Small Cap Value Report (14 Nov 2016) - JPR, TPOP, DWHT, DWHA, CARR, CTP

Monday, Nov 14 2016 by

Good evening,

A late report today, my apologies.

Probably like most people, I'm still struggling to take in all the changes that are possible or likely in the new Trump era which is beginning soon. The Dow Jones Index has just hit a new all-time high. So why were we all so worried about a Trump victory? It's not looking more like a fear of the unknown, and a large degree of group-think. Why would a business-friendly new President, with a stated intention of drastically reducing corporate taxes & red tape, be a bad thing for shares?

Bond yields seem to have been an even bigger mover than equities, rising strongly. I spoke to one UK company CEO last week, who told me that their pension deficit had shrunk by a quarter in just one month (October). So if we are now coming to the end of this bizarre era of ultra-low interest rates, then companies with big pension deficits could see a decent revival in their share prices perhaps?

Johnston Press (LON:JPR)

Share price: 15.5p (up 18.1% today)
No. shares: 105.9m
Market cap: £16.4m

(at the time of writing, I hold a long position in this share)

Response to press speculation - this follows a Sunday Times article which got wind of an imminent disposal of JPR titles in East Anglia;

The Board of Johnston Press plc (the "Company" or "Group") notes the recent media speculation and confirms it is in late stage discussions with Iliffe Media surrounding the potential disposal of certain titles.

The Company has previously announced that as part of its portfolio review, a number of brands had been identified that were not part of its long-term future and a process has been initiated to explore the potential sale of these assets to identified parties.

This disposal process is ongoing and a further announcement will be made when appropriate. Shareholders are advised that there can be no certainty that the disposal process will lead to any definitive agreements concerning any possible disposals or as to the timing or terms of any such agreements.

The last paragraph is just a generic one,  Of more interest, is that the first paragraph both names the buyer (which is apparently backed by one of Britain's richest families) , and indicates that it is in late stage discussions - so hopefully this deal will…

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Johnston Press plc is a United Kingdom-based local and regional multimedia organization. The Company provides news and information services to local and regional communities through its portfolio of various publications and Websites. The Company operates through two segments: Publishing (in print and online) and Contract Printing. Its portfolio contains approximately 190 paid for weekly newspapers, 10 paid for daily newspapers, 30 free titles and over 10 lifestyle magazines. It also has approximately 190 news sites and over 20 other sites, including entertainment site WOW247 and Jobstoday. Its brands include BallymenaTimes, BanbridgeLeader, Belfast News, News Letter, CarrickTimes, ColeraineTimes, Mid-Ulster Mail, Derry Journal, Sunday Journal, TyroneTimes, LarneTimes, LurganMail, Isle of Man Examiner and Yorkshire Post. Its titles span Scotland, the North East, West Yorkshire, the North West and Isle of Man, South Yorkshire, the South, Midlands and Northern Ireland. more »

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The People's Operator Plc (TPO) is engaged in the provision of mobile phone services. The Company is a cause-based commercial mobile virtual network operator engaged in acquiring customers through viral networking and online communities. It has developed, marketed and operates a mobile phone business that provides consumers with an alternative to traditional providers. It supplies communication services and products to the United Kingdom market through a mobile virtual network. It offers two types of service plans to the United Kingdom subscribers: a Pay Monthly plan (PAYM) and a Pay As You Go plan (PAYG). It consists of over 22,595 subscribers on PAYM and approximately 57,890 subscriber on PAYG. The Company has over 21,000 subscribers in the United States. The TPO Community offers members, charities and other non-profit organizations a social network and a donation platform. The TPO Community comprises over 20,000 individuals from approximately 160 countries. more »

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Dewhurst plc is a United Kingdom-based company, which is engaged in the manufacture of electrical components and control equipment for industrial and commercial capital goods. The Company's segments based on business sectors include Lift, Transport and Keypad. The Company's geographical segments include United Kingdom, Europe, the Americas, Asia & Australia, and Other. The Company is a supplier of components to the lift, transport and keypad industries. Its subsidiaries include Dewhurst UK Manufacturing Ltd, Thames Valley Controls Ltd, Traffic Management Products Ltd (TMP), Dewhurst (Hungary) Kft, Dupar Controls Inc., Elevator Research Manufacturing Corp., Australian Lift Components Pty Ltd, Lift Material Australia Pty Ltd, Dual Engraving Pty Ltd and Dewhurst (Hong Kong) Ltd. more »

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

8 Comments on this Article show/hide all

JohnEustace 14th Nov '16 1 of 8

Is it too soon to start buying some of those companies that have been marked down for their pension deficits?

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Aislabie 15th Nov '16 2 of 8

I am still struggling to understand how the two Dewhursts (DWHT and DWHA) , get to have such differing share price movements. DWHT has been generally moving up while DWHA has been flat to down, with radically different yields resulting. Where is the sense in this? Can minority voting rights make any difference? Surely not?
As an additional comment there is (per Stockopedia's excellent new data) a pension deficit of £54mm to take into account

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Paul Scott 15th Nov '16 3 of 8

In reply to post #157942

Hi Aislabie,

With Dewhurst (LON:DWHT) and Dewhurst (LON:DWHA) I suppose the market prices are just set by supply & demand for each class of share. To my mind the A shares look much better value, as having voting rights with the other, Ordinary shares, is pointless anyway - because the family holds more than 50% of them - so they can do whatever they want already, irrespective of how other shareholders vote.

I did mention the pension deficit in the main report, but maybe you missed it? So I've bolded it, to make it more prominent. The pension deficit is £13m in the most recent accounts. Not sure where your £54m figure is coming from, but it looks wrong.

Looking at the last (2015) Annual Report, the figures are given as below. It's not clear whether they are the accounting, or the actuarial figures. The % gap between scheme assets & liabilities is large, although the £ amount isn't too bad. Although it looks like the type of gap that, even if favourable assumptions occur on things like bond yields, etc, it will still need over-payments of roughly the existing size, which are quite a significant drain on the company's resources.


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Brookeda 15th Nov '16 4 of 8

Hi Paul

I would like to hear your thoughts on castings (CGS) recent results announcement and the post drop/then recovery of the stock price.

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Aislabie 15th Nov '16 5 of 8

In reply to post #157945

My apologies, I should have noted that the pension deficit brings Dewhurst's gearing to 54%, it is not the pound amount.
Your logic on which share (if either) to buy seems correct, but the problem is that over the past year the voting shares have significantly outperformed the A shares. I will dig deeper

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paraic84 15th Nov '16 6 of 8

For further context I have been a People's Operator (LON:TPOP) customer but recently switched to Talk mobile. In my opinion the draw with People's Operator (LON:TPOP) as a customer was that they had cheaper tariffs than virtually every other mobile phone operator. However, they have hiked up their prices which while still competitive are beaten by other operators. They have a policy of spending no money on marketing either. I think the business is doomed.

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FREng 15th Nov '16 7 of 8

Carr's (LON:CARR) seems an odd company - a large international supplier of agricultural supplies coupled to a much smaller engineering specialist in robotics and precision handling equipment for the nuclear industry and similar high hazard industries.

The latter is where the excitement lies. IMO, they should sell it or get it a separate listing.

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Graham Fraser 15th Nov '16 8 of 8

Hi Paul, Re.:JPR I seem to remember that they did until recently have a large pension deficit but that it was magicked away- I wonder if there is a way to compare pension deficits objectively? . I presume pension deficits depend on the presumptions. Secondly, the debt at market value will obviously increase as they buy in their debt.

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 Are LON:JPR's fundamentals sound as an investment? Find out More »

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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