Small Cap Value Report (14 Jul 2016) - EMR, WJG, LVD

14th Jul '16 by Paul Scott

27 comments 17749 reads

Good morning!

The biggest laugh of yesterday definitely came from Jeremy Clarkson's twitter account. I can't repeat it here, due to it containing a rude word, but the gist of it was to express his exasperation at the country now being run by May & Hammond!

Empresaria (LON:EMR)

I enjoyed interviewing the CEO & FD of this international staffing group, yesterday afternoon. Here is the audio link. Thank you for the questions submitted by readers, which I managed to ask in a round about way.

This is a good example of a group which has benefited from having a diverse spread of business in multiple countries. This has insulated it well from the chaos caused by Brexit & resultant sharp forex movements.

Watkin Jones (LON:WJG)

Share price: 103.25p (unchanged today)
No. shares: 255.3m
Market cap: £263.6m

Mello presentation last night - I think it was Nancy Reagan who described Ronnie's demise as "the long goodbye". Well, we had an even longer goodbye last night, after the 3 Directors of Watkin Jones had given a detailed presentation + Q&A to a group of investors in Beckenham. We all shook hands, and bid them goodbye in the restaurant, only to bump into them again over the road Beckenham Junction station. We then shared the same carriage into London, and bid them goodbye again, with handshakes all round again, on the platform at Victoria station. Moments later, we bumped into them again on the station concourse, triggering another round of cheery smiles & waves.

So when I spotted them again, 10 minutes later, on the tube platform, at Oxford Circus, I did what any self-respecting Brit would do, when uncertain of how to behave when constantly bumping into the same people - I dived for cover, and hid at the end of the platform, pretending to be engrossed in something riveting on my smartphone, to avoid further embarrassment! The Directors stood out markedly, due to all 3 wearing immaculately tailored suits. They seem good guys though, definitely a backable management team.

Their 2-hour presentation was excellent. We bombarded them with more questions over dinner, so it must have been exhausting for them. The issue arises again, of how companies are launched on the stock market in a very inappropriate way - by brokers who are keen to do as little work as possible…

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biloseli

14th Jul '16

Very interesting; thanks will89. I would be interested to read any further updates, if you have a chance to post them. And it's nice to hear a positive story about Chinese businesses.

MichaelFBS

Completely empathise with Jeremy Clarkson:

"his exasperation at the country now being run by May & Hammond"

The thing is the other May and Hammond would do a better job I suspect

andrea34

Personally I think firstly that Jeremy is an idiot, and secondly that so far Theresa May has talked a lot of sense and if the can deliver at least some of what she is pledging then the country as a whole will be a happier place.... fingers crossed.

Just my feeble attempt at being witty though I can see now that I am out of touch with readers here (at the time of writing 7 red thumbs down which is a record I think certainly for me, bit upsetting) I wasn't going to get into a political discussion here until I saw the thumbs down. I will make one point here. Talking to friends abroad by appointing Boris Johnson as FS and David Davis as Secretary for Brexit May has a. Shown a singular lack of judgement and b. Made us the laughing stock across the globe.

Ed (Croft) I will make o further political statements here and apologies for this one as this not the right forum.

JohnEustace

That's a smart move by your suppliers. It reduces your need to shop round for alternative suppliers to maintain your margins and so helps them retain your business, so mutually beneficial.
It's good to see the benefits flowing to those who maintain proper long term supplier relationships.

In reaction to all the down votes, I did get that it was a joke....

I think you needed some smilie faces at the end! :-)

JollyBiologist

Not out of touch with me, but I'm keeping a low profile for the same reasons. ;-)

1James1n1

Paul,

It may be a little out of your small-cap remit, but given your retail expertise, do you have any comments on what appear to be positive results this morning for SuperGroup (LON:SGP) and any thoughts with this update on the broader retail environment please?

Ken Lowes

Just goes to prove don't listen to your friends or those quick to make a judgement!!!

Fangorn

"Talking to friends abroad by appointing Boris Johnson as FS and David Davis as Secretary for Brexit May has a. Shown a singular lack of judgement and b. Made us the laughing stock across the globe. "

Smart move surely.

If it goes wrong May can point the finger at the Brexiteers. If it goes well she loses nothing!
Rather canny.

As to making us the laughing stock across the world - not exaggerating are you?

What's wrong with David Davis? He's certainly capable, as well as experienced.

Funderstruck

Don't read anything into the comments of European commissioners, re the new Government appointments, right now they are feeling very sore and upset and very defensive.

marben100

Hi Maddox,

There were 3 primary reasons for the IPO AIUI:

Mark Watkin Jones is now the only family member actively involved in the business (which is now vastly larger than when he took charge). Other family members were looking for an exit for their shareholdings, which the IPO provided.
Senior management is incentivised with shareholdings,. A market quotation makes the value of those shares meaningful and makes them an effective incentive. There are significant management shareholdings, so good alignment of interests between management and external shareholders.
WJG's clients are major institutions, the likes of M&G, AIG etc. Being a transparent, listed entity should help build confidence, ease the sales process and help build their client base.

Cheers,

Mark

ridavies

15th Jul '16

Not a lot of comment on Lavendon (LON:LVD), Paul! I also have a long holding. I bought originally on the following comments from one of my favourites, Small Company Sharewatch. If I had just bogutht their portfolio over the last 10-15 years, even at the higher prices after they had bought, I would be quids in. A lesson there.
Not so with their Lavendon (LON:LVD) recommendation - see below (and incidentally they didnt add it to their portfolio!). Of course, quite a lot of water under the bridge in that time, but Lavendon (LON:LVD) is not performing very differently rthan it was then, although perhaps the higher maergin Saudi business is clearly down, onlty partially replaced by woerk elsewhere in the Gulf. Given their forward thoughts at that time, do you see them being a takeover target sooner or later, and / or will the forecast high cash generation likely next year start to be reflected in the SP? I am holding but am suffering with this my worst performing share - and there doesnt seem to be the justification for it. Best regards RID
PS here is the SCSW comment from May 2015 - wouldnt I like the 174p price tag right now!!

'Lavendon - UK trending higher

174p Epic code: LVD
(Sharewatch) A confident Q1 trading update from Lavendon. Despite relatively modest growth in revenues of just 1%, efficiencies mean that Lavendon expects much faster growth in profitability, margins and return on capital employed. Keynotes were the UK trending higher towards the end of the quarter whilst efficiencies have driven profitability; the Middle East has continued to storm ahead (+11%) with the weaker oil price environment not really affecting activity. Other European territories are unchanged on last year.
At current share prices, Lavendon’s days of independence really do look numbered. Additional equipment has recently been added (ahead of schedule, temporarily lifting net debt to £103m) but the wider investment community hasn’t picked up on the fact that the frantic investment programme will start to peter out towards 2017 as a huge chunk of the fleet will have then been refreshed, after which this company will throw off a tidal wave of cash.
Any would-be-predator would be wise to bid now whilst the shares remain so undervalued. Buy.'

rhomboid1

I also hold Lavendon (LON:LVD) , I bought back in Dec at an average of £1.41 so like you I'm underwater. Since then the business has performed as expected , the share price not so much.

Black Rock have been selling http://www.investegate.co.uk/lavendon-group-plc--l... which has created an overhang .

I think increased H&S awareness and regulations is driving a structural increase in the sophistication of kit required to work at height, the extra demand led £7m investment in the UK is very reassuring, as is the trend in rental revenue. All in all I think this is a great long term proposition for income seekers like me.

Cheers

PS edited as emojis knackered the formatting

Maddox

Thanks Mark,

All sound reasons and the timing is good as the student accommodation development sector is extremely busy. IMHO it should also prosper in the face of Brexit uncertainties - albeit this sub-sector has been hit along with Commercial Property in general - with its greater exposure.

Regards, Maddox

TamzinPiworld

We filmed the Watkin Jones presentation at Mello. We're working on it now, so will probably have it ready to view next week.

Tamzin, PIWorld.co.uk

18th Jul '16

Here's a link to the video of Watkin Jones presenting at Mello:

http://www.piworld.co.uk/videos/2016/7/18/watkin-jones-at-mello-13716

Sniggolb

19th Jul '16

All those adverse comments on the appointments made of David Davis and Boris Johnson are woefully misplaced, the idea that Boris is some sort of court jester is patronising drivel. He is a bright firmer Mayor of London and he was excellent in that major very difficult job. He will be an excellent foreign secretary and will publicise the UK is open for business like never before. Okay he will liven up the white nice in the foreign office but so what?

Boris' critical comments on various overseas luminaries will be rapidly forgotten and what will be remembered is he was one if those who extracted us from the EU which shorty will be seen as the best thing this country decided since we escaped from joining the ghastly Euro project that is destroying the economies of S Europe and is creating youth unemployment on an industrial scale.

The UK has just provided a master class to the world in how a mature democracy should be run. The referendum result went against the establishment view and the electorate gave two fingers to the bien pensant view of things. The PM resigned, a new PM took over and a new cabinet appointed and on we go. Thank God for our constitutional monarchy.

What we don't need are morons running down our new government and the Uk

Like Clarkson last seen punching a BBC producer just because he was rich and famous and because he thought he was unassailable.

Small Cap Value Report (14 Jul 2016) - EMR, WJG, LVD

Empresaria (LON:EMR)

Watkin Jones (LON:WJG)

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Paul Scott

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