports. I recently came across a share you have yet to cover and wondered if you would look at it, it came to my attention via John Lee. Titon Holdings. These are half year results from May. Maybe a bit small and boring but thought it point it out for a future report?

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guyrendell 12th Sep '16 7 of 25

Any thought on Real Good Food, Paul? Interesting research note published by Hardman & Co released today. Seems like it could be a turnaround stock following the sale of its sugar business, Napier Brown.

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Richard Goodwin 12th Sep '16 8 of 25

In reply to post #150048

I always suspect that the risk with Central Asia Metals (LON:CAML) is political. They operate almost solely in Kazahkstan and acquired the second half of the asset by getting a local businessman to buy it from the government and sell it on to them (he got a seat on the board an lots of money).
The financials always look fantastic but it worries me that a new government might not look so favourably on these transactions.

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d40eq6 12th Sep '16 9 of 25

Re: GAH I'm not surprised what has happened to this Company and as you say Paul the writing has been on the wall for a while. I was a shareholder a long time ago, but sold out long before the present troubles.

I came across them latterly in a professional capacity where they were insuring a construction risk. It was high margin risk stuff and the premium matched it. I experienced the worst ever service from an insurance company when seeking an assignment of the policy. You can tell a lot from a business in terms of the business that it does and the customer experience.

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cic 12th Sep '16 10 of 25

Paul, regarding Gable you say "and of course never touch any company in future run by the same Directors". The problem here is that 10 years down the line we will have forgotten all about Gable and who the directors were. What we really need is a sort of database of duff directors and companies that they (used to?) control to help research possible investments. In doing due diligence I usually look at Companies House website to see what other companies the directors have been involved with, but that does not really go far enough. I do have a little database of my own duff directors, and if my attention is initially drawn to a company where a director is on my list that would be an automatic red flag. But I would rather spend my limited time investigating companies I want to invest in than ones to avoid. Something collective here would be helpful, but probably run into all sorts of problems. Just my thoughts!

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mothy9 12th Sep '16 11 of 25

One would love to know the identity of a mentor's mentor! You have certainly become a valued though non-exclusive mentor to yours truly.

Thank you for all your valued and direct eveluations.

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Beginner 12th Sep '16 12 of 25

In reply to post #150084

Titon Holdings (LON:TON) keep cropping up on my value screen, but they look pretty much valued right to me. They make fixings and accoutrements for windows and vent sysytems. The Korean side of the company has seen a slowdown, and their future in the UK seems tied to the uncertain housing market. The US side may now be impacted by rate rises. They have cash though, and the continued weakness of sterling should also help. Hardman give an EPS forecast of 13p and DPS of 3. So plenty to be happy about, if you trust the housing market. Perhaps one to buy on the dips (when they come)?

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Michael Billingham 12th Sep '16 13 of 25

I was interested to see that Tristel has received Regulatory Approval for it's Fuse for Surfaces and Jet for Surfaces disinfectant in Australia. Sales reached £1.2m for these two products in the UK last year and Tristel now has it's own wholly owned subsidiary in Australia which should enable the Company to take advantage of this new Approval.

I believe Tristel are also seeking approval for it's range of products in the States and, while still some way to go, I believe that this will provide significant further growth for the company when this is achieved.

Disclosure: I hold shares in TSTL.

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rhomboid1 12th Sep '16 14 of 25

In reply to post #150114

I sold a modest holding a month ago because I couldn't see a catalyst for a rerating, in so doing I crashed the price 10% or so on the day so it is horribly illiquid. Thankfully what I bought went on to perform as I'd hoped but be aware that the painful spread on the stock is exacerbated if you want to deal in more than a hatful and in less than week or so!

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Carey Blunt 12th Sep '16 15 of 25

Hi Paul,
Next time there is a slow day for RNS test interest you, perhaps you could take a look at Joules (LON:JOUL) . There were a couple of plees to get your verdict on them last week while you were on holiday so you may not have seen them. Given its your specialist area of clothing retailers I and several others would welcome your thoughts.

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ganthorpe 12th Sep '16 16 of 25

Interesting that both last year and this year , the "exceptionals" exceeded the adjusted profits. No wonder the cash flow is a bit thin.
I always wonder how regular charges like this can be called "exceptional". for several years
Not for me

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xcity 12th Sep '16 17 of 25

Titon Holdings (LON:TON) I've seen it written that they manufacture MVHR exclusively in South Korea which offers(ed) a cost advantage in the UK. If so, I assume that will now be reversed.
It will take more thinking for me to have a view overall one way or the other.

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Paul Scott 12th Sep '16 18 of 25

In reply to post #150153

I've looked at Titon Holdings (LON:TON) several times before, and didn't like it. Can't remember why, but there was something wrong with it.

Regards, Paul.

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jonesj 12th Sep '16 19 of 25

In reply to post #150105

I've just made a long overdue move to start my own blacklist of directors, so thanks for the prompt for that. About 30 years late. If there are any pre-existing sources of data, perhaps that's a better starting point.

Charlie Munger keeps advocating "inverting". e.g. Figure out how people lose money and avoid that.

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Samsgrandad 12th Sep '16 20 of 25

In reply to post #150120

I was unsure before I invested that Tristel had a unique product that they could protect from competition. They have, I found, patented methods of packaging the two chemicals which produce chlorine dioxide, in a manner which enables on demand mixing for all manner of cleaning and disinfection. They have, from what I could find on the net, become the de facto supplier of disinfectant for the control of C.Dif and MRSA in UK hospitals. I have posted my research on the TSTL thread on ADVFN.

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Michael Billingham 13th Sep '16 21 of 25

In reply to Samsgrandad,post 20

I believe C.Dif and MRSA are as much a problem in Australian hospitals as they are in the UK. Tristel will, no doubt, want to become 'de facto' supplier there too.

Disclosure: I hold shares in TSTL.

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hayashi22 13th Sep '16 22 of 25

In reply to post #150171

Top of my list would be Sean 'Baldy' Nutley out of Silverdell .If he is not in prison he should be.
I did not own shares -thank the Lord-but had reasons to follow the story.

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Fegger 13th Sep '16 23 of 25

In reply to post #150201

Seemingly flourishing

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hayashi22 13th Sep '16 24 of 25

So not in the nick then. I will certainly avoid luminaprime!

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FREng 11th Jan '17 25 of 25

In reply to post #150084

Titon Holdings (LON:TON) is shooting up now. John Lee bought back in, and said in last weeks FT Money "on a recovery trend, backed by hard assets, cash rich, well covered growing dividend".

Very hard to trade though. I managed to get 2000 today at 130p.

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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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